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Basel Committee & IOSCO Propose Criteria for Simple, Transparent, and Comparable Securitizations

December 11, 2014

On December 11, 2014, the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) issued a Consultative Document proposing criteria that may be used by transaction parties and regulators to assist in the development of simple and transparent securitization structures. They believe that application of these criteria could contribute to building sustainable securitization markets. Earlier this fall, BCBS agreed to consider in 2015 how to incorporate the BCBS-IOSCO criteria into the securitization capital framework.

The Consultative Document identifies 14 criteria of simplicity, transparency, and comparability (proposed STC criteria) that, if satisfied, BCBS and IOSCO believe could indicate that a securitization has a simple, transparent, and comparable structure that could assist market participants in evaluating the risks of the transaction.

For purposes of the Consultative Document:

The proposed STC criteria are organized based on three categories of risk:

Asset Risk

Structural Risk

Fiduciary and Servicer Risk

The proposed STC criteria are focused on term securitizations. Short-term securitizations (including asset-backed commercial paper transactions) are outside of the scope of the proposed STC criteria. However, in the Consultative Document, BCBS and IOSCO request comment regarding whether criteria comparable to the proposed STC criteria should be developed for the short-term securitization market.

Comments on the Consultative Document are due by February 13, 2015.

For a copy of the Consultative Document, click here.

For a copy of the BCBS press release, click here.