Securitized Products Weekly

US Fixed Income Strategy

November 2, 2015
John SimAC (1-212) 834-3124
Amy Sze (1-212) 270-0030
Meghan C. Kelleher (1-212) 270-2017

Proposed FRTB ruling

endangers ABS, CMBS and
non-agency RMBS markets

New capital rules are on the horizon for fixed

income trading books in the form of the
Fundamental Review of the Trading Book
(FRTB)

If our interpretation of the regulatory guidelines

is correct, the ruling would make secondary
trading in securitized products unprofitable for
broker-dealers

The final FRTB ruling is expected to be published

in December 2015. After publication, each
country's regulators will modify the ruling to
conform to their jurisdiction. We expect the final
ruling to be implemented in early 2019

FRTB is comprised of three distinct capital

charges: the default risk capital charge, the
enhanced delta plus risk capital charge
(essentially a market shock component), and a
residual risks add-on component

To be clear, the credit spread shock is the major

contributor to the higher capital charges

As proposed, the FRTB jeopardize banks market

making ability in ABS, CMBS and non-agency
RMBS

As per our analysis, there is no sector that

escapes unscathed; capital will rise dramatically
across all securitized product sectors, except
agency MBS

Ultimately, in its current form, the FRTB would

damage the availability of credit to consumers,
reduce lending activity in the form of commercial
mortgage and set back private securitization,
entrenching the GSEs as the primary
securitization vehicle in the residential mortgage
market

New capital rules are on the horizon for fixed income

trading books in the form of the Fundamental Review of
the Trading Book (FRTB). If our interpretation of the

AC

regulatory guidelines is correct, the FRTB would

make secondary trading in securitized products
unprofitable for broker-dealers. Liquidity, which in
many of our markets is at best anemic, would become
non-existent. In the sections below we cover the ruling in
detail and explain our interpretation of the methodology.

Overview
In May 2012, Basel introduced a new capital framework
titled a Fundamental Review of the Trading Book
(FRTB) that set out a number of specific measures
designed to modify trading book capital requirements.
After this, two consultative documents were published in
October 2013 and December 2014. The final FRTB
ruling is expected to be published in December 2015.
After publication, each country's regulators will modify
the ruling to conform to their jurisdiction. We expect the
final ruling to be implemented in early 2019. Regardless
of this lengthy timeframe, banks would most likely start
down a glide path towards the end target much sooner.
While banks can currently utilize either a standardized
approach (SSFA) or an internal ratings-based (model)
approach (IRB) to calculate capital, the FRTB demands
that a standardized approach be used for calculating
capital requirements for securitization positions held in
trading books. This proposed standardized approach is
comprised of three distinct capital charges: the default
risk capital charge, the enhanced delta plus risk capital
charge (essentially a market shock component), and a
residual risks add-on component. For securitization
exposures, these three components are defined and
calculated as follows:

Default risk: The default risk capital charge for

securitization exposures relies on the revised
securitization framework for banking books and
can be calculated using either the Supervisory
Formula Approach (SFA), or SSFA. The
updated SSFA methodology (which we have
chosen to use in this piece) utilizes a
supervisory adjustment factor (p) of 1 (instead
of 0.5 previously), and a minimum risk weight
of 15% (versus 20% previously) or minimum
capital of 1.2% (previously 1.6%).

Enhanced delta plus risk: This capital charge

addresses linear (delta and vega) and nonlinear (curvature) risks, and will replace
existing VaR methodologies for measuring

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Securitized Products Weekly

US Fixed Income Strategy
November 2, 2015
John SimAC (1-212) 834-3124
Amy Sze (1-212) 270-0030
Meghan C. Kelleher (1-212) 270-2017

market risk. This market risk capital charge

measures sensitivities to multiple risk factors,
including interest rates, equities, FX, and credit
spreads. For securitization positions, this
component can be simplistically thought of as
sensitivity to a credit spread shock. The
magnitude of the shock varies based on asset
class and bond seniority, and is presented as a
risk weight in the proposed framework
(Exhibit 1).

