![Risk.net](https://www.risk.net/sites/default/files/styles/print_logo/public/2018-09/print-logo.png?itok=1TpHrpuP)
Basel experts agree securitisation treatment
Global banking experts have agreed proposals for treating the credit risks for banks of asset securitisation under the complex Basel II capital Accord.
Technical experts with the Capital Task Force, the senior sub-grouping of the Basel Committee on Banking Supervision, agreed the details at a meeting in London that concluded late yesterday, a day ahead of schedule, banking regulators said.
The task force’s proposals will now go for final approval by the Basel Committee at its mid-September meeting in Cape Town in two weeks’ time.
The proposals will be set out in a working paper on asset securitisation that is now likely to be issued on October 1, the date on which more than 300 banks in some 40 countries will also receive the key third Basel II quantitative impact survey, or QIS 3. The Basel Committee also plans to issue a non-technical overview of the Basel II accord on October 1.
The Capital Task Force agreed, among other things, a formula whereby bank regulators can assess the creditworthiness of a loan securitisation where the securitisation has not got a rating from credit rating agencies.
The prudential way of treating an unrated securitisation issue would be for regulators to require banks investing in them to put up protective capital amounting to 100% of the value of the issue to guard against any losses from the default or non-payment of the loans and credits underlying the issue.
But the formula will enable regulators to assign risk weightings to the securitisation so that the amount of protective capital can more accurately match the risks actually faced by the bank. The higher the creditworthiness of the issue, the lower its risk weighting and the less the capital charges required by the regulators.
Meanwhile, the Basel Committee’s risk management sub-group will hold a two-day meeting in Paris on September 11 and 12 to put uncontroversial finishing touches to QIS 3 as it applies to the operational risk aspects of Basel II.
QIS 3 will seek information from the banks on how they will be affected by Basel II, which the regulators want to apply to large, international banks from late 2006.
On October 1, banks will be given the risk-weight functions and formulas they need to apply to the information they are now collecting for draft spreadsheets issued to them by the Basel Committee in July. The committee will want QIS 3 replies by December 20.
Banks will be able to gauge fairly accurately from QIS 3 the final shape of Basel II as envisaged by the Basel supervisors. The committee will also issue on October 1 an overview of progress with the accord.
Regulators hope to issue their third Basel II consultative paper, or CP 3, for industry comment in May next year. They expect to publish the final version of Basel II in late 2003, allowing some three years for banks and their regulators to ready themselves for implementation in late 2006.
David Keefe
For similar articles please visit www.BaselAlert.com - an indispensable source of news, comment and analysis on the development of the Basel II accord and banking supervision. The site contains a searchable archive of news, articles and technical papers, and a free monthly e-mail summary. Click here for a free trial.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
The standoff over separate account margining
CFTC issues sixth extension of no-action relief as long-awaited final rule stalls
Banks fret over vendor contracts as Dora deadline looms
Thousands of vendor contracts will need repapering to comply with EU’s new digital resilience rules
EU banks lose relief on model test after FRTB delay
Deferment of new trading book regime to January 2025 eats into transition period for “erratic” P&L attribution test
Sunday night football and the Basel III endgame
Big banks, political advocates and housing organisations are unlikely allies in race to dropkick new capital regime
Futures exchanges seek clarity on China licensing regime
Hazy details on landmark Futures and Derivatives Law breeds legal uncertainty, unnerving operators
Some EU banks wanted option to start FRTB on time
Representatives of member states raised possibility with European Commission at July meeting discussing the delay
For US Treasury troubles, treat the cause not the symptom
Regulatory alarm about hidden risk in the Treasury futures market misses the point, fund association execs write
Iosco delays pre-hedging consultation to November
Review into controversial practice splits industry