If enacted by U.S. regulators as currently drafted, the Simple Supervisory Formula Approach (SSFA) would require banks to give capital risk weightings to securitizations that are sharply higher than those assessed under the longstanding ratings-based approach, according to a presentation by Brian P. Lancaster, co-head of structured transactions at RBS, and John Jordan, from the bank’s financial institutions division.

The SSFA is meant to bring bank’s business practices into adherence with 939A of the Dodd Frank Act, which mandates that all federal agencies “remove reliance on credit ratings from their regulations and replace them with appropriate alternatives for evaluating creditworthiness.” 

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