Exhibit 1: Reference table for credit spread shock

multiplier for each sector and credit quality under
FRTB

Residual risks add-on: The residual risks addon charge serves as a catch all for other,
potentially unforeseen risks. This charge is
calculated as 1% of a positions notional (face
value); as a result, this add-on is particularly
punitive for non-principal classes (i.e. interestonly bonds) as well as classes traditionally sold
at a deep discount.

Capital calculated under the modified SSFA formula,

credit spread sensitivity charge and the residual add-on is
aggregated to arrive at the total capital for the bond.
To be clear, the credit spread shock is the major
contributor to the higher capital charges. As currently
written, it calls for banks to hold capital buffers that
equate to losses in market value under extraordinarily
large changes in spread. For example, for a jumbo 2.0
bond at the top of the capital structure, the credit spread
shock is equal to its market value change if spreads move
by 400bp. Other sectors and bonds that are lower down
in the capital structure have to hold enough capital to
buffer spread movements that are multiples of that. This
has to be resolved by the regulators for capital to move
down to a reasonable level.

Methodology
In the Appendix, we highlight the capital charges under
the existing SSFA formula and the new FRTB
methodology for non-agency RMBS, CMBS and ABS.
For clarity, let us work through our calculations for
JPMMT 2015-4 B1. At origination, this bond had 4.6%
credit support and a detachment point of 6.85%.
Assuming no 90+ delinquencies, the SSFA formula
under the current Basel III regime leads to a risk weight
of 560%. At a 10.5% capital rate, this translates into
capital charge of around 59% (=10.5% x 560%) of
market value.

AC

Sector

Credit Quality

RMBS - Prime

Senior IG

Multiplier

RMBS - Prime

Non-Senior IG

RMBS - Prime

HY

RMBS - Mid-Prime

Senior IG

RMBS - Mid-Prime

Non-Senior IG

13%

RMBS - Mid-Prime

HY

26%

RMBS - Subprime

Senior IG

RMBS - Subprime

Non-Senior IG

17%

RMBS - Subprime

HY

34%

CMBS

Senior IG

CMBS

Non-Senior IG

17%

CMBS

HY

34%

CLO

Senior IG

CLO

Non-Senior IG

12%
24%

4%
8%
16%
7%

9%

9%

6%

CLO

HY

ABS - Student Loans

Senior IG

ABS - Student Loans

Non-Senior IG

ABS - Student Loans

HY

ABS - Credit Cards

Senior IG

ABS - Credit Cards

Non-Senior IG

10%

ABS - Credit Cards

HY

20%

ABS - Auto

Senior IG

ABS - Auto

Non-Senior IG

4%
7%
14%
5%

5%
10%

ABS - Auto

HY

20%

Other

Senior IG

34%

Other

Non-Senior IG

34%

Other
Source: J.P. Morgan

HY

34%

Under the new FRTB ruling, the capital charge using the
SSFA formula becomes more punitive as the "p" variable
is raised from 0.5 to 1. The SSFA risk weight, therefore,
increases from 560% to 829%. However, the FRTB
methodology doesn't just stop there. It also includes a
credit spread shock and a residual add-on. The residual
add-on is the easiest of the three to calculate. This is just
1% of the bonds face value. The credit spread shock
calculation involves more steps.
The credit spread shock is calculated as the product of
the bond's spread duration (~7.5 years) and a multiplier
in the ruling. The multiplier is dependent on the bond's
current seniority, current credit quality, and sector. A

