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Global policymakers look set to finalise tougher new capital rules on asset-backed securities in December, just three months before defining banks' high-quality assets which may well then be granted better treatment in the future.
The Basel Committee on Banking Supervision (BCBS) is will post final guidance next month and numerous sources close to the talks said risk weight floors used as a starting point in the formula will remain near the 15% level proposed last year.
At more than double the existing requirement, these levels would contrast starkly with the recent push behind the revival of the sector. Even more confusingly, they would ignore the incoming definition of Simple, Transparent and Comparable ABS that the Basel Committee itself is drawing up for March with IOSCO, the global securities standard-setter.
That definition is meant to serve as a basis to grant a better treatment to sounder and more straightforward ABS.
"The ultimate goal of the Basel/IOSCO taskforce is to come up with new approach to risk weighting, to feed into bank and insurer capital requirement, as well as liquidity rules," a source involved in the workstream said.
Similar to the process undertaken by European regulators, Basel is set to relax its tough line on securitisation just months after publishing tough capital rules that are the product of years of stigma, and modelled on the worst-performing assets, US sub-prime.
In October, the European Banking Authority published its input on ABS that could qualify for more generous requirements, just days after tough final capital rules for insurers and liquidity rules for banks were posted.
But BNP Paribas's Georges Duponcheele and Alexandre Linden expect the Basel report on risk weights will somehow leave the door open for a future differentiation of rules for higher quality assets.