MIPRU 4.2A Credit risk capital requirement

1This section applies to a firm to which MIPRU 4.2.23 R applies.

The credit risk capital requirement of a firm is 8% of the total of its risk weighted exposure amounts for exposures that:

1. (1)

   are on its balance sheet; and

2. (2)

   derive from:

   1. (a)

      a loan entered into; or

   2. (b)

      a securitisation position originated; or

   3. (c)

      a CIU position entered into;

   on or after 26 April 2014; and

3. (3)

   have not been deducted from the firm's capital resources under MIPRU 4.4.4 R or MIPRU 4.2BA;

calculated in accordance with MIPRU 4.2A.

Any arrangements entered into on or after 26 April 20142 which increase the amount of a loan already advanced or change the security to a loan already advanced or change the contractual terms (other than if the firm is exercising forbearance) of a loan already advanced will be subject to the credit risk capital requirement under MIPRU 4.2A.4R (2)(a) provided that, where the arrangements only increase the amount of a loan already advanced, such requirement shall only apply to the amount of such increase.

The exposure value of an asset itemmust be its balance sheet value.

When calculating risk weighted exposure amounts, a firm must comply with BIPRU 3.2.3 R, BIPRU 3.2.9 R to BIPRU 3.2.19 G, and BIPRU 3.2.38 R in the same way that these provisions apply to a BIPRU firm, except to the extent that a provision is modified or excluded in the table in MIPRU 4.2A.8 R.

For the purposes of applying a risk weight, the exposure value must be multiplied by the risk weight determined in accordance with MIPRU 4.2A.10 R, MIPRU 4.2A.11 R, MIPRU 4.2A.12 R or MIPRU 4.2A.13 R.

To calculate risk weighted exposure amounts on exposures secured by mortgages on residential property, risk weights must be applied to all such exposures,unless deducted from capital resources calculated under MIPRU 4.4, in accordance with BIPRU 3.4.56 R to BIPRU 3.4.88 G.

To calculate risk weighted exposure amounts on exposures in CIUs, risk weights must be applied to all such exposures, unless deducted from capital resources under MIPRU 4.4, in accordance with BIPRU 3.4.114 R to BIPRU 3.4.125 R.

Risk weighted exposure amounts for securitised exposures must be calculated in accordance with MIPRU 4.2B.

To calculate risk weighted exposure amounts on exposures other than those provided for in MIPRU 4.2A.10 R to MIPRU 4.2A.12 R, risk weights must be applied to all such exposures, unless deducted from capital resources calculated under MIPRU 4.4, in accordance with BIPRU 3.5.5 G as though that provision were a rule.

If a firm calculates risk weighted exposure amounts under MIPRU 4.2A.13 R and is directed by BIPRU 3.5.5 G to the "normal rules", it must, in the calculation of those risk weighted exposure amounts, comply with BIPRU 3.4 in the same way that that section applies to a BIPRU firm.

Exposures must be assigned a risk weight of 100% if MIPRU 4.2A.10 R to MIPRU 4.2A.13 R do not set out a calculation for risk weighted exposure amounts applicable to that exposure.

A firm must apply BIPRU 3.4.96 R to BIPRU 3.4.102 R to all past items due.