Minimum Capital Requirements for Credit Risk

(or 3% of the underlying pool), then for purposes of the SEC-IRBA the bank may set LGD as 0.50 and N equal to the following amount: (2) Alternatively, if only C 1 is available and this amount is no more than 0.03, then the bank may set LGD as 0.50 and N as 1/C 1 . Calculation of Risk Weight 22.23 The formulation of the SEC-IRBA is expressed as follows, where: (1) is the capital requirement per unit of securitization exposure under the SEC-IRBA, which is a function of three variables; (2) The constant e is the base of the natural logarithm (which equals 2.71828); (3) The variable a is defined as -(1 / (p * K IRB )); (4) The variable u is defined as D - K IRB ; and (5) The variable l is defined as the maximum of A - K IRB and zero. 22.24 The risk weight assigned to a securitization exposure when applying the SEC- IRBA is calculated as follows: (1) When D for a securitization exposure is less than or equal to K IRB , the exposure must be assigned a risk weight of 1250%. (2) When A for a securitization exposure is greater than or equal to K IRB , the risk weight of the exposure, expressed as a percentage, would equal times 12.5. (3) When A is less than K IRB and D is greater than K IRB the applicable risk weight is a weighted average of 1250% and 12.5 times according to the following formula: 22.25 The risk weight for market risk hedges such as currency or interest rate swaps will be inferred from a securitization exposure that is pari passu to the swaps or, if such an exposure does not exist, from the next subordinated tranche. 22.26 The resulting risk weight is subject to a floor risk weight of 15%. Alternative Capital Treatment for Term Securitizations and Short-Term Securitizations Meeting the STC Criteria for Capital Purposes 22.27 Securitization transactions that are assessed as simple, transparent and comparable (STC)-compliant for capital purposes in 18.67 can be subject to capital requirements under the securitization framework, taking into account that, when the SEC-IRBA is used, 22.28 and 22.29 are applicable instead of 22.17 and 22.26 respectively. 22.28 The supervisory parameter p in SEC-IRBA for an exposure to an STC securitization is expressed as follows, where: (1) 0.3 denotes the p-parameter floor; (2) N is the effective number of loans in the underlying pool, calculated as described in 22.20 ; (3) K IRB is the capital charge of the underlying pool (as defined in 22.2 to 22.5 ); (4) GD is the exposure-weighted average loss-given-default of the underlying pool, calculated as described in 22.21 ; (5) M T is the maturity of the tranche calculated according to 18.22 and 18.23 ; and (6) The parameters A, B, C, D, and E are determined according to Table 33: Look-up table for supervisory parameters A, B, C, D and E Table 33 A B C D E Wholesale Senior, granular (N≥25) 0 3.56 -1.85 0.55 0.07 Senior, non-granular (N<25) 0.11 2.61 -2.91 0.68 0.07 Non-senior, granular (N≥25) 0.16 2.87 -1.03 0.21 0.07 Non-senior, non-granular (N<25) 0.22 2.35 -2.46 0.48 0.07 Retai Senior 0 0 -7.48 0.71 0.24 Non-senior 0 0 -5.78 0.55 0.27 22.29 The resulting risk weight is subject to a floor risk weight of 10% for senior tranches, and 15% for non-senior tranches. 23. Securitizations of Non- Performing Loans No: 44047144 Date(g): 27/12/2022 | Date(h): 4/6/1444 Status: In-Force Securitization of Non-Performing Loans 23.1 A non-performing loan securitization (NPL securitization) means a securitization where the underlying pool's variable W, as defined in 19.6 , is equal to or higher than 90% at the origination cut-off date and at any subsequent date on which assets are added to or removed from the underlying pool due to replenishment, restructuring or any other relevant reason. The underlying pool of exposures of an NPL securitization may only comprise loans, loan-equivalent financial instruments or tradable instruments used for the sole purpose of loan sub-participation as referred to in