As promised on Friday, we here correct our analysis last week of the OCC’s reported decision to reject JPMorgan’s capital treatment for innovative 2016 mortgage structures that could have plowed the way to new-era covered bonds. The initial JPM structure and its risk-weighted asset (RWA) assumption was the first success for U.S. covered bonds in a decade. The OCC’s revised, higher RWA is a blow, but may not block a few more deals now and of course could be revisited as Trump appointees take their places with different views of transactions not only advantageous to large banks, but also used to reduce the direct credit risk assumed by Fannie and Freddie.
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