Today, the Basel Committee issued a second proposal to revise the risk-based capital requirements for securitization exposures. In developing the proposal, the Basel Committee took into account comments received on its first proposal and the results of a quantitative impact study (QIS).
Compared with the Basel Committee’s first proposal, the major changes in the second proposal relate to the hierarchy of approaches for securitization exposures and the calibration of capital requirements.
Proposed hierarchy of approaches. The Basel Committee proposes the following hierarchy of approaches for determining the capital requirement for securitization exposures:
- Where banks have the capacity and supervisory approval to do so, they may use an internal ratings-based approach to determine the capital requirement based on the internal ratings based approach capital charge for the underlying pool of exposures, including expected losses.