Related provisions for BIPRU 3.6.3

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BIPRU 3.6.1RRP
The use of ECAI credit assessments for the calculation of a firm'srisk weighted exposure amounts must be consistent and in accordance with BIPRU 3.61. Credit assessments must not be used selectively.[Note: BCD Article 83(1)]
BIPRU 3.6.2RRP
Where the appropriate regulator's recognition of an ECAI is not limited to its solicited credit assessments, a firm may use an unsolicited credit assessment of an eligible ECAI for the calculation of a firm'srisk weighted exposure amounts.[Note: BCD Article 83(2)]
BIPRU 3.6.4RRP
A firm may nominate one or more eligible ECAIs to be used for the determination of risk weights to be assigned to asset and off-balance sheet items.[Note: BCD Annex VI Part 3 point 1]
BIPRU 3.6.5RRP
A firm which decides to use the credit assessments produced by an eligible ECAI for a certain class of items must use those credit assessments consistently for all exposures belonging to that class.[Note: BCD Annex VI Part 3 point 2]
BIPRU 3.6.6RRP
A firm which decides to use the credit assessments produced by an eligible ECAI must use them in a continuous and consistent way over time.[Note: BCD Annex VI Part 3 point 3]
BIPRU 3.6.7RRP
A firm can only use ECAIs' credit assessments that take into account all amounts both in principal and in interest owed to it.[Note: BCD Annex VI Part 3 point 4]
BIPRU 3.6.8RRP
If only one credit assessment is available from a nominated ECAI for a rated item, that credit assessment must be used to determine the risk weight for that item.[Note: BCD Annex VI Part 3 point 5]
BIPRU 3.6.9RRP
If two credit assessments are available from nominated ECAIs and the two correspond to different risk weights for a rated item, the higher risk weight must be applied.[Note: BCD Annex VI Part 3 point 6]
BIPRU 3.6.10RRP
If more than two credit assessments are available from nominated ECAIs for a rated item, the two assessments generating the two lowest risk weights must be referred to. If the two lowest risk weights are different, the higher risk weight must be assigned. If the two lowest risk weights are the same, that risk weight must be assigned.[Note: BCD Annex VI Part 3 point 7]
BIPRU 3.6.11RRP
(1) If a firm has decided to make use of the credit assessments of export credit agencies, when risk weightingexposures to central governments or central banks, if two or more credit assessments are available to a firm from export credit agencies or if credit assessments are available to a firm from both nominated ECAIs and export credit agencies, the firm must adopt the approach in this rule.(2) If two credit assessments are available and correspond to different risk weights
BIPRU 3.4.2RRP
Subject to BIPRU 3.4.4 R, exposures to central governments and central banks for which a credit assessment by a nominated ECAI is available must be assigned a risk weight according to the table in BIPRU 3.4.3 R in accordance with the assignment by the appropriate regulator in accordance with the Capital Requirements Regulations 2006 of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.[Note: BCD Annex VI Part 1 point 2]
BIPRU 3.4.3RRP

This table belongs to BIPRU 3.4.2 R.

Credit quality step

1

2

3

4

5

6

Risk weight

0 %

20 %

50 %

100 %

100 %

150 %
BIPRU 3.4.7RRP
An export credit agency credit assessment may be recognised by a firm for the purpose of determining the risk weight to be applied to an exposure under the standardised approach if either of the following conditions is met:(1) the credit assessment is a consensus risk score from export credit agencies participating in the OECD "Arrangement on Guidelines for Officially Supported Export Credits"; or(2) the export credit agency publishes its credit assessments, and the export credit
BIPRU 3.4.8RRP
Exposures for which a credit assessment by an export credit agency is recognised for risk weighting purposes must be assigned a risk weight according to the table in BIPRU 3.4.9 R.[Note: BCD Annex VI Part 1 point 7]
BIPRU 3.4.9RRP

This table belongs to BIPRU 3.4.8 R.

