The European Association of Co-operative Banks has published a position paper on proposed revisions to the Basel Securitisation Framework. The EACB has expressed a number of concerns about the proposed methodology:

  • the proposed risk rates for securitisation positions are a multiple as compared to the case of the portfolio where held directly (risk rates in RRBA are excessively high, in particular for investment grade ratings). The proposed rating does not seem to reflect the actual risk but imposes excessive capital charges for the securitisation positions;
  • cliff effects are not removed, especially for highly rated assets, especially in the case of alternative B;
  • the credit enhancements do not seem to be taken into consideration;
  • the assumption that securitisation positions performed poorly does not hold for EU securitisation market, which actually performed in line with expectations from most asset classes and geographic areas, even during the crisis;
  • some regulatory changes already address the shortcomings of securitisation: risk retention rules, Basel III liquidity requirements and regulation aimed at improving the supervision, control and performance of rating agencies.