Related provisions for BIPRU 13.6.24
21 - 40 of 53 items.
The originator of a traditional securitisation may exclude securitised exposures from the calculation of risk weighted exposure amounts and expected loss amounts if either of the following conditions is fulfilled:(1) 2significant credit risk associated with the securitised exposures is considered to have been transferred to third parties; or(2) 2the originator applies a 1250% risk weight to all securitisation positions it holds in the securitisation or deducts these securitisation
Where there is a clean-up call option, the following conditions must be satisfied:(1) the clean-up call option is exercisable at the discretion of the originator;(2) the clean-up call option may only be exercised when 10% or less of the original value of the exposuressecuritised remains unamortised; and(3) the clean-up call option is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to
The securitisation documentation must not contain clauses that:(1) other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator including but not limited to altering the underlying credit exposures or increasing the yield payable to investors in response to a deterioration in the credit quality of the securitised exposures; or(2) increase the yield payable to holders of positions in the securitisation in response
For the purposes of BIPRU 9.4.7 R, an originator will be considered to have maintained effective control over the transferred exposures if it has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is obligated to re-assume transferred risk. The originator's retention of servicing rights or obligations in respect of the exposures does not of itself constitute indirect control of the exposures.[Note:BCD Annex
2Significant credit risk will be considered to be transferred for an originator in the following cases:(1) 2the risk weighted exposure amounts of the mezzanine securitisation positions held by the originator in the securitisation do not exceed 50% of the risk weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;(2) 2where there are no mezzanine securitisation positions in a given securitisation and the originator can demonstrate that
In the case of funded credit protection:(1) to be eligible for recognition the assets relied upon must be sufficiently liquid and their value over time sufficiently stable to provide appropriate certainty as to the credit protection achieved having regard to the approach used to calculate risk weighted exposure amounts and to the degree of recognition allowed; eligibility is limited to the assets set out in the CRM eligibility conditions; and(2) the lending firm must have the
In the case of unfunded credit protection:(1) to be eligible for recognition the party giving the undertaking must be sufficiently reliable, and the protection agreement legally effective and enforceable in the relevant jurisdictions, to provide appropriate certainty as to the credit protection achieved having regard to the approach used to calculate risk weighted exposure amounts and to the degree of recognition allowed; and(2) eligibility is limited to the protection providers
Notwithstanding the presence of credit risk mitigation taken into account for the purposes of calculating risk weighted exposure amounts and as relevant expected loss amounts, a firm must continue to undertake full credit risk assessment of the underlying exposure and must be in a position to demonstrate to the FSA the fulfilment of this requirement. In the case of repurchase transactions and/or securities or commodities lending or borrowing transactions the underlying exposure
Subject to BIPRU 5.8, BIPRU 5.9 and BIPRU 5.7.27 R to BIPRU 5.7.28 R, where the CRM eligibility conditions and the CRM minimum requirements are satisfied, the calculation of risk weighted exposure amounts under the standardised approach may be modified in accordance with the provisions of BIPRU 5.[Note: BCD Annex VIII Part 3 point 1]
The following must be calculated in accordance with BIPRU 9 (Securitisation):(1) risk-weighted exposure amounts for securitisedexposures and for exposures belonging to the IRB exposure class referred to in BIPRU 4.3.2 R (6) (securitisation positions); and(2) the expected loss amounts for securitisedexposures.[Note: BCD Article 87(10) and Article 88(3)]
Where a firm provides credit protection for a number of exposures under terms that the nth default among the exposures shall trigger payment and that this credit event shall terminate the contract, if the product has an external credit assessment from an eligible ECAI the risk weights set out in BIPRU 9 must be applied. If the product is not rated by an eligible ECAI, the risk weights of the exposures included in the basket must be aggregated, excluding n-1 exposures where the
The risk weighted exposure amounts must be calculated according to the formula:Risk-weighted exposure amount = 100% * exposure value except for when the exposure is a residual value of leased properties1 in which case it must1 be calculated as follows:1/t * 100% * exposure value;where t is the greater of 1 and the nearest number of whole years of the lease remaining.1[Note: BCD Annex VII Part 1 point 27]1