MEIP

0

1

2

3

4

5

6

7

Risk weight

0%

0%

20%

50%

100%

100%

100%

150%
BIPRU 3.4.34RRP
Exposures to institutions with a residual maturity of more than three months 6for which a credit assessment by a nominated ECAI is available must be assigned a risk weight according to the table in BIPRU 3.4.35 R in accordance with the assignment by the appropriate regulator in accordance with the Capital Requirements Regulations 2006 of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.[Note: BCD Annex VI Part 1 point 29]
BIPRU 3.4.35RRP

This table belongs to BIPRU 3.4.34 R.

Credit quality step

1

2

3

4

5

6

Risk weight

20%

50%

50%

100%

100%

150%
BIPRU 3.4.37RRP
Exposures to an institution with a residual maturity of three months or less 6for which a credit assessment by a nominated ECAI is available must be assigned a risk weight according to the table in BIPRU 3.4.38 R in accordance with the assignment by the appropriate regulator in accordance with the Capital Requirements Regulations 2006 of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.[Note: BCD Annex VI Part 1 point 31]
BIPRU 3.4.38RRP

This table belongs to BIPRU 3.4.37 R.

Credit quality step

1

2

3

4

5

6

Risk weight

20%

20%

20%

50%

50%

150%
BIPRU 3.4.50RRP
Exposures for which a credit assessment by a nominated ECAI is available must be assigned a risk weight according to the table in BIPRU 3.4.51 R in accordance with the assignment by the appropriate regulator in accordance with the Capital Requirements Regulations 2006 of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.[Note: BCD Annex VI Part 1 point 41]
BIPRU 3.4.112RRP
Exposures to institutions where BIPRU 3.4.34 R to BIPRU 3.4.39 R apply, and exposures to corporates6 for which a short-term credit assessment by a nominated ECAI is available must be assigned a risk weight according to the table in BIPRU 3.4.113 R in accordance with the mapping by the appropriate regulator in accordance with the Capital Requirements Regulations 2006 of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.[Note: BCD Annex VI
BIPRU 3.4.113RRP

This table belongs to BIPRU 3.4.112 R.

6

Credit quality step

1

2

3

4

5

6

Risk weight

20%

50%

100%

150%

150%

150%
BIPRU 3.4.117RRP

Table: Exposures in the form of CIUs for which a credit assessment by a nominated ECAI is available

This table belongs to BIPRU 3.4.116 R.

