European Commission’s Second Public Consultation Paper on Possible Changes to Capital Requirements Directive

August 25, 2008
In its recently published Second Public Consultation Paper on Possible Changes to the Capital Requirements Directive, the European Commission proposes an alternative to the much-criticized requirement in its First Public Consultation Paper that originators of securitizations hold capital for at least 15% of the securitized exposures, even if they were entirely sold in order to reduce the incentives for originators to transfer all risks of a securitization to investors. This update examines the proposed changes.