Where a firm has full recourse in respect of purchased receivables for default risk and for dilution risk, to the seller of the purchased receivables, BIPRU 4.8.21 R and BIPRU 4.8.30 R need not be applied. The exposure may instead be treated as a collateralised exposure.[Note: BCD Article 87(2) (part)]
(1) Where exposures in the form of a CIU1 meet the criteria set out in BIPRU 3.4.121 R to BIPRU 3.4.122 R (Conditions for look through treatment under the standardised approach) and the firm is aware of all of the underlying exposures of the CIU, the firm must look through to those underlying exposures in order to calculate risk weighted exposure amounts and expected loss amounts in accordance with the methods set out in BIPRU 4.BIPRU 4.9.12 R applies to the part of the underlying
(1) Where exposures in the form of a CIU do not meet the criteria set out in BIPRU 3.4.121 R to BIPRU 3.4.122 R (Conditions for look through treatment under the standardised approach) or the firm is not aware of all of the underlying exposures of the CIU, a firm must look through to the underlying exposures and calculate risk weighted exposure amounts and expected loss amounts in accordance with the approach set out in BIPRU 4.7.9 R - BIPRU 4.7.12 R (Simple risk weights). If,
The expected loss amounts for exposures referred to in BIPRU 4.9.11 R - BIPRU 4.9.12 R must be calculated in accordance with the methods set out in BIPRU 4.4.61 R (Calculation of expected loss for sovereigns, institutions and corporates), BIPRU 4.5.12 R - BIPRU 4.5.14 R (Calculation of expected loss for specialised lending), BIPRU 4.6.47 R - BIPRU 4.6.48 R (Calculation of expected loss for retail exposures), BIPRU 4.7.12 R, BIPRU 4.7.17 R and BIPRU 4.7.26 R (Calculation of expected
(1) Transactions with a linear risk profile with a debt instrument as the underlying instrument must be mapped to an interest rate risk position for the debt instrument and another interest rate risk position for the payment leg.(2) Transactions with a linear risk profile that stipulate the exchange of payment against payment, including foreign exchange forwards, must be mapped to an interest rate risk position for each of the payment legs.(3) If the underlying debt instrument
A firm must not recognise netting for the purpose of applying the CCR mark to market method to an exposure treated under BIPRU 13.5.9 R (that is, the exposure value must be determined as if there were a netting set that comprises just the individual transaction).[Note: BCD Annex III Part 5 point 19 (part)]
A firm must determine the exposure value net of collateral, as follows:exposure value = *max(CMV-CMC;(j)((i)(RPTij)-(l)(RPClj))*CCRMj)where:CMV = current market value of the portfolio of transactions within the netting set with a counterparty gross of collateral.That is, where:CMV = (i)(CMVi)where:CMVi = the current market value of transaction i;CMC = the current market value of the collateral assigned to the netting set.That is, where:CMC = (l)(CMCl)whereCMCl = the current market
Within the corporate exposureIRB exposure class, a firm must separately identify as specialised lending exposures, exposures which possess the following characteristics:(1) the exposure is to an entity which was created specifically to finance and/or operate physical assets;(2) the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate; and(3) the primary source of repayment of the obligation is the income generated
A firm using the methods set out in BIPRU 4.5.8 R (Slotting) for assigning risk weights for specialised lending exposures is exempt from the requirement to have an obligor rating scale which reflects exclusively quantification of the risk of obligor default for these exposures. Notwithstanding BIPRU 4.4.7 R (Seven grades for exposures to sovereigns, institutions and corporates), a firm must have for these exposures four grades for non-defaulted obligors and one grade for defaulted
(1) A firm using the methods set out in BIPRU 4.5.8 R (Slotting) for assigning risk weights for specialised lending exposures must assign each of these exposures to a grade in accordance with BIPRU 4 Annex 1 R, taking into account the following factors:(a) financial strength;(b) political and legal environment;(c) transaction and/or asset characteristics;(d) strength of the sponsor and developer including any public private partnership income stream; and(e) security package.(2)
A firm may generally assign preferential risk weights of 50% to exposures in category 1, and a 70% risk weight to exposures in category 2 if:(1) its IRB permission allows this; and(2) the firm's underwriting characteristics and other risk characteristics are substantially strong for the relevant category.[Note:BCD Annex VII Part 1 point 6 (part)]
Where a firm'sIRB permission authorises it generally to assign preferential risk weights as outlined in BIPRU 4.5.10 R of 50% to exposures in category 1, and 70% to exposures in category 2, the EL value for exposures in category 1 must be 0%, and for exposures in category 2 must be 0.4%.[Note:BCD Annex VII Part 1 point 31 (part)]