Credit quality step

1

2

3

4

5

6

Risk weight

20%

50%

100%

100%

150%

150%
BIPRU 3.4.119GRP
A firm should consider a CIU as being high risk where there is no external credit assessment from an eligible ECAI and where the CIU has specific features (such as high levels of leverage or lack of transparency) that prevent it from meeting the eligibility criteria laid out in BIPRU 3.4.121 R.
BIPRU 3.4.133RRP
Where a firm provides credit protection for a number of exposures under terms that the nth default among the exposures triggers payment and that this credit event terminates the contract, and where the product has an external credit assessment from an eligible ECAI the risk weights prescribed in BIPRU 9 must be assigned. 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, up to a
BIPRU 9.8.1RRP
The use of ECAIs' credit assessments for the calculation of a firm'srisk weighted exposure amounts under BIPRU 9 must be consistent and in accordance with BIPRU 9.8.2 RBIPRU 9.8.7 R. Credit assessments must not be used selectively.[Note:BCD Article 99]
BIPRU 9.8.2RRP
A firm may nominate one or more eligible ECAIs the credit assessments of which must be used in the calculation of its risk weighted exposure amounts under BIPRU 9 (a nominated ECAI).[Note:BCD Annex IX Part 3 point 2]
BIPRU 9.8.3RRP
Subject to BIPRU 9.8.5 RBIPRU 9.8.7 R, a firm must use credit assessments from nominated ECAIs consistently in respect of its securitisation positions.[Note:BCD Annex IX Part 3 point 3]
BIPRU 9.8.4RRP
Subject to BIPRU 9.8.5 R and BIPRU 9.8.6 R, a firm must not use an ECAI's credit assessments for its positions in some tranches and another ECAI's credit assessments for its positions in other tranches within the same structure that may or may not be rated by the first ECAI.[Note:BCD Annex IX Part 3 point 4]
BIPRU 9.8.5RRP
Where a position has two credit assessments by nominated ECAIs, the firm must use the less favourable credit assessment.[Note:BCD Annex IX Part 3 point 5]
BIPRU 9.8.6RRP
Where a position has more than two credit assessments by nominated ECAIs, the two most favourable credit assessments must be used. If the two most favourable assessments are different, the least favourable of the two must be used.[Note:BCD Annex IX Part 3 point 6]
BIPRU 9.8.7RRP
(1) Where credit protection eligible under BIPRU 5 (Credit risk mitigation) and, if applicable, BIPRU 4.10 (Credit risk mitigation under the IRB approach) is provided directly to the SSPE, and that protection is reflected in the credit assessment of a position by a nominated ECAI, the risk weight associated with that credit assessment may be used.(2) If the protection is not eligible under BIPRU 5 (Credit risk mitigation) and, if applicable, BIPRU 4.10 (Credit risk mitigation
BIPRU 3.5.1GRP
This section (BIPRU 3.5) sets out a simplified approach to calculating risk weights. This approach is only relevant to an exposure class for which risk weights are determined by the ratings of a nominated ECAI or an export credit agency. For other exposure classes a firm should use the normal approach under the standardised approach.
BIPRU 3.5.2GRP
The approach in this section is only likely to be relevant for a limited licence firm or a limited activity firm that has only incidental credit exposures and for whom it would be prohibitively costly to establish the systems needed to include the credit assessments of ECAIs and export credit agencies in its regulatory capital calculations. However the approach may be used by other firms if appropriate. A firm should notify the appropriate regulator if it adopts the approach in
BIPRU 3.5.3GRP
Rather than risk weightingexposures individually, a firm eligible to apply the simplified approach should apply a single risk weight to all exposures in each exposure class. The simplified risk weight for exposures in a particular class will be the risk weighting for unrated entities for each exposure class in which the external credit assessments influence risk weights.
BIPRU 3.5.5GRP

Table : Simplified method of calculating risk weights

This table belongs to BIPRU 3.5.4 G.

Exposure class

Exposure sub-class

Risk weights

Comments

Central government

Exposures to United Kingdom government or Bank of England in sterling

0%

Exposures to United Kingdom government or Bank of England in the currency of another EEA State

0%

See Note 2.

Exposures to EEA State's central government or central bank in currency of that state

0%

Exposures to EEA State's central government or central bank in the currency of another EEA State

0%

See Notes 2 and 3.

Exposures to central governments or central banks of certain countries outside the EEA in currency of that country

See next column

The risk weight is whatever it is under local law. See BIPRU 3.4.6 R for precise details.

Exposures to European Central Bank

0%

Other exposures

100%

Regional/local governments

Exposures to the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly in sterling

0%

Exposures to the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly in the currency of another EEA State

0%

See Note 2.

Exposures to EEA States' equivalent regional/local governments in currency of that state

0%

See BIPRU 3.4.17 R for details of type of local/regional government covered.

Exposures to EEA States' equivalent regional/local governments in the currency of another EEA State

0%

See BIPRU 3.4.17 R for details of type of local/regional government covered.

See Notes 2 and 3.

Exposures to local or regional governments of certain countries outside the EEA in currency of that country

0%

See BIPRU 3.4.19 R for details of type of local/regional government covered.

See Note 1.

Exposures to United Kingdom or EEA States' local/regional government in currency of that state if the exposure has original effective maturity of 3 months or less

20%

Exposures to United Kingdom or EEA States' local/regional government in the currency of another EEA State if the exposure has original effective maturity of 3 months or less

20%

See Note 2. See Note 3 for local/regional government of an EEA State other than the United Kingdom

Exposures to local or regional governments of countries outside the EEA in currency of that country if the exposure has original effective maturity of 3 months or less

20%

See Note 1.

Other exposures

100%

PSE

Exposures to a PSE of the United Kingdom or of an EEA State if that PSE is guaranteed by its central government and if the exposure is be in currency of that PSE's state.

0%

BIPRU 3.4.24 R describes the United KingdomPSEs covered and BIPRU 3.4.25 R describes the EEAPSEs covered.

Exposures to PSE of a country outside the EEA if that PSE is guaranteed by the country's central government and if the exposure is in currency of that country.

