George Kiladze

Significant Risk Transfer’s impact on the output floor under Basel III: the EU’s proposed panacea unveiled

The European Banking Authority, in its Basel III full implementation impact report¹1 found that European banks’ Tier 1 capital requirements would increase by 15% as a 1result of Basel III changes, with the proposals for an output floor being responsible for a 7.1% overall rise. In this article, the authors consider how significant risk transfer (SRT) transactions can be used to decrease a bank’s risk weighted assets (RWAs) in order to minimise their capital burden in light of increased capital requirements as a result of the output floor. Other capital requirements specific to securitisations are also considered.1 1