United States: BCBS And IOSCO Revise Criteria To Identify Short-Term Securitizations

On May 14, 2018, the Basel Committee on Banking Supervision ("BCBS") and IOSCO revised criteria for identifying "simple, transparent and comparable" ("STC") short-term securitizations.

The 17 revised STC short-term securitizations criteria focus on exposures to asset-backed commercial paper ("ABCP") conduits. The revised criteria build upon the STC criteria published in July 2015, but have been amended to reflect the specific characteristics of ABCP conduits. The new criteria take account of factors such as: (i) the short maturity of the commercial paper issued by ABCP conduits, (ii) the different program structures (multi-seller and single seller), and (iii) the existence of multiple forms of liquidity and credit support facilities.

BCBS and IOSCO also addressed feedback they had received on "technical concerns" following the consultation conducted in July 2017 (see previous coverage). Following this feedback, BCBS and IOSCO amended the following aspects of the criteria they had proposed: (i) the definition of "seller" also applies to transactions that do not involve the sale of assets to the ABCP conduit, (ii) the criteria do not automatically exclude equipment leases and auto loans and lease securitizations from the short-term STC framework, and (iii) the sponsor's role is limited to ensuring that it has received the relevant representations from the sellers.

Concurrently, BCBS issued a standard on the capital treatment of STC short-term securitizations. The standard sets out additional guidance and requirements regarding applying preferential regulatory capital treatment for banks acting as investors in, or as sponsors of, STC short-term securitizations (typically in ABCP structures). Although the short-term STC framework takes effect immediately, its implementation is not mandatory. In addition, jurisdictions that determine the implementation costs outweigh the potential benefits retain the option not to implement the STC framework.

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