0%

See BIPRU 3.4.26 R and Note 1.

Exposures to a PSE of the United Kingdom or of an EEA State in currency of that state if the exposure has original effective maturity of 3 months or less

20%

Exposures to a PSEof the United Kingdom or of an EEA State in the currency of another EEA State if the exposure has original effective maturity of 3 months or less

20%

See Notes 2 and 3.

Exposures to PSE of a country outside the EEA in currency of that country if the exposure has original effective maturity of 3 months or less

20%

See Note 1.

Other exposures

100%

Multilateral development banks

Exposures to multilateral development banks listed in paragraph (1) of the Glossary definition

0%

Simplified approach does not apply. Normal rules apply.

Other exposures

Various

Treated as an institution

EU2, the International Monetary Fund and the Bank for International Settlements

2

0%

Simplified approach does not apply. Normal rules apply.

Institutions

Exposures to United Kingdominstitution in sterling with original effective maturity of three months or less

20%

Exposures to United Kingdominstitution in the currency of another EEA State with original effective maturity of three months or less

20%

See Note 2.

Exposures to institution whose head office is in another EEA State in the currency of that state with original effective maturity of three months or less

20%

Exposures to institution whose head office is in another EEA State in the currency of another EEA State with original effective maturity of three months or less

20%

See Notes 2 and 3.

Exposures to institution with a head office in a country outside the EEA in the currency of that country with original effective maturity of three months or less

20%

See Note 1.

Exposures to United Kingdominstitution in sterling with original effective maturity of over three months

50%

Exposures to United Kingdominstitution in the currency of another EEA State with original effective maturity of over three months

50%

See Note 2.

Exposures to an EEAinstitution with a head office in another EEA State in the currency of that state with original effective maturity of over three 1months

50%

Exposures to an EEAinstitution with a head office in another EEA State in the currency of another EEA State with original effective maturity of over three1 months

50%

See Notes 2 and 3.

Exposures to institution with a head office in a country outside the EEA in the currency of that country with original effective maturity of over three1 months

50%

See Note 1.

Other exposures

100%

Corporates

100%

Retail exposures

75%

Simplified approach does not apply. Normal rules apply.

Mortgages on residential or commercial property

Various

Simplified approach does not apply. Normal rules apply.

Past due items

Various

Simplified approach does not apply. Normal rules apply.

High risk items

150%

Simplified approach does not apply. Normal rules apply.

Covered bonds

Various

Risk weights are based on the risk weight of issuer as described in BIPRU 3.4.110 R. The risk weight of the issuer for this purpose should be calculated under the simplified approach.

Securitisationexposures

Generally 1250%. May look through to underlying exposures if BIPRU 9 allows.

Use the BIPRU 9rules for unrated exposures under the standardised approach

Short term exposures with rating

See BIPRU 3.4.112 R. Not applicable as uses ECAI ratings.

CIUs

May look through to underlying under BIPRU 3.4.123 R

Various

Simplified approach does not apply. Normal rules apply. May use simplified approach to underlying if simplified approach applies to underlying.

May use average risk weight under BIPRU 3.4.124 R

Various

Simplified approach does not apply. Normal rules apply. May use simplified approach to underlyings if simplified approach applies to underlying.

High risk under BIPRU 3.4.118 R

150%

Simplified approach does not apply. Normal rules apply.

Others

100%

Other items under BIPRU 3.2.9 R (16)

Various

Simplified approach does not apply. Normal rules apply.

Note 1: The risk weight should not be lower than the risk weight that applies for national currency exposures of the central government of the third country in question under BIPRU 3.5. That means that this risk weight only applies if the third country is one of those to which BIPRU 3.4.6 R (Preferential risk weight for exposures of the central government of countries outside the EEA that apply equivalent prudential standards) applies.

Note 2: This is a transitional measure. It lasts until 31 December 2012.

