Bank and Insurer Capital
Bank capital regulations are vital to the safety and soundness of our economy by ensuring unintended consequences do not impede economic growth.
Overview
SFA is focused on the impact of regulatory capital and liquidity rules – whether new via proposed regulation or legislative action – and related bank regulatory developments. We are especially focused on implications for the securitization market, as well as on the follow-on effects of these policies for bank lending and availability of credit for consumers and small businesses.
SFA Responds to Basel III Endgame Proposal
Structured Finance Association (SFA) submitted a comment letter to the Federal Reserve, FDIC, and Office of the Comptroller of the Currency in response to their proposed capital amendments to Basel III for institutions with total consolidated assets over $100 billion.
SFA’s letter focuses on the dramatic changes proposed to the securitization framework as well as the implications of these changes to the cost and availability of credit to U.S. households and businesses. The letter highlights how the proposed increases to required risk-based capital are arbitrary and excessive since existing standards already incorporate post-crisis reforms.
The letter also demonstrates how the proposed framework is poorly calibrated, less risk-sensitive, and results in a variety of anomalous results. SFA, on behalf of its members, has requested that policymakers adopt the changes outlined in the letter and re-propose the rule for public comment.
“The BASEL ‘Endgame’ proposal is rife with arbitrary increases supported by little to no empirical data, said Michael Bright, CEO of the Structured Finance Association. “For our industry, chief among these is a doubling of a scaling factor that is clearly meant to be extra punitive to securitization for reasons that have nothing to do with today’s market reality. We strongly encourage the regulators to go back to the drawing board and take seriously the impact these numbers will have on capital formation and our economy.”
SFA would like to thank Mayer Brown and the SFA members who participated in the Basel III Task Force chaired by leaders at Bank of America, Capital One, S&P Global, MetLife, and Wells Fargo.
On July 26, the Structured Finance Association (SFA), on behalf of the members of the NAIC task force, submitted a letter to the Financial (E) Committee of the NAIC on amendments made to the Purposes and Procedures (P&P) Manual of the NAIC Investment Analysts Office. The amendments would authorize the procedures for the SVO’s discretion over NAIC ratings designations through the filing exemption process. The SFA commends the NAIC incorporating feedback from the industry in their revised Amendments. The SFA asks the NAIC to provide investors whose security ratings are under review with the option to invite third parties into the discretion process sooner. SFA believes this will afford third parties, especially rating agencies, the opportunity to provide additional detail behind their rating analysis, and the NAIC additional time to evaluate such information.
Publications & Resources
SFA Responds to NAIC’s Written Comments on Holistic Framework on Insurers Investments
April 25, 2024
News
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