18. Securitization: General Provisions

At the portfolio cut-off date the underlying exposures have to meet the conditions under the Standardized Approach for credit risk, and after taking into account any eligible credit risk mitigation, for being assigned a risk weight equal to or smaller than: (1) 40% on a value-weighted average exposure basis for the portfolio where the exposures are "regulatory residential real estate" exposures as defined in paragraph 7.69 ; (2) 50% on an individual exposure basis where the exposure is a "regulatory commercial real estate" exposure as defined in paragraph 7.70 , an "other real estate" exposure as defined in paragraph 7.80 or a land ADC exposure as defined in paragraph 7.82 ; (3) 75% on an individual exposure basis where the exposure is a "regulatory retail" exposure, as defined in paragraph 7.57 ; or (4) 100% on an individual exposure basis for any other exposure. Criterion D16: Granularity of the Pool 18.95 At the portfolio cut-off date, the aggregated value of all exposures to a single obligor shall not exceed 1% of the aggregated outstanding exposure value of all exposures in the portfolio. Where structurally concentrated corporate loan markets available for securitization subject to ex ante supervisory approval and only for corporate exposures, the applicable maximum concentration threshold could be increased to 2% if the originator or sponsor retains subordinated tranche(s) that form loss absorbing credit enhancement, as defined in 22.16 , and which cover at least the first 10% of losses. These tranche(s) retained by the originator or sponsor shall not be eligible for the STC capital treatment. Simple, Transparent and Comparable Short-Term Securitizations: Criteria for Regulatory Capital Purposes 18.96 The following definitions apply when the terms are used in 18.97 to 18.165 : (1) ABCP conduit/conduit – ABCP conduit, being the special purpose vehicle which can issue commercial paper; (2) ABCP programme – the programme of commercial paper issued by an ABCP conduit; (3) Assets/asset pool – the credit claims and/or receivables underlying a transaction in which the ABCP conduit holds a beneficial interest; (4) Investor – the holder of commercial paper issued under an ABCP programme, or any type of exposure to the conduit representing a financing liability of the conduit, such as loans; (5) Obligor – borrower underlying a credit claim or a receivable that is part of an asset pool; (6) Seller – a party that: (a) Concluded (in its capacity as original lender) the original agreement that created the obligations or potential obligations (under a credit claim or a receivable) of an obligor or purchased the obligations or potential obligations from the original lender(s); and (b) Transferred those assets through a transaction or passed on the interest 92 to the ABCP conduit. (7) Sponsor – sponsor of an ABCP conduit. It may also be noted that other relevant parties with a fiduciary responsibility in the management and administration of the ABCP conduit could also undertake control of some of the responsibilities of the sponsor; and (8) Transaction – An individual transaction in which the ABCP conduit holds a beneficial interest. A transaction may qualify as a securitization, but may also be a direct asset purchase, the acquisition of undivided interest in a replenishing pool of asset, a secured loan etc. 18.97 For exposures at the conduit level (e.g. exposure arising from investing in the commercial papers issued by the ABCP programme or sponsoring arrangements at the conduit/programme level), compliance with the short-term STC capital criteria is only achieved if the criteria are satisfied at both the conduit and transaction levels.