Note 3: The risk weight should not be lower than the risk weight that applies for exposures of the central government of the EEA State in question in the currency of another EEA State under BIPRU 3.5.
BIPRU 3.5.8RRP
If a firm does not nominate one or more eligible ECAIs as referred to in BIPRU 3.6.4 R the firm must not use the financial collateral comprehensive method.
BIPRU 3.3.1RRP
An external credit assessment may be used to determine the risk weight of an exposure in accordance with BIPRU 3.2.20 R to BIPRU 3.2.26 R only if the ECAI which provides it is recognised by the appropriate regulator as an eligible ECAI for the purposes of the standardised approach to credit risk.[Note: BCD Article 81(1)]
BIPRU 3.3.4GRP
The criteria which the appropriate regulator must apply when assessing ECAIs for recognition for exposurerisk weighting purposes are set out in Regulation 22 and Schedule 1 to the Capital Requirements Regulations 2006. In making an assessment against those criteria and in carrying out the mapping process described in BIPRU 3.3.7 G to BIPRU 3.3.9 G the appropriate regulator will have regard to the approach set out in the Committee of European Banking Supervisors' "Guidelines on
BIPRU 3.3.7GRP
Under Regulation 22(3) of the Capital Requirements Regulations 2006 the appropriate regulator is obliged to determine, taking into account the requirements set out in Schedule 2 to the Capital Requirements Regulations 2006, with which of the credit quality steps set out in Part 1 of Annex VI of the Banking Consolidation Directive the relevant credit assessments of an eligible ECAI are to be associated. Those determinations should be objective and consistent.
BIPRU 3.3.8RRP
The credit quality step with which a relevant credit assessment of an eligible ECAI is to be associated is that in the table mapping the credit assessments of eligible ECAIs to credit quality steps published by the appropriate regulator under Regulation 22(3) of the Capital Requirements Regulations 2006.
BIPRU 3.3.9GRP
The table mapping the credit assessments of eligible ECAIs to credit quality steps is published on the appropriate regulator's website and amended from time to time in line with additions to and deletions from the list of eligible ECAIs. The table includes mappings made by a competent authority of another EEA State which are subsequently recognised by the appropriate regulator without carrying out its own determination process under Regulation 22(5) of the Capital Requirements
BIPRU 5.4.2RRP
The following financial items may be recognised as eligible collateral under all approaches and methods:(1) cash on deposit with, or cash assimilated instruments held by, the lending firm;(2) debt securities issued by central governments or central banks which securities have a credit assessment by an eligible ECAI or export credit agency recognised as eligible for the purposes of the standardised approach, which is associated with credit quality step 4 or above under the rules
BIPRU 5.4.5RRP
Debt securities issued by institutions which securities do not have a credit assessment by an eligible ECAI may be recognised as eligible collateral if they fulfil the following criteria:(1) they are listed on a recognised investment exchange or a designated investment exchange;(2) they qualify as senior debt;(3) all other rated issues by the issuing institution of the same seniority have a credit assessment by an eligible ECAI associated with credit quality step 3 or above under
BIPRU 5.4.7RRP
In relation to BIPRU 5.4.2 R (2) to (5):(1) where a security has two credit assessments by eligible ECAIs, the less favourable assessment must be deemed to apply;(2) in cases where a security has more than two credit assessments by eligible ECAIs:(a) the two most favourable assessments must be deemed to apply; or(b) if the two most favourable credit assessments are different, the less favourable of the two must be deemed to apply.[Note:BCD Annex VIII Part 1 point 10]
BIPRU 5.4.46RRP
When debt securities have a credit assessment from an eligible ECAI equivalent to investment grade or better, a firm may calculate a volatility estimate for each category of security.[Note:BCD Annex VIII Part 3 point 43]
BIPRU 5.4.48RRP
For debt securities having a credit assessment from an eligible ECAI equivalent to below investment grade and for other eligible collateral the volatility adjustments must be calculated for each individual item.[Note:BCD Annex VIII Part 3 point 45]
BIPRU 12.7.4RRP
