Banks, Rating Services Concerned about Proposed Changes to Capital Requirements for MBS Holdings
March 22, 2013
Banks and rating services have strong concerns regarding proposed revisions to the Basel securitization framework that would impact capital requirements for securities holdings. They warn that the proposal would discourage banks from participating in the securitization markets.In December, the Basel Committee on Banking Supervision proposed a revised securitization framework it said would make capital requirements more prudent and risk sensitive, mitigate reliance on external credit ratings and reduce the so-called cliff effects in capital requirements. The BCBS proposed two possible hierarchies for assigning capital, enhancements to current ratings-based approaches, and new approaches.