July 06, 2017

BCBS released the consultative document specifying capital treatment for simple, transparent, and comparable (STC) short-term securitizations. This consultation is in addition to the proposed criteria for identifying STC short-term securitizations, which BCBS issued jointly with IOSCO. The proposed capital treatment is consistent with the Basel Committee's July 2016 revisions to the securitization framework. Comments are due by October 05, 2017.

The consultative document on capital treatment for STC short-term securitizations outlines how the short-term STC criteria could be incorporated into the regulatory capital framework for banks. It sets out additional guidance and requirements for applying preferential regulatory capital treatment for banks acting as investors in, or as sponsors of, STC short-term securitizations, typically in asset-backed commercial paper (ABCP) structures. The additional guidance and requirements include that:

Investors have access to key monthly information on the performance and key characteristics of the ABCP structure

The redemption risk of the underlying assets is addressed from the sponsor's perspective

The transactions funded by the conduit have an enforceable legal structure

The relevant information is disclosed by the sponsor to investors

 

The 2016 standard sets out additional guidance and requirements for differentiating the capital treatment of STC short-term securitizations from that of other securitizations. Similarly, provided that the proposed criteria are met, STC short-term securitizations will receive the same reduction in capital requirements as other STC short-term securitizations. This enhances risk sensitivity of the framework without significantly increasing banks' operational burden in computing the applicable capital relief.

 

The second consultation contains the criteria for identifying STC short-term securitization. The criteria take account of the characteristics of ABCP conduits, such as the short maturity of the commercial paper issued, the different forms of program structures, and the existence of multiple forms of liquidity and credit support facilities. The short-term STC criteria maintain and build on the principles in the criteria for identifying STC securitizations, which was issued by BCBS-IOSCO in July 2015 and was included in the revised securitization standard issued in 2016.

 

Related Links

Consultation on Short-Term STC Securitization: Capital Treatment (PDF)

Consultation on Short-Term STC Securitization: Criteria (PDF)

Revised Securitization Framework, July 2016

Comment Due Date: October 05, 2017

Keywords: International, BCBS, Banking, STC, ABCP, Securitization