Specific Risk Rules for Positions Covered under the Securitisation Framework
CA-9.2.11A
The specific risk of securitisation positions as defined in Paragraphs CA-6.1.1 to CA-6.1.6 which are held in the trading book is to be calculated according to the method used for such positions in the banking book unless specified otherwise below. To that effect, the risk weight has to be calculated as specified below and applied to the net positions in securitisation instruments in the trading book. The total specific risk capital charge for the correlation trading portfolio is to be computed according to Paragraph CA-9.2.17, and the total specific risk capital charge for securitisation exposures is to be computed according to Paragraph CA-9.1.4.
Added: January 2012CA-9.2.11B
The specific risk capital charges for positions covered under the standardised approach for securitisation exposures are defined in the table below. These charges must be applied by banks using the standardised approach for credit risk. For positions with long-term ratings of B+ and below and short-term ratings other than A-1/P-1, A-2/P-2, A-3/P-3, deduction from capital as defined in Paragraph CA-6.4.2 is required. Deduction is also required for unrated positions with the exception of the circumstances described in Paragraphs CA-6.4.12 to CA-6.4.16. The operational requirements for the recognition of external credit assessments outlined in Paragraph CA-6.4.6 apply.
Specific Risk Capital Charges under the Standardised Approach Based on External Credit Ratings
External Credit Assessment AAA to AA-
A-1/P-1A+ to A-
A-2/P-2BBB+ to BBB-
A-3/P-3BB+ to BB- Below BB- and below
A-3/P-3 or unratedSecuritisation Exposures 1.6% 4% 8% 28% Deduction Re-securitisation Exposures 3.2% 8% 18% 52% Deduction Added: January 2012CA-9.2.11C
The specific risk capital charges for rated positions covered under the internal ratings-based approach for securitisation exposures are defined in the table below. For positions with long-term ratings of B+ and below and short-term ratings other than A-1/P-1, A-2/P-2, A-3/P-3, deduction from capital as defined in Paragraph CA-6.4.2 is required. The operational requirements for the recognition of external credit assessments outlined in Paragraph CA-6.4.6 apply:
(a) For securitisation exposures, banks may apply the capital charges defined in the table below for senior granular positions if the effective number of underlying exposures (N, as defined in CA-6.4.77) is 6 or more and the position is senior as defined in CA-6.4.55. When N is less than 6, the capital charges for non-granular securitisation exposures of the table below apply. In all other cases, the capital charges for non-senior granular securitisation exposures of the table below apply; and(b) Re-securitisation exposures as defined in Paragraph CA-6.1.5 are subject to specific risk capital charges depending on whether or not the exposure is senior as defined in Paragraph CA-6.4.55.
Specific risk capital charges based on external credit ratings (IRB) External rating
(illustrative)Securitisation exposures Re-securitisation exposures Senior, granular Non-senior, granular Non-granular Senior Non-senior AAA/A-1/P-1 0.56% 0.96% 1.60% 1.60% 2.40% AA 0.64% 1.20% 2.00% 2.00% 3.20% A+ 0.80% 1.44% 2.80% 2.80% 4.00% A/A-2/P-2 0.96% 1.60% 3.20% 5.20% A- 1.60% 2.80% 4.80% 8.00% BBB+ 2.80% 4.00% 8.00% 12.00% BBB/A-3/P-3 4.80% 6.00% 12.00% 18.00% BBB- 8.00% 16.00% 28.00% BB+ 20.00% 24.00% 40.00% BB 34.00% 40.00% 52.00% BB- 52.00% 60.00% 68.00% Below BB-/ A-3/P-3 Deduction
Added: January 2012CA-9.2.11D
The specific risk capital charges for unrated positions under the securitisation framework as defined in Paragraphs CA-6.1.1 to CA-6.1.6 will be calculated as set out below, subject to CBB approval:
(a) If a bank has approval for the internal ratings-based approach for the asset classes which include the underlying exposures, the bank may apply the supervisory formula approach (Paragraphs CA-6.4.66 to CA-6.4.81). When estimating PDs and LGDs for calculating KIRB, the bank must meet the minimum requirements for the IRB approach;(b) To the extent that a bank has approval to apply the internally developed approach referred to in CA-14.11.1B to the underlying exposures and the bank derives estimates for PDs and LGDs from the internally developed approach specified in Paragraphs CA-14.11.7 and CA-14.11.8 that are in line with the quantitative standards for the internal ratings-based approach, the bank may use these estimates for calculating KIRB and, consequently, for applying the supervisory formula approach (Paragraphs CA-6.4.66 to CA-6.4.81); and(c) In all other cases the capital charge can be calculated as 12% of the weighted average risk weight that would be applied to the securitised exposures under the standardised approach, multiplied by a concentration ratio. If the concentration ratio is 12.5 or higher the position has to be deducted from capital as defined in Paragraph CA-6.4.2. This concentration ratio is equal to the sum of the nominal amounts of all the tranches divided by the sum of the nominal amounts of the tranches junior to or pari passu with the tranche in which the position is held including that tranche itself.The resulting specific risk capital charge must not be lower than any specific risk capital charge applicable to a rated more senior tranche. If a bank is unable to determine the specific risk capital charge as described above or prefers not to apply the treatment described above to a position, it must deduct that position from capital.
Added: January 2012CA-9.2.11E
A position subject to deduction according to Paragraphs CA-9.2.11B to CA-9.2.11D may be excluded from the calculation of the capital charge for general market risk whether the bank applies the standardised measurement method or the internal models method for the calculation of its general market risk capital charge.
Added: January 2012
