BIPRU 9.9 Calculation of risk-weighted exposure amounts for securitisation positions

To calculate the risk weighted exposure amount of a securitisation position, the relevant risk weight must be assigned to the exposure value of the position in accordance with BIPRU 9.9 - BIPRU 9.14 based on the credit quality of the position.

[Note: BCD Article 96(1) (part) and Annex IX1, Part 4 point 1]

For the purpose of BIPRU 9.9.1 R, the credit quality of a position may be determined by reference to an ECAI credit assessment or otherwise, as set out in BIPRU 9.9BIPRU 9.14.

[Note: BCD Article 96(1) (part)]

1. (1)

   Where there is an exposure to different tranches in a securitisation, the exposure to each tranche must be considered a separate securitisation position.

2. (2)

   The providers of credit protection to securitisation positions must be treated as holding positions in the securitisation.

3. (3)

   securitisation positions include exposures to a securitisation arising from interest rate or currency derivative contracts.

   [Note: BCD Article 96(2)]

Subject to BIPRU 9.9.5 R,

1. (1)

   where a firm calculates risk weighted exposure amounts under the standardised approach to securitisations outlined in BIPRU 9.11, the exposure value of an on-balance sheet securitisation position must be its balance sheet value;

2. (2)

   where a firm calculates risk weighted exposure amounts under the IRB approach to securitisations outlined in BIPRU 9.12, the exposure value of an on-balance sheet securitisation position must be measured gross of value adjustments;

3. (3)

   the exposure value of an off-balance sheet securitisation position must be its nominal value multiplied by a conversion figure as prescribed in this chapter; and

4. (4)

   the conversion figure referred to in (3) must be 100% unless otherwise specified.

   [Note: BCD Annex IX Part 4 point 2]

The exposure value of a securitisation position arising from a financial derivative instrument must be determined in accordance with BIPRU 13 (Treatment of derivative instruments).

[Note: BCD Annex IX Part 4 point 3]

Where a securitisation position is subject to funded credit protection, the exposure value of that position may be modified in accordance with and subject to the requirements of BIPRU 5 (Credit risk mitigation) as further specified in BIPRU 9.11.13 R and BIPRU 9.14.

[Note: BCD Annex IX Part 4 point 4]

Where a securitisation position is subject to funded or unfunded credit protection the risk weight to be applied to that position may be modified in accordance with BIPRU 5 (Credit risk mitigation) and, if applicable, BIPRU 4.10 (Credit risk mitigation under the IRB approach) read in conjunction with BIPRU 9.14.

[Note: BCD Article 96(3)]

1. (1)

   Where a firm has two or more overlapping positions in a securitisation the firm must, to the extent that the positions overlap, include in its calculation of risk weighted exposure amounts only the position, or portion of a position, producing the higher risk weighted exposure amounts. The firm may also recognise such an overlap between capital charges for specific risk in relation to positions in the trading book and capital charges for positions in the non-trading book, provided that the firm is able to calculate and compare the capital charges for the relevant positions.2

2. (2)

   For the purposes of (1), overlapping means that the positions, wholly or partially, represent an exposure to the same risk such that to the extent of the overlap there is a single exposure.

   [Note: BCD Annex IX Part 4 point 5]

Subject to the provisions of GENPRU that deal with the deduction of securitisation positions at stage M in the relevant capital resources table, the risk weighted exposure amount must be included in the firm's total of risk weighted exposure amounts for the purposes of the calculation of its credit risk capital requirement.

[Note: BCD Article 96(4)]