MIPRU 4.2B Securitisation
Application
This section applies to a firm to which MIPRU 4.2.23 R applies.
Purpose
The purpose of MIPRU 4.2B is to set out:
- (1)
how a firm that is required to calculate the credit risk capital requirement under MIPRU 4.2.23 R should calculate the risk weighted exposure amounts for securitisation positions; and
- (2)
the requirements that investors, originators and sponsors of securitisations on the balance sheet will have to meet (BIPRU 9.3.1A R and BIPRU 9.3.15 R to BIPRU 9.3.20 R).
Calculation of risk weighted exposure amount for securitisation positions
To calculate the risk weighted exposure amount for securitisation positions, a firm must comply with BIPRU 9 in the same way that that section applies to a BIPRU firm, except to the extent that a provision of BIPRU 9 is modified or excluded in the table in MIPRU 4.2B.4 R.
This table belongs to MIPRU 4.2B.3 R
BIPRU provision |
Adjustment |
All sections of BIPRU 9 |
All references to capital resources in BIPRU 9 are replaced by references to capital resources calculated under MIPRU 4.4 |
All sections of BIPRU 9 |
A reference to a provision of BIPRU 3, BIPRU 5 or BIPRU 9 must be read in conjunction with MIPRU 4.2A.8 R, MIPRU 4.2B.4 R and MIPRU 4.2C.4 R |
This rule does not apply |
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This provision does not apply |
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The words "and these should be taken into account under the overall Pillar 2 rule" do not apply |
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This provision does not apply |
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This provision does not apply |
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This section does not apply |
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These rules do not apply |
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The first sentence of this rule is amended to read as follows: "A firm, whether acting as sponsor or originator, must apply the same sound and well defined criteria used for credit granting in respect of exposures held on its balance sheet to exposures to be securitised." |
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This rule is amended to read as follows: "A firm must apply the same standards of analysis to exposures under BIPRU 9.3.15 R regardless of whether it has purchased or originated those exposures." |
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Where a firm is an originator, it must comply with this rule as it applies to a credit institution |
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Where a firm is an originator or sponsor of a securitisation, it must comply with this rule in the same way that it applies to a credit institution |
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Where a firm is an originator or sponsor of a securitisation, it must comply with this rule in the same way that it applies to a credit institution |
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This provision does not apply |
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This provision does not apply |
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This rule is amended to read as follows: "The originator of a traditional securitisation may exclude securitised exposures from the calculation of risk weighted exposure amounts and expected loss amounts if significant credit risk associated with the securitised exposures has been transferred to third parties and the transfer complies with the conditions in BIPRU 9.4.2 R to BIPRU 9.4.10 R." |
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These provisions do not apply |
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This rule is amended to read as follows: "An originator of a synthetic securitisation may calculate risk weighted exposure amounts, and, as relevant, expected loss amounts, for the securitised exposures in accordance with BIPRU 9.5.3 R and BIPRU 9.5.4 R, if significant credit risk has been transferred to third parties, either through funded or unfunded credit protection, and the transfer complies with the conditions in (2) - (5)." |
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The reference to BIPRU 4.10 (Credit risk mitigation under the IRB approach) does not apply |
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This rule does not apply |
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This rule does not apply |
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These provisions do not apply |
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The reference to BIPRU 9.9 to BIPRU 9.14 is replaced by a reference to BIPRU 9.9 to BIPRU 9.11 The reference to BIPRU 3 is replaced by a reference to MIPRU 4.2A The reference to BIPRU 4 (IRB approach) does not apply |
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This rule does not apply |
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The reference to BIPRU 9.9 to BIPRU 9.14 is replaced by a reference to BIPRU 9.9 to BIPRU 9.11 |
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The reference to BIPRU 4.10 (Credit risk mitigation under the IRB approach) does not apply |
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The reference to BIPRU 9.9 to BIPRU 9.14 is replaced by a reference to BIPRU 9.9 to BIPRU 9.11 |
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This provision does not apply |
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This provision does not apply |
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The reference to BIPRU 9 is replaced by a reference to MIPRU 4.2B |
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The reference to BIPRU 9 is replaced by a reference to MIPRU 4.2B |
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The references to BIPRU 4.10 (Credit risk mitigation under the IRB approach) do not apply |
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The reference to BIPRU 9.9 to BIPRU 9.14 is replaced by a reference to BIPRU 9.9 to BIPRU 9.11 |
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The reference to BIPRU 9.9 to BIPRU 9.14 is replaced by a reference to BIPRU 9.9 to BIPRU 9.11 |
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This rule does not apply |
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This rule does not apply |
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The reference to BIPRU 9.14 does not apply |
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The reference to BIPRU 4.10 (Credit risk mitigation under the IRB approach) and the reference to BIPRU 9.14 do not apply |
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The words "subject to the provisions of GENPRU that deal with the deduction of securitisation positions at stage M in the relevant capital resources table" do not apply |
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The references to the IRB approach do not apply |
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This rule does not apply |
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The reference to BIPRU 9.12.8 R does not apply |
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These rules do not apply |
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This section does not apply |
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This section does not apply |
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This section does not apply |
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This section does not apply |
Subject to BIPRU 9.3.6 G, for the purposes of BIPRU 9.4.1 R and BIPRU 9.5.1 R the transfer of credit risk to third parties should only be considered significant if the proportion of risk transferred is broadly commensurate with, or exceeds, the proportion by which risk weighted exposure amounts are reduced.
For measuring the reduction in risk and risk weighted exposure amounts, an originator should assess the securitisation positions it holds against the underlying exposures as if they had never been securitised.
An originator should use an appropriate method, consistent with its own internal processes, to assess whether the risk transferred is significant.
If the result of:
- (1)
applying a risk weight of 1250% to all positions that an originator holds in the securitisation; or
- (2)
deducting all those positions from capital resources;
is a reduction in the originator's capital requirement compared to the capital requirements that would apply had it not transferred the securitised exposures, then the originator may treat the risk transferred as significant for the purposes of BIPRU 9.4.1 R and BIPRU 9.5.1 R.