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Securitized Products Weekly

US Fixed Income Strategy
November 2, 2015
John SimAC (1-212) 834-3124
Amy Sze (1-212) 270-0030
Meghan C. Kelleher (1-212) 270-2017

bond is only classified as being senior if the detachment

point is 100%. The ruling is currently silent on which
ratings to use when bonds are rated by multiple ratings
agencies. To be conservative; we have adopted the
lowest of available ratings to classify the bond as being
investment-grade or non-investment grade. Under these
criteria, JPMMT 2015-4 B1would be classified as a nonsenior investment grade bond in the prime RMBS sector.
Based on Exhibit 1, the bond will have an 8% credit
spread shock multiplier. The capital charge from the
credit spread shock is therefore about 60% of the market
value of the bond (7.5 x 8%). Finally, in the Appendix,
we divide the credit shock and the residual add-on by 8%
to show the values on a RWA basis.
The three components of RWA are then aggregated and
multiplied by a firmwide capital rate to arrive at the
FRTB capital charge for the bond. For small banks, this
firmwide capital is 8%. However, large broker-dealers
who will be affected by this ruling have to add-on the
GSIB charge and the countercyclical measure that raises
firmwide capital to somewhere in the low to mid-teens.
In our exercise, we use 10.5%, which gets us to a capital
charge of 169% for the bond.

Impact on ABS
The cumulative effect on total RWA under FRTB
versus Basel 2.5 is huge. The senior investment grade
part of the capital structure, the highest quality ABS, will
see the biggest increase in capital from the old regime.
Using FORDO 2015-C as an example, class A senior
tranches will see total capital increase by 4.4 to 10.4
times, while subordinate tranches will see increases of
1.3 to 1.9 times. Within the seniors, tranches with more
spread duration will require more capital under the
sensitivity approach. Furthermore, only ABS that
detaches at 100% is considered senior under the FRTB
proposed rules (we assumed all class A bonds to be
senior for our estimates).
While capital on subordinates is increasing by smaller
multiples, on an absolute basis, the new capital charges
represent big numbers. The proposed FRTB capital as a
percentage of market value for FORDO 15-C C is 154%
versus 117% currently. In other words, more than dollarfor-dollar capital charge will be required for a large bank
to hold FORDO 15-C C on its trading books. The
proposed required FRTB capital will be 236% of market
value for NAVSL15-3 B, a bond that is backed by
FFELP student loans guaranteed by the US government.

AC

There is no additional asset breakout for ABS and any

asset class that does not fit cards, autos or student loans
falls into other under the proposed rules. Other ABS
will likely see significant increases in required capital
multiple times over the previous requirement given that
the highest risk weight of 34% is applied across the
capital structure to the other category.
Our estimated capital charges suggest that banks
would need to completely rethink their market
making activity for ABS under the proposed FRTB
rules. Bid/ask spreads or trading volumes would clearly
have to increase substantially to achieve target ROE with
the increased capital charge. At some point, the
economics may point to simply no longer making a
market in the product. This will result in ABS investors
losing liquidity, ABS sponsors getting shut out of
securitization funding, and, ultimately, consumers having
less access to credit.

Impact on CMBS
The FRTB proposal dramatically increases the
potential capital requirement for new issue conduit
bonds even if they have no delinquent loans. For
JPMBB 2015-C31, the capital requirement as a
percentage of market value jumps to 82% for super
seniors, 191% for AS, 202% to 274% for the IG-rated
subs, and 416% for the below investment grade
subordinate classes. In other words, for many tranches
dealers would need to hold far more capital than the
actual market value of the security. The culprit for the
dramatic spike in capital requirements is clear: the credit
spread shock component is by far the largest contributor
to the total capital requirement, constituting 68% to 97%
of total required capital for the tranches in this example.
The onerous credit spread shock multipliers for
CMBS leads to this outcome. The total capital
requirements are similar for fixed-rate, longer duration
single asset/borrower deals while total capital
requirements are mitigated for floating single
asset/borrower deals, simply by the virtue of their lower
spread durations (approximately 5 years at maximum
extension for most deals). We note that these examples
only illustrate potential capital charges under FRTB at
the bond level and do not take into consideration offsets
to capital arising from any correlation benefits.
While the long implementation timeline will mean that
legacy CMBS bonds will largely have matured at that
point, we think it is instructive to calculate potential

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Securitized Products Weekly

US Fixed Income Strategy
November 2, 2015
John SimAC (1-212) 834-3124
Amy Sze (1-212) 270-0030
Meghan C. Kelleher (1-212) 270-2017

