Related provisions for BIPRU 5.2.6
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In the case of corporate exposures, for dilution risk of purchased receivables PD must be set equal to EL estimate for dilution risk. If a firm is under its IRB permission using the advanced IRB approach for LGD estimates for corporate exposures and it can decompose its EL estimates for dilution risk of purchased corporate exposure receivables into PDs and LGDs in a reliable manner, the PD estimate may be used. A firm may recognise unfunded credit protection in the PD in accordance
Unfunded credit protection may be recognised by adjusting PDs subject to BIPRU 4.6.54 R. For dilution risk, where a firm does not use its own estimates of LGDs, this must be subject to compliance with BIPRU 5 (Credit risk mitigation) modified by BIPRU 4.10 and, for this purpose, a firm may recognise unfunded credit protection providers other than those indicated in the CRM eligibility conditions provided the firm is able to demonstrate that the unfunded protection provider giving
Unfunded credit protection may be recognised as eligible by adjusting PD or LGD estimates subject to the minimum IRB standards as specified in BIPRU 4.10.43 R - BIPRU 4.10.48 R and in accordance with the IRB permission either in support of an individual exposure or a pool of exposures. A firm must not assign guaranteed exposures an adjusted PD or LGD such that the adjusted risk weight would be lower than that of a comparable, direct exposure to the guarantor.[Note:BCD Annex VII
The value of general/collective provisions which a firm may include in its tier two capital resources as referred to in GENPRU 2.2.187 R may not exceed 1.25% of the sum of the following:(1) 22 the market risk capital requirement22multiplied by a factor of 12.5; and(2) the sum of risk weighted assets under the standardised approach for credit risk.
It is likely that a loan is not connected lending of a capital nature if:(1) it is secured by collateral that is eligible for the purposes of credit risk mitigation under the standardised approach to credit risk as set out in BIPRU 5.4 (Financial collateral) and BIPRU 5.5 (Other funded credit risk mitigation); or(2) it is repayable on demand (and should be treated as such for accounting purposes by the borrower and lender) and the bank can demonstrate that there are no potential
4Where liabilities are linked to orders made under section 148 of the Social Security Administration Act 1992 the risks associated with the business8 may be mitigated by holding assets to cover an alternative index which is reasonably expected to at least cover the section 148 order (e.g. RPI plus a margin) over the duration of the link. The firm's exposure to an order under section 148 exceeding this index should be appropriately limited by putting a cap on the liabilities linked
When determining the portion of a past due item that is secured, the FCA expects the secured portion of an exposure covered by a mortgage indemnity product that is eligible for credit risk mitigation purposes under Part Three, Title II, Chapter 4 of the EU CRR (Credit risk mitigation) to qualify as an eligible guarantee (see article 129(2) of the EU CRR).
(1) A firm which has an IRB permission must publicly disclose the information laid down in BIPRU 11.6.1 Rto BIPRU 11.6.4 R.(2) A firm which recognises credit risk mitigation in accordance with BIPRU 5 must publicly disclose the information laid down in BIPRU 11.6.5 R.(3) [deleted]3[Note: BCD Article 145(2), CAD Article 39]1
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)]
A firm must calculate the exposure value of a long settlement transaction in accordance with either:(1) BIPRU 13; or(2) the master netting agreement internal models approach, if it has a master netting agreement internal models approachwaiver which permits it to apply that approach.[Note: BCD Article 78(2) second sentence, in respect of long settlement transaction]
For the purposes of assessing adequate quality in INSPRU 3.2.38R (3), reference should be made to the criteria for credit risk loss mitigation set out in INSPRU 2.1.16 R. The valuation rules in PRA Rulebook: Non-Solvency II firms: Insurance Company – Overall Resources and Valuation6 apply for the purpose of determining the value of both collateral received, and the securities transferred, by the firm. In addition, where collateral takes the form of assets transferred, under the
Where eligible credit protection under MIPRU 4.2C (Credit risk mitigation) is provided directly to the securitisation special purpose entity 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. Where the credit protection is not provided to the securitisation special purpose entity but provided directly to a securitisation position, the credit assessment must not be re
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) 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
In addition to the requirements in BIPRU 13.7.2 R to BIPRU 13.7.9 R, for contractual cross product netting agreements the following criteria must be met:(1) the net sum referred to in BIPRU 13.7.6 R (1) must be the net sum of the positive and negative close out values of any included individual bilateral master agreement and of the positive and negative mark-to-market value of the individual transactions (the Cross-Product Net Amount);(2) the written and reasoned legal opinions