(iii) Exceptions to General Treatment of Unrated Securitisation Exposures
CA-6.4.12
As noted in the tables above, unrated securitisation exposures must be deducted with the following exceptions: (i) the most senior exposure in a securitisation, (ii) exposures that are in a second loss position or better in ABCP programmes and meet the requirements outlined in paragraph CA-6.4.15, and (iii) eligible liquidity facilities.
Apr 08Treatment of Unrated Most Senior Securitisation Exposures
CA-6.4.13
If the most senior exposure in a securitisation of a traditional or synthetic securitisation is unrated, a bank that holds or guarantees such an exposure may determine the risk weight by applying the "look-through" treatment, provided the composition of the underlying pool is known at all times. Banks are not required to consider interest rate or currency swaps when determining whether an exposure is the most senior in a securitisation for the purpose of applying the "look-through" approach.
Apr 08CA-6.4.14
In the look-through treatment, the unrated most senior position receives the average risk weight of the underlying exposures subject to CBB review. Where the bank is unable to determine the risk weights assigned to the underlying credit risk exposures, the unrated position must be deducted.
Apr 08Treatment of Exposures in a Second Loss Position or Better in ABCP Programmes
CA-6.4.15
Deduction is not required for those unrated securitisation exposures provided by sponsoring banks to ABCP programmes that satisfy the following requirements:
(a) The exposure is economically in a second loss position or better and the first loss position provides significant credit protection to the second loss position;(b) The associated credit risk is the equivalent of investment grade or better; and(c) The bank holding the unrated securitisation exposure does not retain or provide the first loss position.Apr 08CA-6.4.16
Where these conditions are satisfied, the risk weight is the greater of (i) 100% or (ii) the highest risk weight assigned to any of the underlying individual exposures covered by the facility.
Apr 08Risk Weights for Eligible Liquidity Facilities
CA-6.4.17
For eligible liquidity facilities as defined in paragraph CA-6.4.19 and where the conditions for use of external credit assessments in paragraph CA-6.4.6 are not met, the risk weight applied to the exposure's credit equivalent amount is equal to the highest risk weight assigned to any of the underlying individual exposures covered by the facility.
Apr 08
