Even as the guidelines from the Bank of International Settlements (BIS) look as if they won't be finalized for at least another few years, the U.S. regulators are pushing ahead with the final ruling on the treatment of residuals on all securitizations, as well as the final U.S. version of the risk-weighting/recourse provisions for rated securitized assets, Washington sources told ASR.
In a statement last month to the Committee On Banking, Housing and Urban Affairs and the U.S. Senate, concerning the failure of Superior Bank, John Reich, director of the Federal Deposit Insurance Corp., said that the regulators will complete their final guidelines on residuals sometime in October. These will be published before Dec. 1 into the Federal Register, a source said.
Although some players had predicted the regulators would nix the 25% sublimit on counting retained interests as part of tier-one capital, it looks like some form of the limit will stand, in addition to the dollar-for-dollar capital matching.
However, it is said that the types of assets that were lumped into this category has softened to some extent. For example, purchased credit card relationships will not be subject to the same limit as subprime mortgage residuals.
The recourse guidelines, of course, include the long-awaited, revised risk weighting for higher quality assets as well, which changes the capital charge on triple-A and double-A-rated securitized assets to 20% from 100%. Previously the regulators made no distinctions in the capital charge for the tiers of credit risk in securitization.