Basel Committee’s Proposed Revisions to the Securitization Framework

May 28, 2013

The Basel Committee on Banking Supervision (the “Basel Committee”) published a consultative document, “Revisions to the Basel Securitisation Framework” (the “Proposed Revisions”) on December 18, 2012, which proposes substantial changes in how banks calculate their risk-based capital requirements related to securitization exposures. The Proposed Revisions are intended to, among other things, make capital requirements for securitizations more prudent and risk-sensitive and to mitigate mechanistic reliance on external credit ratings. This OnPoint provides an overview of the two proposed alternatives for calculating the capital for securitization exposures, specifically discussing the major components of each alternative and how both alternatives work, and concludes with a brief summary of the American Securitization Forum’s response to the Proposed Revisions.

Read “Basel Committee’s Proposed Revisions to the Securitization Framework.”