FRTB capital charges for legacy conduit CMBS bonds in

order to illustrate what capital charges could look like for
seasoned new issue bonds as we near the go live date.
For legacy conduit CMBS bonds with flushed
delinquency pipelines (GG10 used here as an example),
the total capital requirements across the credit stack are
significantly lower relative to the FRTB requirement for
new issue conduit CMBS even though their credit ratings
are worse overall. This is attributed to lower spread
durations (CS01s) on these bonds, which lowers the
contribution to total capital from the credit spread shock
component. However, the total capital requirements
under the proposed rule are still multiples greater for
these bonds than the current SSFA requirements due to,
again, the large credit spread shock component. For
legacy conduit CMBS bonds with a significant amount of
delinquent loans (MLCFC 2007-5 used here as an
example), capital requirements are quite large even as
their spread durations are low. This is due to the fact that
the default risk contribution to total required capital
increases due to a large concentration of seriously
delinquent loans (30.8% for this deal).
To be clear, if these requirements are intentional, they
spell an extremely onerous outlook for secondary
trading in the CMBS market, effectively making it
impossible for market makers to continue to operate
in this market. Such enormous capital burdens are
difficult to mitigate effectively. CMBX and CDX are
frequently utilized by CMBS market participants for
credit spread hedging purposes but from a capital
perspective under FRTB, the utilization of these
instruments are not efficient for capital relief for the
credit spread shock component. For one, any capital
offsetting potential can only be realized if the synthetic
instrument is in the same product category as the cash
instrument, meaning CDX cannot be used to offset
capital requirements for CMBS. And for capital offsets
on CMBS to be fully realized using CMBX, the
underlying exposures would have to be identical. If
underlying exposures are not identical, hedging via
CMBX only partially offsets capital based on how crosstranche and cross-deal correlations are defined in the
proposal. Bottom line, for the credit spread shock capital
requirement, CMBX is largely ineffective in offsetting
cash bond capital requirements. For default risk (SSFA),
however, netting is more flexible, allowing CMBX to act
as a more effective RWA offset relative to the credit
spread shock component due to the fact that underlying

AC

exposures across CMBX and cash bonds do not

necessarily have to match identically.
Other ways to offset capital are unrealistic, providing no
way for broker/dealers to effectively make markets in
CMBS under this proposal. Another option for capital
relief would be to pass on the increased cost to CMBS
loan borrowers, but the magnitude of coupon increases
would be massive, making that option unrealistic. Still
another route for capital relief would be to pass the cost
onto investors by widening bid/ask spreads, but in our
view this option is also unrealistic given the magnitude
of the concessions investors would have to make.
Framed in a different way, assuming a 15% pre-tax and
pre-expense ROE and a 3bp bid/ask spread for generic
10-year new issue super-seniors, the current capital
charges require broker/dealers to turn over the supersenior book 11 times per year in order to maintain that
ROE. Under the proposed capital regime, the turnover
rate needs to increase to 157-464 times per year
depending on the tranche in order to maintain the 15%
ROE. Obviously, that degree of turnover is unlikely,
forcing required returns to fall. A more realistic turnover
rate of 6 times per year for super seniors would generate
less than 1% ROE for broker/dealers, which we believe
would lead them to exit the market.
The lack of secondary trading in CMBS has significant
and broad implications for the commercial mortgage
market. A significant decline in secondary market
activity will impact the primary markets ability to
issue deals in size and inevitably lead to a decline in
lending activity. CMBS lending has historically
commanded a significant share of overall CRE lending
and, as of Q2 2015, represents 22% of total CRE lending.
There is no clear group of originators that can easily
absorb this level of origination volume, especially for
higher risk borrowers and a decline in CMBS lending
activity is bound to negatively impact broader economic
activity.

