As anticipated and in response to a lot of hell-no comments from the U.S. and other recalcitrant countries, the Basel Committee has proposed some rewrites to the final “fundamental review of the trading book” (FRTB) rules governing the risk-based regulatory capital for global banks. What Basel didn’t change is the fact that, as before, the FRTB is complex and very specific to individual banks and asset classes. This means that strategic analytics for firms and/or deal structures must go into more detail than possible in an overall report. That said, it’s clear that the new approach to the FRTB may open a bit of balance-sheet capacity for big banks to hold RMBS not guaranteed by a government. Still, all the revisions do is crack open the earlier FRTB. Even with its changes, there still wouldn’t be enough liberated capital to make a meaningful difference in who would want an RMBS or credit-risk tranche from anything other than Ginnie or a GSE.
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