In particular the recommendations relate to the capital requirements of the banks, which the Basel Committee and the FSB recommend raising sharply, including by toughening the requirements for assets to qualify as Tier 1 and Tier 2 capital.
Borrowers are hampered not only by their lack of equity but also by the tighter credit conditions in mortgage markets. New securitizations of nonprime mortgages have virtually halted, and commercial banks have tightened their standards, especially for riskier mortgages. Indeed, the available evidence suggests that private lenders are originating few nonprime loans at any terms. This situation calls for a vigorous response.