Impact on non-agency RMBS

The capital impact on jumbo 2.0, CRT and SFR
markets is so onerous that we wonder if this was the
actual intent of the regulators. Specifically, the credit
spread impact (highlighted earlier) is problematic. At
first blush, we thought that the regulators simply had a
mathematical mistake in their calculation (and were off
by a factor of 100), but unfortunately this is what was
intended.

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Securitized Products Weekly

US Fixed Income Strategy
November 2, 2015
John SimAC (1-212) 834-3124
Amy Sze (1-212) 270-0030
Meghan C. Kelleher (1-212) 270-2017

Capital on AAA jumbo 2.0 would increase from 2.1% (as

a % of market value) to a whopping 26%, and this could
cause more dealers to exit the non-agency market. To put
this into perspective, if a trading business were to target a
pre-tax pre-expense 15% ROE, the current capital charge
would require them to turn their book 2 times per year.
However, the new charge would require them to turn the
book over 32 times per year (Exhibit 2), which is
unrealistic in light of annual BWIC volumes of
approximately $2-$3bn. Anecdotally, on a good year,
trading desks turn their book over 4-6 times.
We believe the new capital charges would make it highly
unattractive for dealers to hold inventory in non-agency
securities, threatening the existence of the market. Put
another way, if the trading business were able to turn
their book over 6 times, their ROE would be 2.8% under
the new capital rules, which is below the threshold.
Things get even worse for lower rated bonds. The already
challenged CRT sector gets even worse with capital on
bottom classes almost tripling from more than 100% to
over 300%. SFR goes from a viable sector with 2.1%
capital charges for class A through D to about 200%. If
this was the intended impact from Basel, then they are
effectively shutting down the non-agency RMBS
markets.
Even without this extraordinarily punitive credit spread
charge, the residual add-on would increase capital for a
sector that is already struggling against headwinds
related to illiquidity, capital usage, and lack of
sponsorship. Policymakers have at various times
advocated for GSE reform in which the private sector
(and private capital) would play a larger role. However,
with such high capital requirements under the
proposal compared with capital advantages for
GSE securities and a negligible amount of capital for
the GSEs themselves we believe this proposal
would significantly set back private securitization,
entrenching the GSEs as the primary securitization
vehicle in the mortgage market.

AC

Exhibit 2: The new capital charges would make it

highly unattractive for dealers to hold inventory
causing more dealers to exit the non-agency market
Turnover to make
15% ROE
Bid-Ask

SSFA

FRTB

ROE under 6x
Turnover
FRTB

Jumbo 2.0
JPMMT 2015-4 1A9

0.13%

32

2.8%

JPMMT 2015-4 B1

0.25%

35

101

0.9%

JPMMT 2015-4 B2

0.50%

38

63

1.4%

JPMMT 2015-4 B3

0.50%

39

64

1.4%

JPMMT 2015-4 B4

0.50%

39

96

0.9%

JPMMT 2015-4 B5

0.50%

39

121

0.7%

STACR 2015-DNA2 M1

0.07%

281

265

0.3%

STACR 2015-DNA2 M2

0.10%

197

322

0.3%

STACR 2015-DNA2 M3

0.10%

197

456

0.2%

STACR 2015-DNA2 B

0.10%

197

554

0.2%

IHSFR 2015-SFR3 A

0.10%

306

0.3%

IHSFR 2015-SFR3 B

0.15%

199

0.5%

IHSFR 2015-SFR3 C

0.15%

199

0.5%

IHSFR 2015-SFR3 D

0.15%

195

0.5%

IHSFR 2015-SFR3 E

0.15%

190

0.5%

IHSFR 2015-SFR3 F
Source: J.P. Morgan

0.15%

69

211

0.4%

Credit Risk Transfer

Single Family Rental

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Securitized Products Weekly

US Fixed Income Strategy
November 2, 2015
John SimAC (1-212) 834-3124
Amy Sze (1-212) 270-0030
Meghan C. Kelleher (1-212) 270-2017

