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Part III Quantitative Capital Requirements, 9 Capital Treatment of Securitizations

Bart P.M. Joosen

From: Capital and Liquidity Requirements for European Banks (1)

Edited By: Bart P.M. Joosen, Marco Lamandini, Tobias H. Tröger

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 04 March 2024

Subject(s):
Credit risk — Securities — Prudential regulation — Basel 2 — Basel 3 — Capital requirement — Liquidity — Basel committee on Banking Supervision

This chapter addresses the prudential treatment of securitisation transactions. It focuses on the various facets of the prudential treatment from a perspective of European regulated credit institutions in the various roles and capacities banks may play or assume in securitisation transactions. Firstly, for banks acting as originator or original lender, provided strict conditions are met, a securitisation transaction may result in an off-balance sheet treatment for prudential purposes, in other words assets forming part of the securitisation transaction are no longer part of the assets held by banks for which risk weights must be calculated. Secondly, from the perspective of banks investing in securitisation positions, such positions may obtain lower risk weights if they meet certain conditions. Thirdly, banks may act as sponsor in connection with Asset Backed Commercial Paper (ABCP) transactions, therefore fulfilling a pivotal role in managing the liquidity of the ABCP conduit. Finally, securitisation positions held by banks within the treasury function may be comprised in the liquidity buffer in order to meet the liquidity management rules. The chapter looks at the development of the regulatory framework for securitisations in the Basel Committee on Banking Supervision (BCBS), as well as the adoption of the Basel capital standards and the Significant Risk Transfer (SRT) rules in Europe.

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