Subject to BIPRU 9.11.5 R, the risk weighted exposure amount of a ratedsecuritisation position must be calculated by applying to the exposure value the risk weight associated with the credit quality step with which the credit assessment has been determined to be associated, as prescribed in BIPRU 9.11.2 R or BIPRU 9.11.3 R.[Note:BCD Annex IX Part 4 point 6]
For an originator or sponsor, the risk weighted exposure amounts calculated in respect of its positions in a securitisation may be limited to the risk weighted exposure amounts which would be calculated for the securitised exposures had they not been securitised subject to the presumed application of a 150% risk weight to all past due items and items belonging to regulatory high risk categories (see BIPRU 3.4.104 R and BIPRU 3 Annex 3 R) amongst the securitised exposures.[Note:BCD
(1) A firm having an unratedsecuritisation position may apply the treatment set out in this paragraph for calculating the risk weighted exposure amount for that position provided the composition of the pool of exposuressecuritised is known at all times.(2) A firm may apply the weighted-average risk weight that would be applied to the securitised exposures referred to in (1) under the standardised approach by a firm holding the exposures multiplied by a concentration ratio.(3)
Subject to the availability of a more favourable treatment by virtue of the provisions concerning liquidity facilities in BIPRU 9.11.10 RBIPRU 9.11.12 R, a firm may apply to securitisation positions meeting the conditions set out in BIPRU 9.11.9 R a risk weight that is the greater of:(1) 100%, or(2) the highest of the risk weights that would be applied to any of the securitised exposures under the standardised approach by a firm holding the exposures.[Note:BCD Annex IX Part 4
When the conditions in this paragraph have been met, and in order to determine its exposure value, a conversion figure of 50% may be applied to the nominal amount of a liquidity facility. The risk weight to be applied is the highest risk weight that would be applied to any of the securitised exposures under the standardised approach by a firm holding the exposures. Those conditions are as follows:11(1) the liquidity facility documentation must clearly identify and limit the circumstances
To determine its exposure value, a conversion figure of 0% may be applied to the nominal amount of a liquidity facility that is unconditionally cancellable provided that the conditions set out at BIPRU 9.11.10 R are satisfied and that repayment of draws on the facility are senior to any other claims on the cash flows arising from the securitised exposures.[Note:BCD Annex IX Part 4 point 15]
Where a firm calculates the risk weighted exposure amount of a securitisation position under the standardised approach, where credit protection is obtained on a securitisation position, the calculation of risk weighted exposure amounts may be modified in accordance with BIPRU 5 (Credit risk mitigation).[Note:BCD Annex IX Part 4 point 34]
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]
(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) The providers of credit protection to securitisation positions must be treated as holding positions in the securitisation.(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) 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) 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)
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]
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)]
The IRB approach is an alternative to the standardised approach for calculating a firm's credit risk capital requirements. It may be applied to all a firm'sexposures or to some of them, subject to various limitations on partial use as set out in BIPRU 4.2. Under the IRB approach capital requirements are based on a firm's own estimates of certain parameters together with other parameters set out in the Banking Consolidation Directive.
If a provision of the Handbook relating to the IRB approach says that a firm may do something if its IRB permission allows it, a firm may do that thing unless its IRB permission expressly says that it may not do so except that:(1) BIPRU 4.2.18 R - BIPRU 4.2.19 R (Sequential implementation of IRB approach) and BIPRU 4.2.26 R (1)-BIPRU 4.2.26R (5) (Combined use of standardised approach with IRB approach) only apply if expressly permitted by a firm'sIRB permission;(2) a firm may
For the purposes of calculating risk weighted exposure amounts, a maturity mismatch occurs when the residual maturity of the credit protection is less than that of the protected exposure. Protection of less than three months residual maturity, the maturity of which is less than the maturity of the underlying exposure, must not be recognised.[Note: BCD Annex VIII Part 4 point 1]
(1) The maturity of the credit protection and that of the exposure must be reflected in the adjusted value of the collateral according to the following formula:CVAM = CVA x (t-t*)/(T-t*)where:(a) CVA is the volatility adjusted value of the collateral as specified in BIPRU 5.4.28 R or the amount of the exposure, whichever is the lowest;(b) t is the number of years remaining to the maturity date of the credit protection calculated in accordance with BIPRU 5.8.3 R to BIPRU 5.8.5
