The Australian Prudential Regulation Authority's plan to limit issues of asset-backed securities to two tranches may make it harder for issuers to meet the needs of investors and to secure capital relief.Delegates at the Australian Securitisation Forum annual conference, which is being held in Sydney, said yesterday that APRA's plan to simplify RMBS and ABS structures ignored the fact that multiple tranches were needed to meet different investor requirements.The executive director of securitisation at Resimac, Mary Ploughman, said: "We launched a transaction this week with eight tranches. We don't put them there to be complex."We are responding to investors. We put layers in our deals because of investor concerns about such things as LMI (lender's mortgage insurance) or extension risk."On Monday, APRA's executive general manager, research and statistics, Charles Littrell, outlined the regulator's approach to prudential reform of securitisation, which will be spelled out in detail in a consultation paper to be issued in the New Year.APRA proposes that a securitisation structure would have only an A note and a B note. The A note would comprise about 90 per cent of a typical home loan securitisation. The expectation is that the A notes would be AAA-rated.In a funding-only securitisation, where the originating ADI retains all the credit risk, the B notes would be held by the issuer. "APRA's expectation is that the B notes will comprise the current mezzanine and equity tranches of a securitisation," Littrell said.In a securitisation designed for capital relief, ADIs would be allowed a pari passu capital reduction to the extent that B notes are sold, but with a minimum retention of around 20 per cent, so as to reduce agency risks associated with unconstrained and non-recourse lending. "This is the skin in the game requirement," Littrell said.The senior manager of secured funding at National Australia Bank's group treasury, Eva Zileli, said: "We are concerned that the proposed two-tranche structure is simplistic. It is hard to see how it would work for ABS."ING Direct's deputy treasurer, Peter Casey, said: "We don't make deals complex for the sake of it. If simplification makes it more difficult for issuers to get capital relief that would not be a good thing."The head of securitisation at Bank of Queensland, James Shaw said: "Given different ratings… [agencies'] methodologies, we might not be able to get a rating on the B notes. That would be a problem for investors who only buy rated notes."Ploughman said she was disappointed Littrell made no mention of securitisation arrangements that involved warehouse funding and non-regulated issuers.Zileli said she would have liked to hear more from the regulator about its approach to master-trust structures.