Cadwalader attorneys reviewed newly issued criteria for identifying "simple, transparent and comparable" ("STC") short-term securitizations. The criteria were issued by the Basel Committee on Banking Supervision ("BCBS") and IOSCO. The attorneys also addressed a BCBS standard on the capital treatment of STC short-term securitizations (the "Standard").

As previously covered, the 17 Short-Term STC Criteria developed by the BCBS and IOSCO focus on exposures to asset-backed commercial paper ("ABCP") conduits. The Short-Term STC Criteria reflect the characteristics of ABCP conduits; in particular, the roles played by sellers and sponsors.

Short-Term STC Criteria also have implications for the regulatory capital requirements in relation to short-term STC securitizations. The Standard, issued by the BCBS, sets out additional guidance and requirements concerning the application of preferential regulatory capital treatment for banks acting as investors in, or as sponsors of, STC short-term securitizations (the "Short-Term STC Capital Criteria"). The attorneys examined aspects of this additional criteria, including: (i) banks' compliance with the Short-Term STC Capital Criteria; (ii) determination of compliance with the Short-Term STC Capital Criteria; and (iii) capital treatment for exposures to ABCP conduits or transactions that are compliant with the Short-Term STC Capital Criteria.

The attorneys concluded that while the STC framework is generally welcome for both term and short-term securitizations, certain aspects may preclude it from widespread use. First, the STC framework has been largely superseded in the European Union by its "simple, transparent and standardised" criteria in the new Securitisation Regulation. Second, the criteria may be too restrictive and the regulatory benefits not sufficiently significant to encourage broad adoption.

The memorandum was authored by Stephen Day, David Quirolo, Nick Shiren, Jeremiah Wagner, Suzanne Bell, Robert Cannon and Neil Macleod.

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