Treatment of Asset Securitisations

The purpose of this paper prepared by the Securitisation Group of the Basel Committee is to discuss two sets of proposals that were initially outlined in the January 2001 consultative package. The first proposal is for an IRB treatment of securitisations, and the second is a general approach to synthetic securitisations. By design, these proposals are based on other elements of the New Basel Capital Accord. For example, the IRB treatment of traditional and synthetic securitisations relies on the IRB risk weight functions for credit risk. Similarly, the treatment of synthetic securitisations incorporates elements of the credit risk mitigation framework. Therefore, as the Committee's work on these other aspects of the New Basel Capital Accord evolves, so too will elements of the securitisation proposals discussed herein.

This paper is being issued to further the Committee's dialogue with the industry on the development of a minimum capital requirement for securitisations. Interested parties are invited to comment on the issues outlined in this paper. Comments should be submitted to relevant national supervisory authorities and central banks and may also be sent to the Secretariat of the Basel Committee on Banking Supervision at the Bank for International Settlements, CH-4002 Basel, Switzerland, by 15 November 2001. Comments may be submitted via e-mail: BCBS.capital@bis.org or by fax: +41 61 280 9100. Comments on working papers will not be posted to the BIS website.