For the purpose of BIPRU 12.7.3R, a firm may not include a debt security unless:(1) the central government or central bank in question has been assessed by at least two eligible ECAIs as having a credit rating associated with credit quality step 1 in the table set out in BIPRU 12 Annex 1R (Mapping of credit assessments of ECAIs to credit quality steps);4 and4(2) that debt security is either:(a) denominated in the domestic currency of the country in question; or(b) denominated
BIPRU 12.7.6RRP
For the purpose of BIPRU 12.7.5R, a firm may not include reserves held at a central bank unless:(1) the central bank in question has been assessed by at least two eligible ECAIs as having a credit rating associated with credit quality step 1 in the table set out in BIPRU 12 Annex 1R (Mapping of credit assessments of ECAIs to credit quality steps);4 and4(2) those reserves are denominated in the domestic currency of the central bank in question.
BIPRU 12.7.6ARRP
3For the purpose of BIPRU 12.7.2R (2), a firm may not include securities issued by a designated multilateral development bank unless:(1) the designated multilateral development bank in question has been assessed by at least two eligible ECAIs as having a credit rating associated with credit quality step 1 in the table set out in BIPRU 12 Annex 1R (Mapping of credit assessments of ECAIs to credit quality steps);4 and4(2) those securities are denominated in any of Canadian dollars,
IFPRU 4.12.10GRP
Notification under IFPRU 4.12.1 G should include sufficient information to enable the FCA to assess whether the possible reduction in RWEA which would be achieved by the securitisation is justified by a commensurate transfer of credit risk to third parties. The FCA expects this to include the following:(1) details of the securitisation positions, including rating, exposure value and RWEA broken down by securitisation positions sold and retained;(2) key transaction documentation
IFPRU 4.12.16GRP
To assess a firm's ability to use its own policies and methodologies for assessing significant risk transfer, the FCA's permission reviews will focus on:(1) the firm's understanding of the risk of any potential transactions within permission scope, including for potential underlying assets, securitisation structures and other relevant factors that affect the economic substance of risk transfer;(2) the governance around significant risk transfer assessment (including sign-off procedures)
IFPRU 4.12.17GRP
The information the FCA expects a firm to provide in a permission application includes the following:(1) details of the firm's governance processes for significant risk transfer, including details of any relevant committees and the seniority and expertise of key persons involved in sign-off;(2) a copy of the firm's significant risk transfer policy, including details of the significant risk transfer calculation policies, methodologies and any models used to assess risk transfer
IFPRU 4.2.10GRP
When determining whether exposures in the form of units or shares in a CIU are associated with particularly high risk, the FCA expects the following features would be likely to give rise to such risk:(1) an absence of external credit assessment of such CIU from an ECAI recognised under article 132(2) of the EU CRR (Items representing securitisation positions) and where such CIU has specific features (such as high levels of leverage or lack of transparency) that prevent it from
IFPRU 4.2.12GRP
Until such time as the European Commission adopts implementing technical standards drafted by the European Supervisory Authorities Joint Committee to specify for all ECAIs the relevant credit assessments of the ECAI that correspond to credit quality steps, the FCA expects a firm to continue to have regard to the table mapping the credit assessments of certain ECAIs to credit quality steps produced in accordance with regulation 22(3) of the Capital Requirements Regulations 2006.
BIPRU 9.7.1RRP
An ECAI's credit assessment may be used to determine the risk weight of a securitisation position in accordance with BIPRU 9.9 only if the ECAI is an eligible ECAI.[Note:BCD Article 97(1)]
BIPRU 9.7.2RRP
(1) A firm must2 not use a credit assessment of an eligible ECAI to determine the risk weight of a securitisation position in accordance with BIPRU 9.9 unless it complies with the principles of credibility and transparency as elaborated in (2) to (6).222(2) There must be no mismatch between the types of payments reflected in the credit assessment and the types of payment to which the firm is entitled under the contract giving rise to the securitisation position in question.(3)
BIPRU 9.12.11RRP