Appendix
ABS
Basel 2.5

FRTB
FRTB RWA

CE%

Risk Weight

Capital as %
of MV

SSFA

FORDO 15-C A1

12.3%

20%

2.1%

FORDO 15-C A2A

12.3%

20%

2.1%

FORDO 15-C A2B

12.3%

20%

FORDO 15-C A3

12.3%

FORDO 15-C A4

12.3%

FORDO 15-C B

9.4%

629%

66.1%

882%

276%

13%

1171%

123%

FORDO 15-C C

7.4%

1117%

117.3%

1180%

275%

13%

1468%

154%

SDART 2015-5 A1

50.3%

20%

2.1%

15%

19%

13%

47%

5%

SDART 2015-5 A2A

50.3%

20%

2.1%

15%

106%

13%

133%

14%

Total RWA

Capital as %
of MV

Credit Sprd

Residual

67%

9%

13%

88%

9%

67%

40%

13%

119%

12%

2.1%

67%

40%

13%

119%

12%

20%

2.1%

67%

90%

12%

169%

18%

20%

2.1%

67%

129%

12%

208%

22%

Auto

SDART 2015-5 A2B

50.3%

20%

2.1%

15%

107%

13%

135%

14%

SDART 2015-5 A3

50.3%

20%

2.1%

15%

193%

13%

221%

23%

SDART 2015-5 B

39.4%

20%

2.1%

15%

469%

13%

497%

52%

SDART 2015-5 C

26.2%

20%

2.1%

63%

546%

13%

622%

65%

SDART 2015-5 D

17.0%

52%

5.4%

241%

605%

13%

859%

90%

SDART 2015-5 E

12.0%

262%

27.6%

564%

1251%

13%

1827%

192%

18.8%

20%

2.1%

35%

163%

12%

211%

22%

NAVSL 2015-3 A1

4.3%

20%

2.1%

15%

113%

13%

140%

15%

NAVSL 2015-3 A2

4.3%

20%

2.1%

15%

388%

13%

416%

44%

NAVSL 2015-3 B

1.5%

596%

62.5%

811%

1418%

16%

2244%

236%

SMB 2015-B A1

24.0%

20%

2.1%

18%

83%

13%

113%

12%

SMB 2015-B A2A

24.0%

20%

2.1%

18%

262%

12%

292%

31%

SMB 2015-B A2B

24.0%

20%

2.1%

18%

271%

13%

301%

32%

SMB 2015-B A3

24.0%

20%

2.1%

18%

372%

13%

402%

42%

SMB 2015-B B

14.5%

94%

9.9%

325%

798%

14%

1136%

119%

SMB 2015-B C

7.8%

640%

67.2%

869%

845%

14%

1728%

181%

DEFT 2015-1 A1

25.0%

20%

2.1%

17%

53%

13%

83%

9%

DEFT 2015-1 A2

25.0%

20%

2.1%

17%

309%

13%

338%

36%

DEFT 2015-1 A3

25.0%

20%

2.1%

17%

613%

13%

643%

68%

DEFT 2015-1 B

19.7%

41%

4.3%

223%

756%

13%

991%

104%

DEFT 2015-1 C

11.2%

247%

26.0%

533%

860%

13%

1405%

148%

DEFT 2015-1 D

7.2%

963%

101.2%

1089%

1006%

13%

2108%

221%

Cards
CHAIT 2015-A7 A7
Student Loans

Other

Note: Based on our understanding of currently proposed FRTB rules. The calculation is simplified for illustration purposes (e.g., excluded other sensitivity factors and
variables).
Source: J.P. Morgan

AC

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Securitized Products Weekly

US Fixed Income Strategy
November 2, 2015
John SimAC (1-212) 834-3124
Amy Sze (1-212) 270-0030
Meghan C. Kelleher (1-212) 270-2017

CMBS
FRTB

Basel 2.5
CMBS
Type

Current
Quality

Senior IG

New Issue
Conduit
CMBS

Non-Senior IG

HY

Legacy
Conduit
(DLQ
Pipeline
Flushed)

Senior IG

HY

Senior IG

Legacy
Conduit
(Full DLQ)
HY

Senior IG
Fixed
SASB

Floating
SASB

Non-Senior IG

FRTB RWA
Total

Capital as

Deal / Tranche

C/E %

RWA

Capital as
% of MV

SSFA

Spread

Credit
Resid.

