In conjunction with a joint consultation laying out criteria for simple and clear asset-backed securities (ABS) that may warrant preferential risk-based capital (RBC) treatment, the Basel Committee has finalized the RBC applicable to these instruments, addressing crisis-learned lessons about ABS risk and revising the current Basel III rules. After extensive debate, the final standards largely hike the risk-weighted asset (RWA) treatment for ABS, only slightly reducing it for a restrictively-defined group of high-quality ABS tranches.
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