The Australian Prudential Regulation Authority is considering a radical simplification of the structure of securitised debt issues to overcome what it sees as "gaming" by issuers.APRA's executive general manager policy, research and statistics, Charles Littrell, said the regulator had observed that some financial institutions followed "the letter but not the spirit" of the prudential requirements that apply to securitisation.Speaking at yesterday's Australian Securitisation Forum conference in Sydney, Littrell said: "We have become considerably less tolerant of the over-complication that has crept into this financial product."One way of dealing with this would be to limit a securitised debt issue to two tranches, he said.Next year APRA plans to review APS 120, the prudential standard for securitisation. Littrell revealed that this review will focus on several concerns.He said that some approved deposit-taking institutions were progressing securitisations and claiming capital relief without meeting the basic documentation requirements associated with self-assessment.Some ADIs retained the junior tranche in their securitisation and, therefore, did not transfer much, if any, credit risk. Many of these ADIs, nonetheless, claimed to have taken relevant risk assets and capital requirements off balance sheet.APRA was also seeing signs that some issuers were placing junior tranches in a non-commercial fashion with "corporate cousins" or by arbitraging with other ADIs.Littrell said: "APRA regards the basic concessions in securitisation, the ability to remove all capital requirements on the underlying assets, and the permission to pledge assets, as extraordinary benefits. We do not propose to award these benefits to structures and issuers that do not merit them."Among the changes envisaged are moves towards "skin- in-the-game requirements" (where institutions are required to keep some of the marketed instruments themselves) and, possibly, a mandated complying structure as well. Littrell said: "A securitisation structure must have at least two tranches to be a securitisation. [But] is there any good prudential reason to have more than two tranches?" ADIs not seeking capital relief can hold on to their junior tranches. APRA intends to "regularise" this interim arrangement.