FIS Horizons 2023 Brochure - Riding the wave - Flipbook - Page 14
From Basel (III) to
Brussels: no direct train
service for securitization
capital requirements
Tauhid Ijaz
Partner, London
George Kiladze
Senior Associate, London
Jane Griffiths
Counsel Knowledge Lawyer, London
The EU has surged ahead of the UK and the US in implementing the Basel III
standards. The EU Banking Package has been reviewed by the Council of the
EU and will be negotiated with the European Parliament, ahead of the
planned commencement date of 1 January 2025.
The Council has broadly agreed with the
industry bodies’ call for a delay in the
implementation of Basel III and the softening
of certain aspects of regulatory oversight.
However, other than temporary transitional
relief for the output floor until 2030, no
substantive changes urged by the market for
the securitization framework were adopted: a
capital framework for ESG was not
determined, there were no changes to the
capital surcharge applicable to all
securitizations, and no significant softening of
the standardized approach for specific asset
classes. This may negatively affect the
competitiveness of European securitizations,
at a time where regulators are urged to unlock
excess capital to reignite funding in the real
economy. In particular, the impact of the
output floor, coupled with the capital
surcharge for securitizations, is widely
perceived as contributing to making the
securitization market less attractive from a
capital perspective, thereby potentially
impacting bank organizations and bank
participations in securitizations.
Read the full article on Engage here.
Article correct as of 11 November 2022
Note: since publication of the article, the
Bank of England published its consultation on
the implementation of Basel III; proposals
include a revision of the standardized
approach for credit risk, a revised approach to
market risk and adopting the approach of
some other jurisdictions by transitioning the
output floor over 5 years. The EBA also
published its prudential report confirming no
changes to the “p” factor. Please see our
article here.
Article correct as of 21 December 2022.
