Minimum Capital Requirements for Credit Risk

The sponsor should ensure that provisions regarding the replacement of key counterparties (in particular the servicer or liquidity provider) in the event of failure or non-performance or insolvency or other deterioration of any such counterparty for the transactions are well-documented (in the documentation of these individual transactions). 18.163 The sponsor should ensure that for all transactions the performance reports include all of the following: the transactions’ income and disbursements, such as scheduled principal, redemption principal, scheduled interest, prepaid principal, past due interest and fees and charges, delinquent, defaulted, restructured and diluted amounts, as well as accurate accounting for amounts attributable to principal and interest deficiency ledgers. Criterion D18: Credit Risk of Underlying Exposures (Transaction Level Only) 18.164 At the date of acquisition of the assets, the underlying exposures have to meet the conditions under the Standardized Approach for credit risk and, after account is taken of any eligible credit risk mitigation, be 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 D19: Granularity of the Pool (Conduit Level Only) 18.165 At the date of acquisition of any assets securitized by one of the conduits' transactions, the aggregated value of all exposures to a single obligor at that date shall not exceed 2% of the aggregated outstanding exposure value of all exposures in the programme. Where structurally concentrated corporate loan markets, subject to ex ante supervisory approval and only for corporate exposures, the applicable maximum concentration threshold could be increased to 3% if the sellers or sponsor retain subordinated tranche(s) that form loss-absorbing credit enhancement, as defined in 22.16 , 19. Securitization: Standardized Approach No: 44047144 Date(g): 27/12/2022 | Date(h): 4/6/1444 Status: In-Force Standardized Approach (SEC-SA) 19.1 To calculate capital requirements for a securitization exposure to a standardized approach (SA) pool using the securitization standardized approach (SEC-SA), a bank would use a supervisory formula and the following bank-supplied inputs: the SA capital charge had the underlying exposures not been securitized ( K SA ); the ratio of delinquent underlying exposures to total underlying exposures in the securitization pool ( W ); the tranche attachment point (A); and the tranche detachment point (D). The inputs A and D are defined in paragraphs 22.14 and 22.15 respectively. Where the only difference between exposures to a transaction is related to maturity, A and D will be the same. K SA and W are defined in 19.2 to 19.4 and 19.6. 19.2 K SA is defined as the weighted-average capital charge of the entire portfolio of underlying exposures, calculated using the risk-weighted asset amounts in chapter 7 in relation to the sum of the exposure amounts of underlying exposures, multiplied by 8%. This calculation should reflect the effects of any credit risk mitigant that is applied to the underlying exposures (either individually or to the entire pool), and hence benefits all of the securitization exposures. K SA is expressed as a decimal between zero and one (that is, a weighted-average risk weight of 100% means that K SA would equal 0.08).