Corporate Exposure Securitization To Be Unaffected By Basel II

The implementation of Basel II will not lead to a reduction in the securitization of corporate exposures, according to analysts at Standard and Poor's.

  • 22 Dec 2006
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The implementation of Basel II will not lead to a reduction in the securitization of corporate exposures, according to analysts at Standard and Poor's. While the new regulatory capital framework, set to be introduced on Jan.1, may reduce regulatory capital arbitrage incentives, banks may increasingly view securitization as an effective method of neutralizing potential volatility in the Basel II capital ratios, according to Bernard de Longevialle, credit analyst at the rating agency. "One of our concerns is that Basel II may create an incentive for less-sophisticated banks to acquire the riskiest assets," he added. An S&P report, 'Assessment Of The Basel II Framework: Incentive To Securitize Corporate Exposures Remains,' identifies two main elements of Basel II which would reduce regulatory arbitrage incentives. Firstly, the framework's risk-sensitive treatment of each asset class will lower capital requirements for low-risk assets. Secondly, retained equity tranches will be deducted 50% from Tier 1 capital and 50% from Tier 2 capital, instead of being deducted from total capital ­ essentially Tier 2 capital ­ as is currently the case in jurisdictions such as the U.K., the Netherlands and Germany.

Andrew South, credit analyst at S&P, said that securitizations in which the originator holds most of the risk through the CDO equity piece may prove doubly appealing. "Not only will banks benefit from lower but still significant capital relief under Basel II, but, since the equity piece is not rated, the associated capital charge would not be affected by future volatility in the portfolio's credit quality."

  • 22 Dec 2006

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 4,755 19 11.75
2 Citi 4,288 14 10.60
3 Rabobank 2,633 4 6.51
4 Goldman Sachs 2,615 4 6.46
5 Barclays 2,603 8 6.43

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Jul 2017
1 Bank of America Merrill Lynch 57,210.26 177 12.39%
2 Citi 56,957.04 171 12.34%
3 Wells Fargo Securities 47,551.45 149 10.30%
4 JPMorgan 32,965.91 111 7.14%
5 Credit Suisse 23,990.96 75 5.20%