Table:

This table belongs to BIPRU 9.12.10 R

4

4Credit Quality Step

Securitisation positions

Resecuritisation positions

Credit assessments other than short term

Short-term credit assessments

A

B

C

D

E

1

1

7%

12%

20%

20%

30%

2

8%

15%

25%

25%

40%

3

10%

18%

35%

35%

50%

4

2

12%

20%

40%

65%

5

20%

35%

60%

100%

6

35%

50%

100%

150%

7

3

60%

75%

150%

225%

8

100%

200%

350%

9

250%

300%

500%

10

425%

500%

650%

11

650%

750%

850%

all other, unrated

1250%

[Note: For mapping of the credit quality step to the credit assessments of eligible ECAIs, refer to: http://www.fca.org.uk/your-fca/documents/fsa-ecais-securitisation for the FCA and http://www.bankofengland.co.uk/publications/Documents/other/pra/policy/2013/ecaissecuritisation.pdf for the PRA.]

[Note:BCD, Annex IX, Part 4, point 46]4

BIPRU 9.12.20RRP
(1) If:(a) a firm'sIRB permission allows it to use this treatment; and(b) the conditions in (2)(16) are satisfied,a firm may attribute to an unrated position in an asset backed commercial paper programme a derived rating as laid down in (3).(2) Positions in the commercial paper issued from the programme must be rated positions.(3) Under the ABCP internal assessment approach, the unrated position must be assigned by the firm to one of the rating grades described in (5). The position
BIPRU 11.5.10RRP
For a firm calculating risk weighted exposure amounts in accordance with the standardised approach to credit risk, the following information must be disclosed for each of the standardised credit risk exposure classes;(1) the names of the nominated ECAIs and export credit agencies and the reasons for any changes;(2) the standardised credit risk exposure classes for which each ECAI or export credit agency is used;(3) a description of the process used to transfer the issuer and issue
BIPRU 11.5.17RRP
A firm calculating risk weighted exposure amounts in accordance with BIPRU 9 or capital resource requirements according to BIPRU 7.2.48A R to BIPRU 7.2.48K R4 must disclose the following information, where relevant separately for its trading book and non-trading book:4(1) a description of the firm's objectives in relation to securitisation activity;(1A) the nature of other risks, including liquidity risk inherent in securitised assets;4(1B) the type of risks in terms of seniority
IFPRU 4.6.28GRP
In the FCA's view, a model is not likely to be compliant where the firm cannot demonstrate that it rank orders risk and predicts default rates for each country, regardless of any apparent conservatism in the model.
IFPRU 4.6.29GRP
The FCA expects a firm using a rating agency grades as the primary driver in its IRB models to be able to demonstrate (and document) compliance with the following criteria:(1) the firm has its own internal rating scale;(2) the firm has a system and processes in place that allow it to continuously collect and analyse all relevant information, and the 'other relevant information' considered by the firm in accordance with article 171(2) of the EU CRR reflects the information collected
BIPRU 13.5.15RRP
There is one hedging set for each issuer of a reference debt instrument that underlies a credit default swap.Nth to default basket credit default swaps must be treated as follows:2(1) 2the size of a risk position in a reference debt instrument in a basket underlying an nth to default credit default swap is the effective notional value of the reference debt instrument, multiplied by the modified duration of the nth to default derivative, with respect to a change in the credit spread
BIPRU 13.5.22RRP

This table belongs to BIPRU 13.5.21 R.

Hedging set categories

CCR Multiplier (CCRM)

(1)

Interest Rates

0.2%

(2)

Interest Rates for risk positions from a reference debt instrument that underlies a credit default swap and to which a capital charge of 1.60%, or less, applies under BIPRU 7.2.44 R1.

0.3%

(3)

Interest Rates for risk positions from a debt instrument or reference debt instrument to which a capital charge of more than 1.60% applies under BIPRU 7.2.44 R.

0.6%

(4)

Exchange Rates

2.5%

(5)

Electric power

4.0%

(6)

Gold

5.0%

(7)

Equity

7.0%

(8)

Precious Metals (except gold)

8.5%

(9)

Other commodities (excluding precious metals and electricity power)

10.0%

(10)

Reference debt instruments of an nth to default derivative that have a credit assessment from a recognised ECAI equivalent to credit quality step 1 to 32

2

0.3%2

2(11)

Reference debt instruments of an nth to default derivative that do not have a credit assessment from a recognised ECAI equivalent to credit quality step 1 to 3

0.6%

2(12)

Underlying instruments of financial derivative instrument that are not in any of the above categories.

