(iii) Exceptions to General Treatment of Unrated Securitisation Exposures
CA-6.4.12
As noted in the tables above, unrated securitisation exposures must be risk weighted at 1,250% 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.
January 2015Treatment 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
conventional bank licensee 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.Conventional bank licensees 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.January 2015CA-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
conventional bank licensee is unable to determine the risk weights assigned to the underlyingcredit risk exposures, the unrated position must be risk-weighted at 1,250%.January 2015Treatment of Exposures in a Second Loss Position or Better in ABCP Programmes
CA-6.4.15
A 1,250% risk weighting is not required for those unrated securitisation exposures provided by sponsoring
conventional bank licensees 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 associatedcredit risk is the equivalent of investment grade or better; and(c) Theconventional bank licensee holding the unrated securitisation exposure does not retain or provide the first loss position.January 2015CA-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.
January 2015Risk 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.
January 2015
