Capital treatment for "simple, transparent and comparable" securitisations

In November 2015 the Basel Committee on Banking Supervision released a consultative document on Capital treatment for "simple, transparent and comparable" securitisations. This proposal builds on the revised capital standards issued by the Committee in December 2014.

The Criteria for identifying simple, transparent and comparable securitisations (STC criteria) were published by the Basel Committee and the International Organization of Securities Commissions in July 2015. The July 2015 STC criteria are designed to mitigate securitisation risks, including uncertainty related to asset risk, structural risk, governance and operational risk. Transactions that comply with these criteria should therefore have lower structural and model risk.

The July 2015 STC criteria noted that additional or more detailed criteria, such as those related to the credit risks of the underlying securitised assets, may be necessary based on specific needs and applications. Given that greater prescriptiveness is required for using the STC criteria in regulatory capital requirements, the Committee proposes to supplement the July 2015 STC criteria with additional criteria for the specific purpose of differentiating the capital treatment of STC from that of other securitisation transactions. The additional criteria would, for example, exclude transactions in which the standardised risk weights for the underlying assets exceed certain levels.

Compliance with the expanded set of STC criteria provides additional confidence in the performance of the transactions. The Committee is proposing to reduce minimum capital requirements for such STC securitisations by reducing the risk weight floor for senior exposures, and by rescaling risk weights for other exposures. A range for the potential reduction in capital charges is suggested. The Committee will make a final decision on calibration in 2016 based on further analysis and assessment of the quantitative impact of the proposals.

The Committee welcomes comments on this consultative document. Comments should be uploaded here by Friday 5 February 2016 or they may be sent by post to: Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland. All comments will be published on the website of the Bank for International Settlements unless a respondent requests confidential treatment.