Basel
ii in the United States of America
From the
Basel ii
Compliance Professionals Association (BCPA),
the largest association of Basel ii Professionals in the
world
Final Rule, USA
Risk-Based Capital Standards
Advanced Capital Adequacy Framework — Basel II
Operational requirements for traditional
securitizations
In a traditional securitization, an
originating bank typically transfers a portion of the
credit risk of exposures to third parties by selling them
to a securitization SPE.
Under the final rule, consistent with the
proposed rule, banks engaging in a traditional securitization may exclude the underlying
exposures from the calculation of risk weighted assets only if each of the following
conditions is met:
(i) the transfer is a sale under GAAP;
(ii) the
originating bank transfers to third parties credit risk
associated with the underlying exposures; and
(iii)
any clean-up calls relating to the securitization are
eligible clean-up calls (as discussed below).
Originating banks that meet these conditions must hold regulatory capital against any
securitization exposures they retain in connection with
the securitization.
Originating banks that fail to meet these conditions must hold regulatory capital against the
transferred exposures as if they had not been securitized and must deduct from tier 1
capital any gain-on-sale resulting from the transaction.
The
operational requirements for synthetic securitization are
described in preamble section V.E.7., below.
Consistent with the general risk-based
capital rules, the above operational requirements refer specifically to GAAP
for the purpose of determining whether a securitization
transaction should be treated as an asset sale or a
financing.
In
contrast, the New Accord stipulates guiding principles
for use in determining whether sale treatment is
warranted.
One
commenter requested that the agencies conform the proposed
operational requirements for traditional securitizations
to those in the New Accord.
The
agencies believe that the current conditions to
qualify for sale treatment under GAAP are broadly
consistent with the guiding principles enumerated in the
New Accord.
However,
if GAAP in this area were to change
materially in the future, the agencies would reassess,
and possibly revise, the operational
standards.
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