FSA has published its third major consultation paper on strengthening capital standards. The paper consults on implementing those aspects of the third Capital Requirements Directive (CRD3) that must be implemented by the end of 2011. The paper covers:
- the trading book, specifically calibration of the floor to the correlation trading portfolio all price risk (APR) model, providing guidance on stress testing the correlation trading portfolio, removing the super-equivalent standard rules for securitisation credit derivatives, creating transitional arrangements for securitisation positions, capping the capital charge for individual debt positions and giving a choice of exposure value to firms that hold positions in credit derivatives as protection sellers;
- securitisations, where FSA now gives feedback and more detail on proposals it previously made. The consultation makes new proposals on FSA’s approach to CRD3 requirements that relate to securitisation in the non-trading book, adopting the (then) Committee of European Banking Supervisors (CEBS) “Article 122a” guidelines and consequential minor changes to the rules that implement Article 122a. FSA also gives more feedback on the scope of re-securitisations and securitisations, highly complex re-securitisations (Article 122b) and re-securitisation risk weights. It has also updated proposals for changes to the reporting of securitisation positions; and
- other changes, including implementing the CEBS guidelines on the management of operational risks in market-related activities into FSA rules and changes to reporting requirements.
FSA needs comments by 11 July, so it can make its rules during Q3 2011 and implement them by the end of the year. It says it thinks a two-month consultation period is appropriate as most of the proposals are not new. (Source: Consultation Paper 11/9***: Strengthening Capital Standards 3)