Further to the update in Edition 12 of this SCM Briefing on the next steps in developing a definition of "high quality securitisation", the Basel Committee and International Organisation of Securities Commissions (IOSCO) have issued a Consultative Document proposing a set of 14 Criteria for identifying "simple, transparent and comparable" (STC) securitisations, which are broadly described as those in which the embedded risks (and rewards) can be thoroughly evaluated and understood by investors. The 14 proposed Criteria are intended to identify and assist in the development of STC securitisations, assist investors in conducting due diligence on securitisation transactions, reduce stigma and improve simplicity in terms of asset and structural risks. Focusing on the three key types of risk inherent in the securitisation process, the Criteria are grouped under the headings of asset risk, structural risk and fiduciary and servicer risk, such that the Criteria seek to separate the pure credit risk arising from the assets underlying a securitisation from the structural elements that may undermine a transaction's credit quality. The proposed approach is described as a "modular" one, whereby the Criteria may be complemented with additional and/or more detailed criteria based on specific (industry) requirements and applications. Indeed, the proposed Criteria are described as non-exhaustive, and it is envisaged that they are supplemented with jurisdiction-specific provisions beyond the globally-applicable minima. We provide a detailed summary of the Consultative Document in a Feature Piece in this Edition of the SCM Briefing.
Basel Committee and IOSCO Consultative Document