September 29, 2017
Comments on the Consultative Document
Capital treatment for simple, transparent and comparable short-term securitisations
issued by the Basel Committee on Banking Supervision
Japanese Bankers Association
We, the Japanese Bankers Association (“JBA”), would like to express our gratitude
for this opportunity to comment on the consultative document: Capital treatment forsimple, transparent and comparable short-term securitisations, issued by the BaselCommittee on Banking Supervision (“BCBS”) on July 6, 2017.
We respectfully expect that the following comments will contribute to your furtherdiscussion.

[Executive Summary]
We welcome the BCBS’s new proposal of the STC criteria for short-term
securitisations such as asset-backed commercial papers (“short-term STC criteria”) andthe capital treatment for short-term securitisations qualifying for STC status, reflecting
our comments provided for “Capital treatment for “simple, transparent andcomparable” securitisations” issued in November 2015. 1 We are grateful to the BCBS
for discussing the criteria and the framework by taking 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.

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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

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[Specific Comments]
1. Payment status
The additional requirement for capital purposes in Criterion A3 requires theoriginal sellers or sponsors to verify that the obligor of the underlying assets has notbeen the subject of insolvency. It would however be very difficult for an original seller
or a sponsor to verify that the obligor has not been insolvent or has not experienced debt
restructuring process in the three years prior to the date of origination. In practice, thesponsor pays attention to the likelihood of default or other similar events at the time ofor after the transfer of the underlying assets. Therefore, this requirement should be
modified to “the original seller or sponsor should, to the best of their knowledge, verify
that it is unlikely that there will be default, debt restructuring or other similar events forunderlying assets at the time of the transfer of the underlying asset.”
2. Asset selection and transfer
The additional requirement for capital purposes in Criterion A5 states that anindependent third-party legal opinion must support the true sale of assets. Under amulti-seller programme, assets are purchased from a number of originators. Therefore, it
is difficult to obtain a legal opinion for each contract in practice if a legal opinion isrequired for each contract. Whereas, an agreement on the transfer of assets generally
uses a template. Given this, we would like to confirm if the requirement is satisfied byobtaining a legal opinion for this template.
3. Granularity of the poolIf the originator is an industrial corporation, it has fewer clients than financial
institutions, which have unspecified large number of clients, and its underlying assets
are less diversified. Thus, there could be a number of cases where the aggregated valueof all exposures to a single obligor exceeds 1% or 2% of the aggregated outstanding
exposure value of all exposures in the programme.
Therefore, the limit on the aggregated value of all exposures to a single debtor
should be raised to 5% from the proposed level.
4. Timeline
It would take a substantial amount of time to establish a framework or
develop/modify systems at each financial institution. We request the BCBS to set a
realistic timeline which is, for example, changing the timing of initial implementation toJanuary 2019 and/or determining an appropriate grandfathering, being aware of the2

implementation situation in other foreign jurisdictions, so as not to impair Japanesebank’s international competitiveness in the development of globalization.
[Response to the question]
Question 2 (With regard to the requirement to allow preferred capital treatment forsponsors’ exposures) What are respondents’ views on the baseline and alternative
approaches being considered by the Committee?
(Response)
We would like to confirm that, when there is a time lag between the acquisition ofunderlying assets and the issuance of ABCP or in other cases, the sponsor’s loan to theconduit is treated as a sponsor’s exposure.
Among the baseline approach, alternative approaches 1 and 2, we believe thealternative approach 2 is the most appropriate.
As described in the consultative document, in case STC capital treatment isassessed on a transaction-by-transaction basis in line with the alternative approach 2,even if a transaction that does not satisfy the STC criteria is included in an ABCP
conduit, it may lead to provide with the sponsor an incentive to continuously increase
STC-compliant transactions under the same conduit.

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