BCBS Publishes Revised Securitization Framework with Capital Treatment for STC Securitizations

On Monday, July 11th, the Basel Committee on Banking Supervision (“BCBS”) announced the publication of an updated standard for the regulatory capital treatment of securitization exposures that includes the regulatory capital treatment for STC securitizations. This standard amends the BCBS's 2014 capital standards for securitizations, and the capital treatment for simple, transparent and comparable (“STC”) securitizations builds on the 2015 STC criteria.

The BCBS said that a “modest reduction” in capital should be allowed for bonds made up of lower-risk assets and that risk weight floors could be cut to 10 percent from 15 percent for the safest portion of the securities. The lower capital charges will apply to the senior-ranking portions of bonds backed by assets that meet regulators’ criteria for STC securitizations. The updated securitization framework will come into effect in January of 2018.

SFIG previously submitted a comment letter on the BCBS’s consultative document regarding capital treatment for STC securitizations and a response to the BCBS-IOSCO final criteria for identifying STC securitizations. If you would like to join SFIG’s High Quality Securitization Task Force or our Regulatory Capital & Liquidity Committee, please contact Alyssa.Acevedo@sfindustry.org.

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