18 December 2012

Revisions to the Basel Securitisation Framework - Consultative document published by the Basel Committee

The performance of securitisations and the central role they played during the financial crisis were a key motivation for the Basel Committee to perform a broader review of its securitisation framework for regulatory capital requirements. The Committee's objectives are to make capital requirements more prudent and risk-sensitive; to mitigate mechanistic reliance on external credit ratings; and to reduce current cliff effects in capital requirements.

The major elements of the proposed revised framework include the following:

• Two possible hierarchies that would be significantly different from those employed in the existing securitisation framework. These two proposed hierarchies differ in aspects such as the specific approach to be applied for certain types of exposures; the order and scope of application of approaches; and the flexibility that is given either to jurisdictions or to banks to opt for one approach or the other.
• Proposed enhancements to the current ratings-based approaches and the supervisory formula approach that are part of the Basel II securitisation framework. The proposal contains a revised ratings-based approach and a modified supervisory formula approach, both of which are intended to create a more risk-sensitive and prudent calibration. To accomplish these objectives, underlying assumptions of the current framework have been revised to reflect lessons learned during the crisis. The enhanced approaches also incorporate additional risk drivers, such as maturity.
• The introduction of new approaches, such as a simplified supervisory formula approach and different applications of the concentration ratio-based approach that was included in the Basel 2.5 enhancements.

In the coming months, the Committee will conduct a quantitative impact study (QIS) on the proposals. Responses to the public consultation, together with the QIS results, will be considered as the Committee moves forward to revise the securitisation framework.

Comments on the proposals should be submitted by Friday, 15 March, 2013.

Press release

Consultative document

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