On January 16 2009 the Basel Committee on Banking Supervision issued its consultation proposals for enhancing the June 2006 Accord published by the committee, the International Convergence of Capital Measurement and Capital Standards, a Revised Standard dealing with securitisation. Comments on the proposals are due no later than April 17 2009.
The proposals principally focus on: (i) increasing capital requirements for so-called resecuritisations; and (ii) increasing capital requirements for, and public disclosure regarding, liquidity support provided by sponsors of asset-backed commercial paper (ABCP) conduits. The proposals are noteworthy for two reasons. First, the committee’s incremental approach confirms its view that the Accord is fundamentally sound and effective in aligning regulatory capital with credit risks. Such an approach is in stark contrast to the European Commission’s rush to modify the Capital Requirements Directive in material ways, in particular their much-criticised and oft-modified skin-in-the-game proposals.
Second, the...