(1) The maturity of the credit protection and that of the exposure must be reflected in the adjusted value of the credit protection according to the following formula:GA = G* x (t-t*)/(T-t*)where:(a) G* is the amount of the protection adjusted for any currency mismatch;(b) GA is G* adjusted for any maturity mismatch;(c) t is the number of years remaining to the maturity date of the credit protection calculated in accordance with BIPRU 5.8.3 R to BIPRU 5.8.5 R, or the value of
(1) An originator of a synthetic securitisation may calculate risk weighted exposure amounts1, 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 either of the following conditions is fulfilled:1(a) 1significant credit risk is considered to have been transferred to third parties, either through funded or unfunded credit protection; or(b) 1the originator applies a 1250% risk weight to all securitisation
(1) In calculating risk weighted exposure amounts for the securitised exposures, where the conditions in BIPRU 9.5.1 R are met, the originator of a synthetic securitisation must, subject to the treatment of maturity mismatches set out in BIPRU 9.5.6 R-BIPRU 9.5.8 R, use the relevant calculation methodologies set out in BIPRU 9.9-BIPRU 9.14and not those set out in BIPRU 3 (Standardised credit risk) or BIPRU 4 (IRB approach).(2) For firms calculating risk weighted exposure amounts
Subject to the treatment of maturity mismatches set out in BIPRU 9.5.6 R-BIPRU 9.5.8 R, the originator must calculate risk weighted exposure amounts in respect of all tranches in the securitisation in accordance with the provisions of BIPRU 9.9-BIPRU 9.14. For example, where a tranche is transferred by means of unfunded credit protection to a third party, the risk weight of that third party must be applied to the tranche in the calculation of the originatorsrisk weighted exposure
For the purposes of calculating risk weighted exposure amounts in accordance with BIPRU 9.5.3 R, any maturity mismatch between the credit protection by which the tranching is achieved and the securitised exposures must be taken into consideration in accordance with BIPRU 9.5.7 R-BIPRU 9.5.8 R.[Note:BCD Annex IX Part 2 point 5]
The maturity of the securitised exposures must be taken to be the longest maturity of any of those exposures subject to a maximum of five years. The maturity of the credit protection must be determined in accordance with BIPRU 5 (Credit risk mitigation) and, so far as relevant, BIPRU 4.10 (Credit risk mitigation under the IRB approach).[Note:BCD Annex IX Part 2 point 6]
(1) An originator must ignore any maturity mismatch in calculating risk weighted exposure amounts for tranches appearing pursuant to BIPRU 9.9-BIPRU 9.14 with a risk weight of 1250%. For all other tranches the maturity mismatch treatment prescribed in BIPRU 5.8 (Maturity mismatches) must be applied in accordance with the following formula:RW* is [RW(SP) x (t-t*)/(T-t*)] + [RW(Ass) x (T-t)/(T-t*)](2) The following apply for the purposes of the formula in (1):(a) RW* is risk weighted
In respect of a securitisation position in respect of which a 1250% risk weight is assigned, a firm may, as an alternative to including the position in its calculation of risk weighted exposure amounts, deduct from its capital resources the exposure value of the position. For these purposes, the calculation of the exposure value may reflect eligible funded protection in a manner consistent with BIPRU 9.14.[Note:BCD Annex IX Part 4 points 35, 74 and 75(b)]
Where a firm applies BIPRU 9.10.2 R, 12.5 times the amount deducted in accordance with that paragraph must, for the purposes of BIPRU 9.11.5 R and BIPRU 9.12.8 R, be subtracted from the amount specified in whichever of those rules applies as the maximum risk weighted exposure amount to be calculated by a firm to which one of those rules applies.[Note:BCD Annex IX Part 4 point 36 and point 76]
For the purposes of BIPRU 9.10.2 R (as it applies to the IRB approach):(1) the exposure value of the position may be derived from the risk weighted exposure amounts taking into account any reductions made in accordance with BIPRU 9.10.4 RBIPRU 9.10.6 R;(2) where the supervisory formula method is used to calculate risk weighted exposure amounts and L KIRBR and [L+T] > KIRBR the position may be treated as two positions with L equal to KIRBR for the more senior of the positions.[Note:BCD
A firm calculating risk weighted exposure amounts in accordance with the IRB approach must disclose the following information:(1) the scope of the firm'sIRB permission;(2) an explanation and review of:(a) the structure of internal rating systems and relation between internal and external ratings;(b) the use of internal estimates other than for calculating risk weighted exposure amounts in accordance with the IRB approach;(c) the process for managing and recognising credit risk
