On February 11, 2015, the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), and the Federal Deposit Insurance Corporation (FDIC) released an Excel-based calculator that is designed to assist banks with calculating the capital levels required for their securitization exposures in order to comply with bank regulatory capital requirements under Basel III. The calculator can be accessed on the FDIC announcement page.

This tool will be available for all banks that use the simplified supervisory formula approach to help calculate associated capital requirements. Banks may opt to use the simplified supervisory formula approach (SSFA) under the standardized approach, which is part of the revised capital rule that became effective on January 1, 2015 (for more information, see Article, Basel III Framework: US-EU Comparison: Glossary). Use of the tool is optional and is not a component of regulatory reporting.

The revised capital rule replaced the existing generally applicable risk-based capital standards with a standardized approach. Banks subject to the advanced approaches risk-based capital rule must use the standardized approach to determine their risk-based capital floor, and all other banks must use the standardized approach to determine their overall minimum risk-based capital requirements.

The standardized approach removes references to external credit ratings and provides alternative measures of creditworthiness for determining risk-based capital requirements for securitization exposures. The simplified supervisory formula approach is designed to apply relatively higher risk-based capital requirements to the riskier junior tranches of securitizations, which absorb losses first which applying relatively lower requirements to the most senior tranches. (see Practice Note, BCBS standards and guidelines).

The automated tool:

To ensure that the tool is being used appropriately, banks should continue to: