The Basel Committee on Banking Supervision (Basel Committee) has published an updated standard for the regulatory capital treatment of securitisation exposures that includes the regulatory capital treatment for “simple, transparent and comparable” (STC) securitisations. The updated standard amends the Basel Committee’s 2014 capital standards for securitisations.

The updated standards sets out additional criteria for differentiating the capital treatment of STC securitisations from that of other securitisation transactions.  The most material enhancements to the criteria are as follows:

  • more explicit requirements for minimum performance history (added to the base criterion A2), incorporating language used within the Basel Committee’s Internal Ratings Based framework;
  • the exclusion of transactions if standardised risk weights for the underlying exposures exceed certain levels. This criterion aims to help ensure that higher-risk underlying exposures would not be able to qualify for alternative treatment as STC-compliant transactions; and
  • a more explicit definition of granularity. With this, the Basel Committee intends to provide clarity as to how granular a pool must be. No single exposure should comprise more than 1% of the underlying pool.

View Revised securitisation framework with capital treatment for “simple, transparent and comparable” securitisations, 11 July 2016