September 29, 2017
Comments on the Consultative Document
Criteria for identifying simple, transparent and comparable short-term securitisations
issued by the Basel Committee on Banking Supervision and the Board of the International
Organization of Securities Commission
Japanese Bankers Association
We, the Japanese Bankers Association (“JBA”), would like to express our gratitude
for this opportunity to comment on the consultative document: Criteria for identifying
simple, transparent and comparable short-term securitisations, issued by the BaselCommittee on Banking Supervision (“BCBS”) and the Board of the International
Organization of Securities Commissions (“IOSCO”) on July 6, 2017.
We respectfully expect that the following comments will contribute to your furtherdiscussion.
[Executive Summary]
We welcome the BCBS and the IOSCO’s new proposal of the STC criteria forshort-term securitisations such as asset-backed commercial papers (“short-term STCcriteria”), reflecting our comments provided for “Capital treatment for “simple,transparent and comparable” securitisations” issued in November 2015. 1 We are
grateful to the BCBS and the IOSCO for discussing the short-term STC criteria bytaking account of the characteristics of ABCP conduits.
On the other hand, there are still requirements practically difficult to comply withand those that need further clarification in the consultative document. We therefore
expect that such requirements will be further reviewed to establish a better balanced
framework from perspectives of cost and benefit.
In the following Specific Comments, we would like to comment on those matterswhich need to be considered in terms of practical business in order to take actions inline with the purposes of the consultative document.

1

JBA’s Comment on the Consultative Document: Capital treatment for “simple, transparent andcomparable” securitisations, issued by the Basel Committee on Banking Supervisionhttps://www.zenginkyo.or.jp/fileadmin/res/abstract/opinion/opinion280235.pdf

1

[Specific Comments]
1. Asset performance history
Criterion A2 requires the sponsor to provide investors with historical data
regarding performance history of credit claims and receivables with substantially similarrisk characteristics to underlying assets.
In this regard, when the sponsor prepares and discloses data for the assets with
substantially similar risk characteristics to underlying assets, the sponsor should beallowed to take flexible approaches in consideration of sponsor’s confidentiality
obligations. For example, the sponsor may use aggregated data created by third parties
such as external rating agencies.
2. Asset selection and transfer
Criterion A5 requires the sponsor to disclose to investors the receipt of appropriate
representations and warranties from sellers that the credit claims or receivables beingtransferred to the securitisation are not subject to any condition or encumbrance that canbe foreseen to adversely affect enforceability in respect of collections due. We would
like to confirm that Criterion A5 can be satisfied if the sponsor discloses the fact that thesponsor receives such representations and warranties from sellers, and the sponsor is not
required to disclose an individual legal agreement with sellers.
If an individual legal agreement with sellers is required to be disclosed, it is likely
to be difficult to comply with this requirement in practice. Therefore, we request tospecify how this disclosure is expected to be made.

[Response to the question]
Question 4: Do respondents agree that the right balance has been achieved in theshort-term STC criteria between the level of transparency needed by investors exposed
to commercial paper issued by STC ABCP conduits and the need to protect the“private” nature of the underlying transactions financed by such STC ABCP conduits?
(Response)We think the following revisions need to be made to the proposed requirements.
Criterion A4 sets forth that the sponsor should inform investors of the material
selection criteria applied when selecting sellers (including where they are not financial
institutions). It also specifies that the sponsor should ensure that sellers disclose to it the2timing and purpose of changes to underwriting standards.
(Specific requirements)“The sponsor should also inform investors of the material selection criteria applied
when selecting sellers (including where they are not financial institutions).”“The sponsor should also ensure that sellers disclose to it the timing and purpose ofchanges to underwriting standards.”
Informing the material selection criteria may lead to disclosure of the sponsor’s
confidential information depending on the scope, and thereby may damage its ability tocompete. We therefore would like to confirm that this requirement can be satisfied bydisclosing to investors elements (e.g., the size of sales and/or industry/sector, etc.)
which are the basis for the selection criteria, instead of disclosing the sponsor’s internal
selection criteria itself.
In addition, we would like to clarify that changes to underwriting standards to bedisclosed by sellers to the sponsor should be limited to material changes that may have asignificant impact on collectability in the future. If any changes to the underwriting
standards are required to be disclosed, this could impose excessive operational burden
for information disclosure, and discourage sellers to securitize their assets.
There would be various approaches for the sponsor to ensure that sellers disclose to
the sponsors significant changes made to their underwriting standards in their process ofstructuring credit claims and receivables. For example, including such requirement in alegal agreement, or carrying out periodic hearing to sellers as a part of the sponsor’sinternal management is considered as the sponsor’s approaches. We would like toconfirm that each sponsor is allowed to take flexible approaches in line with its businesspractice as described above.
In the case of a conduit’s acquisition of credit claims or receivables on abulk-purchase basis, instead of on a revolving-purchase basis, the transfer of the credit
clams or receivables from sellers is executed only once on the closing date. Hence any
subsequent changes to underwriting standards would not have any impact on
performance of the claims or receivables having been transferred. Therefore, such atransaction on a bulk-purchase basis should be excluded from the scope of thisrequirement.
3

Q9. Do respondents agree that the proposed methodology to calculate the average
maturity of the transactions funded by the ABCP conduit is appropriate? Do
respondents agree that the limit on maturity transformation should be set at a value
between one and three years?
(Response)
As for the criterion for cap on maturity transformation, the residual maturity in theobject of the calculation is proposed to be based on the following items of 1 and 2:
1.

the exposure-weighted average residual maturity of the conduit’s contractual
obligations resulting from the beneficial interests held or the assets purchased by
the conduit in order to finance the transactions of the conduit, and2. the exposure-weighted average maturity of the underlying assets financed by theconduit.
With respect to the calculation of weighted average maturity set forth in Criterion
B14, the item 2 should be more specifically defined.
For the item 2, it is not always the case where data, which enable to calculate
weighted average maturity of underlying assets in each pool, is provided. In such a case,the sponsor may instead use the maximum maturity of the assets in the pool as definedin the legal agreements governing the pool (eg investment guidelines). In this regard, if
the legal agreements do not specify the maximum maturity of the assets for a certain
pool, the resultant value for the item 2 would be an infinite value. Since thismethodology is considered to be excessively conservative, more detailed methodology
should be established. The detailed methodology should make the resultant value finite
numbers by including appropriate conditions, such as “if the legal agreements do not
specify the maximum maturity of the assets, the maximum maturity should be set at 5years,” or “if the proportion of a pool with no stated maximum maturity is less than 5%,
the pool should be excluded in calculating the weighted average.”4