RWA

% of MV

JPMBB 2015-C31 A1

30.0%

20%

2.1%

15%

272%

12%

299%

31%

JPMBB 2015-C31 A2

30.0%

20%

2.1%

15%

459%

12%

486%

51%

JPMBB 2015-C31 A3

30.0%

20%

2.1%

15%

857%

12%

884%

93%

JPMBB 2015-C31 ASB

30.0%

20%

2.1%

15%

666%

12%

693%

73%

JPMBB 2015-C31 AS

24.8%

20%

2.1%

112%

1695%

12%

1820%

191%

JPMBB 2015-C31 B

16.5%

63%

6.6%

269%

1640%

12%

1921%

202%

JPMBB 2015-C31 C

11.9%

280%

29.4%

583%

1610%

13%

2207%

232%

JPMBB 2015-C31 D

7.8%

825%

86.6%

1005%

1588%

16%

2609%

274%

JPMBB 2015-C31 E

5.1%

1250%

131.3%

1250%

2686%

26%

3962%

416%

JPMBB 2015-C31 F

3.5%

1250%

131.3%

1250%

2686%

26%

3962%

416%

JPMBB 2015-C31 NR

0.0%

1250%

131.3%

1250%

2686%

26%

3962%

416%

GSMS 2007-GG10 A4

27.6%

20%

2.1%

17%

141%

12%

170%

18%

GSMS 2007-GG10 A1A

27.6%

20%

2.1%

17%

154%

12%

183%

19%

GSMS 2007-GG10 AM

12.5%

145%

15.2%

382%

638%

13%

1032%

108%

GSMS 2007-GG10 AJ

2.1%

1097%

115.2%

1163%

629%

22%

1814%

190%

GSMS 2007-GG10 B

0.6%

1250%

131.3%

1250%

1131%

83%

2464%

259%

GSMS 2007-GG10 C

0.0%

1250%

131.3%

1250%

1131%

224%

2605%

274%

MLCFC 2007-5 A4

30.9%

73%

7.6%

226%

114%

12%

352%

37%

MLCFC 2007-5 A4FL

30.9%

73%

7.6%

226%

114%

13%

352%

37%

MLCFC 2007-5 A1A

30.9%

73%

7.6%

226%

113%

12%

351%

37%

MLCFC 2007-5 AM

17.4%

920%

96.6%

1060%

502%

12%

1573%

165%

MLCFC 2007-5 AMFL

17.4%

920%

96.6%

1060%

514%

13%

1587%

167%

MLCFC 2007-5 AJ

5.6%

1250%

131.3%

1250%

489%

13%

1752%

184%

MLCFC 2007-5 AJFL

5.6%

1250%

131.3%

1250%

506%

13%

1769%

186%

MLCFC 2007-5 B

3.2%

1250%

131.3%

1250%

404%

28%

1682%

177%

MLCFC 2007-5 C

2.2%

1250%

131.3%

1250%

323%

52%

1625%

171%

MLCFC 2007-5 D

0.0%

1250%

131.3%

1250%

289%

132%

1671%

175%

HGMT 2015-HGLR A1A1

42.8%

20%

2.1%

15%

848%

13%

876%

92%

HGMT 2015-HGLR A1A2

42.8%

20%

2.1%

15%

849%

13%

877%

92%

HGMT 2015-HGLR B

30.1%

20%

2.1%

40%

1685%

13%

1738%

182%

HGMT 2015-HGLR C

22.9%

20%

2.1%

128%

1660%

13%

1801%

189%

HGMT 2015-HGLR D

8.1%

323%

33.9%

564%

1621%

13%

2198%

231%
463%

HY

HGMT 2015-HGLR E

0.0%

1250%

131.2%

1250%

3145%

13%

4408%

Senior IG

GSCR 2015-HULA A

56.3%

20%

2.1%

15%

489%

12%

516%

54%

GSCR 2015-HULA B

47.7%

20%

2.1%

15%

961%

12%

988%

104%

GSCR 2015-HULA C

41.3%

20%

2.1%

15%

948%

12%

975%

102%

GSCR 2015-HULA D

31.7%

20%

2.1%

38%

920%

13%

970%

102%

GSCR 2015-HULA E

17.0%

35%

3.7%

186%

1806%

13%

2005%

210%

2762%

290%

Non-Senior IG

HY

GSCR 2015-HULA F
0.0%
851%
