Collateral damage: Capital proposals threaten Europe's ABS market

The European Central Bank wants to promote securitisation, but critics of the Basel Committee’s proposed new capital rules fear the extra burden will snuff out the European market altogether. The stage is set for the latest clash between policy and regulation. Laurie Carver reports

Georges Duponcheele, BNP Paribas

Working late while London’s lit-up streets were buzzing with Christmas shoppers last year, credit risk quants at BNP Paribas ran into something puzzling. A spreadsheet used in a securitisation deal kept spitting out huge capital numbers under the modified supervisory formula approach (MSFA), proposed by the Basel Committee on Banking Supervision on December 18, days earlier. The sum of the capital generated by all the deal’s tranches was three times the amount that would be required to hold the

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