For the purposes of BIPRU 11.6.1 R (3), the description must include the types of exposure included in the IRB exposure class, the definitions, methods and data for estimation and validation of PD and, if applicable, LGD and conversion factors, including assumptions employed in the derivation of these variables, and the descriptions of material deviations from the definition of default, including the broad segments affected by such deviations.[Note: BCD Annex XII Part 3 point
For the purposes of BIPRU 11.6.1 R (4), where a firm uses its own estimates of LGDs or conversion factors for the calculation of risk weighted exposure amounts for exposures falling into the sovereign, institution and corporate IRB exposure class1, the firm must disclose those exposures separately from exposures for which it does not use such estimates.[Note: BCD Annex XII Part 3 point 1 (part)]
A firm applying credit risk mitigation techniques must disclose the following information:(1) the policies and processes for, and an indication of the extent to which the firm makes use of, on- and off-balance sheet netting;(2) the policies and processes for collateral valuation and management;(3) a description of the main types of collateral taken by the firm;(4) the main types of guarantor and credit derivative counterparty and their creditworthiness;(5) information about market
(1) Where significant credit risk associated with securitised exposures has been transferred from the originator in accordance with the terms of BIPRU 9.4 or BIPRU 9.5, that originator may:(a) in the case of a traditional securitisation, exclude from its calculation of risk weighted exposure amounts and, as relevant, expected loss amounts, the exposures which it has securitised; and(b) in the case of a synthetic securitisation, calculate risk weighted exposure amounts and, as
1Significant credit risk will be considered to have been transferred for originators in the following cases:(1) the risk weighted exposure amounts of the mezzanine securitisation positions held by the originator in the securitisation do not exceed 50% of the risk weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;(2) where there are no mezzanine securitisation positions in a given securitisation and the originator can demonstrate
Subject to BIPRU 13.8.3 R, in respect of a securities financing transaction, if a firm:(1) has a CCR internal model method permission which covers the transaction; or(2) has a master netting agreement internal models approach permission which covers the transaction;then the firm must use the CCR internal model method approach or the master netting agreement internal models approach, as applicable, to calculate the exposure value for that transaction unless an exception in BIPRU
Notwithstanding BIPRU 13.8.2 R, a firm must determine the exposure value of a credit risk exposure outstanding with a central counterparty in accordance with BIPRU 13.8.8 R1, provided that the central counterparty'scounterparty credit riskexposures with all participants in its arrangements are fully collateralised on a daily basis.[Note: BCD Article 78(4) in respect of SFTs]
A firm may attribute an exposure value of zero for CCR to a securities financing transaction or to any other exposures in respect of that transaction (but excluding an exposure arising from collateral held to mitigate losses in the event of the default of other participants in the central counterparty's arrangements) which is outstanding with a central counterparty and has not been rejected by the central counterparty.[Note: BCD Annex III Part 2 point 6 in respect of SFTs]
Without prejudice to BIPRU 5.6.1 R, eligibility is limited to reciprocal cash balances between a firm and a counterparty. Only loans and deposits of the lending firm may be subject to a modification of risk weighted exposure amounts and, as relevant, expected loss amounts as a result of an on-balance sheet netting agreement.[Note: BCD Annex VIII Part 1 point 4]
For on-balance sheet netting agreements - other than master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions and/or other capital market-driven transactions – to be recognised for the purposes of BIPRU 5 the following conditions must be satisfied:(1) they must be legally effective and enforceable in all relevant jurisdictions, including in the event of the insolvency or bankruptcy of a counterparty;(2) the firm must
1(1) 1Where the conditions set out in BIPRU 5.5.5 R are satisfied, the portion of the exposure collateralised by the current surrender value of credit protection falling within the terms of BIPRU 5.5.4 R must be either:(a) 1subject to the risk weights specified in (3) where the exposure is subject to the standardised approach to credit risk; or(b) 1assigned an LGD of 40% where the exposure is subject to the IRB approach but not subject to the firm's own estimates of LGD.(2) 1In
A firm may treat contractual netting as risk-reducing only under the following conditions:(1) the firm must have a contractual netting agreement with its counterparty which creates a single legal obligation, covering all included transactions, such that, in the event of a counterparty's failure to perform owing to default, bankruptcy, liquidation or any other similar circumstance, the firm would have a claim to receive or an obligation to pay only the net sum of the positive and