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The Basel Committee on Banking Supervision ("BCBS") and IOSCO proposed criteria for identifying "simple, transparent, and comparable" ("STC") short-term securitizations.
The published report highlighted criteria to "assist the financial industry in the development of STC structures." In the report, BCBS and IOSCO noted that previously issued STC criteria could not properly be applied to short-term securitizations, particularly those issuing commercial paper through an asset-backed commercial paper ("ABCP") conduit.
The report contains 17 STC criteria for short-term securitizations related to ABCP conduits. The criteria include guidance on due diligence and evaluatory requirements in the following areas:
- asset risk, including nature of assets, performance history, underwriting consistency, selection and transfer, and initial and outgoing data;
- structural risk, including liquidity support, redemption cash flow, asset and liability mismatches, payment priorities, disclosure requirements, alignment of interest and maturity transformation; and
- fiduciary and servicer risk, including fiduciary and contractual responsibilities and transparency to investors.
BCBS and IOSCO are seeking public comments on the proposed STC criteria. Comments must be received by October 5, 2017.
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