Calculation of Credit RWA Arising from Securitisations
PIB 4.14.8 PIB 4.14.8
Authorised Firmmust calculate the Credit RWAamounts for Exposuresarising from securitisations according to the requirements in this section.
PIB 4.14.8 Guidance1. An
Authorised Firmshould apply the securitisation framework set out in this section for determining the regulatory Capital Requirementson Exposuresarising from traditional and Synthetic Securitisationsor similar structures that contain features common to both.2. This section sets out the requirements for Originators, Authorised Firmswhich transfer Credit Riskfrom their balance sheets and Sponsorsin a securitisation transaction involving Non-Trading Book Exposures. This section also sets out the methodologies for calculation of RWAamounts for securitisation Exposures. The Rulessetting out the methodologies for calculation of Market Risk Capital Requirementamounts for securitisation Exposuresheld in the Trading Bookare specified in PIB chapter 5 and PIB App5 of this module.3. As securitisations may be structured in many different ways, an Authorised Firmengaging in the activities relating to securitisations (whether traditional or Synthetic) must ensure that the economic substance of the transaction is fully considered, and reflected, in determining the capital treatment of a securitisation, rather than relying on the legal form of the Securitisation.
Authorised Firmis required, subject to PIB Rule 4.14.12, to include all securitisation Exposuresin its calculation of Credit RWAsrelating to securitisations, including the following:(a) those arising from the provision of Credit Riskmitigants to a securitisation;(b) investments in asset backed Securities;(c) retention of a subordinated tranche;(d) extension of a liquidity facility; and(e) extension of Credit Enhancement.
Authorised Firmmust include in its calculation of Credit RWAall of its securitisation Exposuresheld in the Non-Trading Book, except for those securitisation Exposureswhich the Authorised Firmis required to include as deductions from T1 Capital and deductions from T2 Capital.
Repurchased securitisation transactions must be treated as retained securitisation