Requirements in Order for a Synthetic Securitisation to be Excluded from the Calculation of RWA
PIB 4.14.18 PIB 4.14.18(1) An
Authorised Firmwhich is an Originatoror a Sponsorof a Synthetic Securitisationmay recognise the effects of Credit Riskmitigation of the Synthetic Securitisationin calculating its SE Exposure RWAs, only if:(a) all of the conditions detailed in PIB Rule A4.10.2 have been complied with;(b) the effects of Credit Riskmitigation are obtained through eligible credit protection, eligible financial Collateralor both; and(c) Credit Riskis transferred to third parties.(2) In relation to (b), the Credit Riskmitigation techniques used must meet the requirements of PIB section 4.13.
PIB 4.14.18 Guidance
In relation to (1)(c) the transferor is deemed to have effective control over the transferred
Credit Risk Exposuresif it has the ability to repurchase the assets, or is obliged to retain the risk of the transferred assets. This does not include the retention of servicing rights.
PIB 4.14.19(1) An
Authorised Firmmeeting the conditions in PIB Rule 4.14.18 must still hold regulatory capital against any securitisation Exposuresit retains.(2) The Authorised Firmmay recognise the effects of Credit Riskmitigation of eligible financial Collateralpledged by any SPE, but it may not recognise any SPE which is an Issuerof securitisation Exposuresas an eligible protection provider.