This second consultative paper comprises a detailed set of proposals, including draft standards text, for a comprehensive revision of the treatment of securitisation. Comments on the proposals should be uploaded by 21 March, 2014.
In developing these proposals, the Committee has carefully taken into account the comments received on the first consultative document, as well as the results of the related quantitative impact study (QIS). Revisions have also been informed by the Committee's desire to strike an appropriate balance between risk sensitivity, simplicity and comparability.
Relative to the first consultation, the major changes in this consultative document apply to the hierarchy of approaches, and the calibration of capital requirements.
For the hierarchy, the Committee has proposed a simple framework akin to that used for credit risk:
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Where banks have the capacity and supervisory approval to do so, they may use an internal ratings-based approach to determine the capital requirement based on the risk of the underlying pool of exposures, including expected losses.
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If this internal ratings-based approach cannot be used for a particular securitisation exposure, an external ratings-based approach may be used (assuming that the use of ratings is permitted within the relevant jurisdiction).
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Finally, if neither of these approaches can be used, a standardised approach would be applied. This is based on the underlying capital requirement that would apply under the standardised approach for credit risk, and other risk drivers.
In reviewing the calibration of the approaches, the Committee has revised some of the modelling assumptions behind the original calibration proposed in the first consultative document. These changes result in greater consistency with the underlying credit risk framework. The result is to significantly reduce capital requirements vis-à-vis the initial proposals, although capital requirements remain more stringent than under the existing framework. The Committee also proposes to set a 15 per cent risk-weight floor for all approaches, instead of the 20 per cent floor originally proposed.
The Committee welcomes comments on all aspects of this consultative document and the proposed standards text. Comments on the proposals should be uploaded by Friday 21 March, 2014. All comments may be published on the website of the Bank for International Settlements unless a comment contributor marks their comment as confidential.
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