Collateral damage: Capital proposals threaten Europe's ABS market

Insecuritisation

duponcheele-20georges
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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