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
Eligible market disruption liquidity
facilities
Under the proposed SFA, there was no
special treatment provided for ABCP liquidity facilities that could be drawn
upon only during periods of general market disruption.
In contrast, the New Accord
provides a more favorable capital treatment within the SFA for eligible market
disruption liquidity facilities than for other liquidity
facilities.
Under
the New Accord, an eligible market disruption liquidity
facility is a liquidity facility that supports an ABCP
program and that
(i) is subject to an asset quality
test that precludes funding of underlying exposures that
are in default;
(ii) can
be used to fund only those exposures that have an
investment-grade external rating at the time of
funding, if the underlying exposures that
the facility must fund against are externally rated
exposures at the time that the exposures are sold to the
program; and
(iii)
may only be drawn in the event of a general market
disruption.
The agencies sought comment on the
prevalence of eligible market disruption liquidity facilities that might be subject
to the SFA and, by implication, whether the final rule
should incorporate the treatment provided in the New
Accord.
Commenters responded that eligible market disruption
liquidity facilities currently are not a material
product
line for U.S. banks, but urged international consistency
in this area.
To limit additional complexity in the final rule,
and because U.S. banks have limited exposure to
eligible market disruption liquidity
facilities, the agencies are not including a separate
treatment of eligible market disruption liquidity
facilities in the final rule.
The
agencies believe that the final rule provide
adequate flexibility to determine an appropriate capital
requirement for market disruption
liquidity facilities.
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