89.4%
985%
1764%
13%
Note: Assumes total required capital of 10.5%, including the baseline minimum requirement of 8% and the 2.5% countercyclical buffer
Source: J.P. Morgan, PricingDirect, Bloomberg, Basel Committee on Banking Supervision

AC

Indicates certifying analyst. See last page for analyst certification and important disclosures.

Securitized Products Weekly

US Fixed Income Strategy
November 2, 2015
John SimAC (1-212) 834-3124
Amy Sze (1-212) 270-0030
Meghan C. Kelleher (1-212) 270-2017

Non-agency RMBS

Basel III

FRTB
FRTB RWA

CE%

Risk
Weight

Capital
as % of MV

SSFA

Credit
Sprd

Residual

Total RWA

Capital
as % of MV

JPMMT 2015-4 1A9

15.0%

20%

2.1%

15%

225%

12%

252%

26%

JPMMT 2015-4 B1

4.6%

560%

58.8%

829%

764%

12%

1605%

169%

JPMMT 2015-4 B2

2.9%

1199%

125.9%

1223%

759%

13%

1995%

209%

JPMMT 2015-4 B3

1.8%

1250%

131.3%

1250%

753%

13%

2016%

212%

JPMMT 2015-4 B4

0.8%

1250%

131.3%

1250%

1774%

18%

3042%

319%

JPMMT 2015-4 B5

0.0%

1250%

131.3%

1250%

2578%

22%

3850%

404%

STACR 2015-DNA2 M1

4.9%

1250%

131.3%

976%

187%

13%

1176%

123%

STACR 2015-DNA2 M2

2.7%

1250%

131.3%

1231%

803%

13%

2047%

215%

STACR 2015-DNA2 M3

1.0%

1250%

131.3%

1250%

1632%

13%

2895%

304%

STACR 2015-DNA2 B

0.0%

1250%

131.3%

1250%

2257%

13%

3520%

370%

IHSFR 2015-SFR3 A

55.0%

20%

2.1%

15%

1913%

13%

1940%

204%

IHSFR 2015-SFR3 B

44.9%

20%

2.1%

15%

1870%

13%

1898%

199%

IHSFR 2015-SFR3 C

36.7%

20%

2.1%

15%

1870%

13%

1898%

199%

IHSFR 2015-SFR3 D

29.1%

20%

2.1%

15%

1828%

13%

1855%

195%

IHSFR 2015-SFR3 E

17.7%

37%

3.9%

15%

1785%

13%

1813%

190%

IHSFR 2015-SFR3 F

5.0%

653%

68.6%

293%

1700%

13%

2006%

211%

Jumbo 2.0

Credit Risk Transfer

Single Family Rental

Basel III capital does not include market risk capital that is currently sourced from firmwide VAR models;
Capital under FRTB does not include other market shocks (i.e. equity, FX, commodity, etc.) as these are not material relative to the credit spread shock;
RWA shown as a % of Market Value;
Source: J.P. Morgan, PricingDirect, Bloomberg, Basel Committee on Banking Supervision

AC

Indicates certifying analyst. See last page for analyst certification and important disclosures.

Securitized Products Weekly

US Fixed Income Strategy
New York, November 2, 2015

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Indicates certifying analyst. See last page for analyst certification and important disclosures.

Securitized Products Weekly

US Fixed Income Strategy
New York, November 2, 2015

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