The second white paper from the Bank of International Settlements addressing the risk weightings for securitization under the proposed Basel II rulings is still receiving a thumbs down from European asset-backed bankers and analysts. The paper, which proposes a 12% risk weighting for triple-A rated ABS and up to a 244% risk weighting for double-Bs, has some market participants fairly miffed.
The paper, which was presented to the European ABS community last Monday, has been criticized for not taking the point of view of the industry into consideration. "Securitization is being considered separately from the rest of capital markets in a silo," notes one analyst. Among a host of other complaints, bankers and analysts cannot believe the discrepancy in risk weightings between corporates or sovereigns and ABS. Below B- for corporates or sovereigns will garner a 150% risk weighting. "That's telling investors they are better off investing in Argentina than a double-B ABS deal. That's a joke," says an analyst.