Treasury to create MBS gold standard

The Treasury is locked in discussions about a gold standard that will accredit mortgage-backed securities in a bid to reopen the wholesale mortgage funding market.

The Treasury is understood to be striving to rebuild confidence in the wholesale markets, which have been partially closed since August, by giving its stamp of approval to MBS tranches that meet its standards of creditworthiness.

Angus Armstrong, a treasury official, is understood to be heading the team assigned to create the standard, which is expected to be unveiled in the Budget next week.

But industry pundits question the feasibility of the standard.

One source says: “The devil is in the detail. It’s something, which is expected to be announced in the Budget so it gives the team little time to prepare.”