Eligible Liquidity Positions
Authorised Firmproviding an unrated eligible liquidity facility may assign to the resulting securitisation Exposurethe highest risk weight that would be applied to any of the underlying Exposurescovered by the facility.
PIB 4.14.43(1) An off balance sheet SE
Exposurewill receive a 100% CCF unless:(a) the Exposurequalifies as an eligible liquidity facility, or(b) the Exposureis an eligible Servicercash advance facility.(2) In relation to (1), an eligible Servicercash advance facility is a facility provided to a securitisation in order to ensure uninterrupted flow of payments to investors. As long as the Serviceris entitled to full reimbursement and this right is senior to all other claims on cash flows from the underlying pool of Exposures, and where these facilities meet the requirements of PIB 4.14.44 and are unconditionally cancellable at any time, any undrawn commitments can then have a 0% CCF applied.
PIB 4.14.44(1) For the purposes of PIB Rule 4.14.42, an
Authorised Firmmay treat an Exposureas an eligible liquidity facility provided the following requirements are met:(a) the liquidity facility documentation must clearly identify and limit the circumstances under which it may be drawn;(b) draws must be limited to the amount that is likely to be repaid from the liquidation of the underlying Exposuresand any seller provided Credit Enhancements;(c) the facility must not provide credit support by covering for any losses incurred in the underlying pool of Exposuresprior to drawdown;(d) the facility must not be structured to provide regular or permanent funding;(e) the facility must be subject to an asset quality test to preclude it being used to cover Credit Risk Exposuresthat are in default;(f) where the facility is used to fund externally rated Securitiesthe facility can only be used to fund Securitiesthat are externally rated Investment Gradeat the time of funding;(g) the facility cannot be drawn after all Credit Enhancementsfrom which the liquidity facility would benefit have been exhausted; and(h) repayment of draws of the facility cannot be subordinated to any interests of any note holder in the programme or be subject to deferral or waiver.(2) Where the Exposuremeets the requirements as set out in (1), the following CCF will apply:(a) 50% to the eligible liquidity facility regardless of maturity; and(b) 100% if an external rating of the liquidity facility is used for the risk weighting.
PIB 4.14.45(1) An
Authorised Firmwhich provides credit protection for a basket of reference Exposuresthrough an unrated first-to-default Credit Derivativemay apply to the securitisation Exposurethe aggregate of the risk weights that would be assigned to the reference Exposures, provided that the resulting Capital Requirementdoes not exceed the notional amount of the credit protection.(2) An Authorised Firmwhich provides credit protection for a basket of reference Exposuresthrough an unrated second-to-default Credit Derivativemay apply the treatment referred to in (1), except that in aggregating the risk weights, the reference Exposurewith the lowest risk-weighted amount may be excluded.