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
Securitizations of
Revolving Residential
Mortgage Exposures
The agencies sought comment on the
appropriateness of the proposed 4.5 percent excess spread trapping point and on
whether there were other types and levels of early amortization triggers used in
securitizations of revolving retail exposures that should
be addressed by the agencies.
Although some commenters believed the 4.5 percent trapping point assumption was reasonable, others
believed that it was inappropriate for securitizations of HELOCs.
Unlike credit
card securitizations, U.S. HELOC securitizations typically do not generate
material excess spread and typically are structured with credit enhancements and
early amortization triggers based on other
factors, such as portfolio loss rates.
Under the proposed treatment, banks would be required to hold capital against the
potential early amortization of most U.S. HELOC securitizations at their inception, rather
than only if the credit quality of the underlying
exposures deteriorated.
Although
the New Accord does not provide an alternative methodology, the agencies concluded that
the features of the U.S. HELOC securitization market warrant an alternative approach.
Accordingly, the final rule allows a bank the option of applying
either
(i) the CFs
in Tables I and J, as appropriate, or
ii) a
fixed CF equal to 10 percent to its securitizations
for which all or substantially all of the underlying
exposures are revolving residential mortgage exposures.
If a
bank chooses the fixed CF of 10 percent, it must use
that CF for all securitizations for which all or
substantially all of the underlying
exposures are revolving residential mortgage exposures.
The
agencies will monitor the implementation of this
alternative approach to ensure that it is consistent with safety
and soundness.
Return
to Table of Contents
Return to
Index
Read more
about our
Certified Basel
ii Professional (CBiiPro)
program
Read more
about our Certified Pillar 2 Expert
(CP2E)
program
Read more about our
Certified Pillar 3 Expert
(CP3E)
program
Read
more about our Certified
Stress Testing Expert (CSTE)
program
 | |
