17. Regulatory Capital Requirements for Securitizations

  1. Daniel Rösch and
  2. Harald Scheule
  1. Kristina Lützenkirchen1,
  2. Daniel Rösch1 and
  3. Harald Scheule2

Published Online: 29 AUG 2013

DOI: 10.1002/9781118818503.ch17

Credit Securitizations and Derivatives: Challenges for the Global Markets

Credit Securitizations and Derivatives: Challenges for the Global Markets

How to Cite

Lützenkirchen, K., Rösch, D. and Scheule, H. (2013) Regulatory Capital Requirements for Securitizations, in Credit Securitizations and Derivatives: Challenges for the Global Markets (eds D. Rösch and H. Scheule), John Wiley & Sons Ltd, Chichester, UK. doi: 10.1002/9781118818503.ch17

Author Information

  1. 1

    Leibniz University of Hannover

  2. 2

    University of Technology, Sydney

Publication History

  1. Published Online: 29 AUG 2013
  2. Published Print: 12 APR 2013

ISBN Information

Print ISBN: 9781119963967

Online ISBN: 9781118818503

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Keywords:

  • ratings based approach (RBA);
  • regulatory capital;
  • securitizations;
  • standardized approach (SA);
  • supervisory formula approach (SFA)

Summary

Asset securitizations are one of the most significant developments in financial intermediation in recent years. Financial institutions use vehicles such as asset-backed securities (ABSs), collateralized debt obligations (CDOs) or mortgage-backed securities (MBSs) to restructure the asset risks of their portfolios and transfer these to investors. Under regulations which are currently implemented, banks may apply the following three approaches: at present two different ways for financial institutions that have received the approval to use the IRB Approach to determine regulatory capital for securitized assets are provided: the Ratings Based Approach (RBA) and Supervisory Formula Approach (SFA). Non-IRB banks (banks that use the Standardized Approach (SA) for their calculations of regulatory capital for their credit exposures) are required to apply the SA to calculate capital requirements for their securitization exposures. The SA is also based on external ratings but is less sophisticated than the RBA approach.