CA-6.4.48

Banks that have received approval from CBB to use the IRB approach for the type of underlying exposures securitised (e.g. for their corporate or retail portfolio) must use the IRB approach for securitisations. Conversely, banks may not use the IRB approach to securitisation unless they receive approval to use the IRB approach for the underlying exposures from CBB.

CA-6.4.49

If the bank is applying the IRB approach for some exposures and the standardised approach for other exposures in the underlying pool, it should generally use the approach corresponding to the predominant share of exposures within the pool. The bank must consult with the CBB on which approach to apply to its securitisation exposures. To ensure appropriate capital levels, there may be instances where the CBB requires a treatment other than this general rule.

CA-6.4.50

Where there is no specific IRB treatment for the underlying asset type, originating banks that have received approval to use the IRB approach must calculate capital charges on their securitisation exposures applying the standardised approach in the securitisation framework, and investing banks with approval to use the IRB approach must apply the RBA.

CA-6.4.51

The Ratings-Based Approach (RBA) must be applied to securitisation exposures that are rated, or where a rating can be inferred as described in paragraph CA-6.4.60. Where an external or an inferred rating is not available, either the Supervisory Formula (SF) or the Internal Assessment Approach (IAA) must be applied. The IAA is only available to exposures (e.g. liquidity facilities and credit enhancements) that banks (including third-party banks) extend to ABCP programmes. Such exposures must satisfy the conditions of paragraphs CA-6.4.62 and CA-6.4.63. For liquidity facilities to which none of these approaches can be applied, banks may apply the treatment specified in paragraph CA-6.4.84. Exceptional treatment for eligible servicer cash advance facilities is specified in paragraph CA-6.4.86. Securitisation exposures to which none of these approaches can be applied must be deducted.

CA-6.4.52

For a bank applying the IRB approach to securitisation, the maximum capital requirement for the securitisation exposures it holds is equal to the IRB capital requirement that would have been assessed against the underlying exposures had they not been securitised and treated under the appropriate sections of the IRB framework including section CA-5.7. In addition, banks must deduct the entire amount of any gain-on-sale and credit enhancing I/Os arising from the securitisation transaction in accordance with paragraphs CA-6.4.2 to CA-6.4.4.

Operational Requirements for Inferred Ratings