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ARTICLE · 24 FEBRUARY 2015

Regulatory Capital Tool For Securitization Exposures

A&O Shearman
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On February 13, 2015, the Board of Governors of the Federal Reserve System, the FDIC and the Office of the Comptroller of the Currency announced that they have developed an automated tool to aid financial institutions...

United StatesFinance and Banking
A&O Shearman
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On February 13, 2015, the Board of Governors of the Federal Reserve System, the FDIC and the Office of the Comptroller of the Currency announced that they have developed an automated tool to aid financial institutions subject to the agencies' regulatory capital rules in calculating risk-based capital requirements for individual securitization exposures. This tool is not a part of the regulatory capital rules or a component of regulatory reporting, and financial institutions may use the tool solely at their own discretion. Specifically, institutions that use the rules' Simplified Supervisory Formula Approach to calculate risk-based capital requirements for securitization exposures may use the tool to calculate capital requirements for such exposures. The SSFA is a formula-based approach intended to apply relatively higher capital requirements to the more risky junior tranches of securitizations that are the first to absorb losses, and relatively lower requirements to the

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