Considering that the Basel II recommendations for bank capital requirements affects about two dozen banks - at the most, according to banking experts - it sure is causing a stir in the industry. Capital markets observers, however, say the revised set of recommendations, might have, only minor effects on securitization.

Under the Basel II scheme, for which large banks mainly pushed passage, institutions are allowed to choose between two methods for calculating adequate regulatory capital, and apply one of them. The first employs an internal rating based (IRB) approach. Banks can utilize their own internal estimates for default probabilities to determine the risk-weighted capital allocation. The second is more standardized. Risk weights are applied based on the exposure's external rating, according to DBRS. As such, Basel II is more sensitive to credit ratings than the previous model.

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