10.0%

[Note: BCD Annex III Part 5 Table 5 and Part 5 point 15 (c)2]

BIPRU 4.10.37RRP
(1) In the case of a firm using the IRB approach to calculate risk weighted exposure amounts and expected loss amounts, the persons in (2) are added to the list in BIPRU 5.4.64 R (Definition of core market participant).(2) The persons referred to in (1) are other financial companies (including insurance companies) exposures to which do not have a credit assessment by an eligible ECAI and are internally rated as having a probability of default equivalent to that associated with
BIPRU 4.10.38RRP
(1) In the case of a firm using the IRB approach in calculating risk weighted exposure amounts and expected loss amounts, the persons in (2) are added to the list in BIPRU 5.7.1 R (List of eligible providers of unfunded credit protection).(2) The persons referred to in (1) are other corporate entities, including parent undertakings, subsidiary undertakings and affiliate corporate entities of the firm, that do not have a credit assessment by an eligible ECAI and are internally
BIPRU 7.2.44RRP

Table: specific risk position risk adjustments

This table belongs to BIPRU 7.2.43R.

Issuer

Residual maturity

Position risk adjustment

Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States' regional governments or local authorities which would qualify for credit quality step 1 or which would receive a 0% risk weight under the standardised approach to credit risk.

Any

0%

(A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States' regional governments or local authorities which would qualify for credit quality step 2 or 3 under the standardised approach to credit risk.

(B) Debt securities issued or guaranteed by institutions which would qualify for credit quality step 1 or 2 under the standardised approach to credit risk.

(C) Debt securities issued or guaranteed by institution which would qualify for credit quality step 3 under BIPRU 3.4.34 R (Exposures to institutions: Credit assessment based method) or which would do so if it had an original effective maturity of three months or less.

(D) Debt securities issued or guaranteed by corporates which would qualify for credit quality step 1, 2 or 32 under the standardised approach to credit risk.

(E) Other qualifying debt securities (see BIPRU 7.2.49R)

2

Zero to six months

0.25%

over 6 and up to and including 24 months

1%

Over 24 months

1.6%

(A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States' regional governments or local authorities or institutions which would qualify for credit quality step 4 or 5 under the standardised approach to credit risk.

(B) Debt securities issued or guaranteed by corporates which would qualify for credit quality step 4 under the standardised approach to credit risk.

(C) Exposures for which a credit assessment by a nominated ECAI is not available.

2

Any

8%

(A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States' regional governments or local authorities or institution which would qualify for credit quality step 6 under the standardised approach to credit risk.

(B) Debt securities issued or guaranteed by corporate which would qualify for credit quality step 5 or 6 under the standardised approach to credit risk.

(C) An instrument that shows a particular risk because of the insufficient solvency of the issuer of liquidity. This paragraph applies even if the instrument would otherwise qualify for a lower position risk adjustment under this table.

Any

12%

Note: The question of what a corporate is and of what category a debt security falls into must be decided under the rules relating to the standardised approach to credit risk.

[Note:CAD Annex I point 14 Table 1]2

BIPRU 7.2.49RRP
A debt security is a qualifying debt security if:(1) it qualifies for a credit quality step under the standardised approach to credit risk corresponding at least to investment grade; or(2) it has a PD which, because of the solvency of the issuer, is not higher than that of the debt securities referred to under (1) under the IRB approach; or(3) it is a debt security for which a credit assessment by a nominated ECAI is unavailable and which meets the following conditions:(a) it
BIPRU 9.9.2RRP
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)]
BIPRU 4.9.3RRP
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
BIPRU 12.9.27GRP
For the purpose of the notification expected under BIPRU 12.9.26 G, the appropriate regulator would expect any such notification to be made in the way envisaged in BIPRU 12.9.25 R.
BIPRU 3.2.20RRP
(1) To calculate risk weighted exposure amounts, risk weights must be applied to all exposures, unless deducted from capital resources, in accordance with the provisions of BIPRU 3.4.(2) The application of risk weights must be based on the standardised credit risk exposure class to which the exposure is assigned and, to the extent specified in BIPRU 3.4, its credit quality.(3) Credit quality may be determined by reference to:(a) the credit assessments of eligible ECAIs in accordance