Basel: Treatment of securitisation transactions for banks

Jonathan G F Walsh, Partner, Head of International Securities Group, Norton Rose. An earlier version of this article originally appeared in the September 2003 edition of Norton Rose’s International Securities Quarterly.

This article examines the proposals for the regulatory treatment of securitisation transactions set out in the consultation papers issued to date by the Basel Committee on banking supervision (the Committee). The latest working paper (CP3) was issued by the Committee in April 2003, for final comment by 31 July 2003. The European Commission issued its third consultation paper (CD3) on the implementation of the “Basel II” proposals in July 2003. As at 15 March 2004 more than 130 respondents had commented on issues raised by CD3. The UK Financial Services Authority (FSA) also issued a consultation paper in July 2003, Consultation Paper 189 (CP189), setting out for the first time its primary approaches to the implementation of the new Basel and EU capital adequacy standards in the UK, on which (as at the time of writing) there has been no feedback. Last, but not least, UK HM Treasury also released a consultation document in December 2003 (‘HMT Paper’) relating to the transposition of the new Basel Accord into EU legislation. Accordingly, now would seem an appropriate time to take stock of the capital treatment of asset securitisation likely to apply as from 2007 in most European jurisdictions as a result of the implementation of the new rules.