Sensitivities-Based Method: Definition of Delta Risk Buckets, Risk Weights and Correlations

For aggregating delta CSR securitisations (CTP) risk positions within a bucket, the delta risk correlation ρ kl is derived the same way as in [7.54] and [7.55], except that the correlation parameter applying when the sensitivities are not related to same curves, ρ kl ( b asis) , is modified. (1) ρ kl ( b asis) is now equal to 1 if the two sensitivities are related to same curves, and 99.00% otherwise. (2) The identical correlation parameters for ρ kl (name) and ρ kl (tenor) to CSR non-securitisation as set out in [7.54] and [7.55] apply. 7.61 For aggregating delta CSR securitisations (CTP) risk positions across buckets, the correlation parameters for γ bc are identical to CSR non-securitisation as set out in [7.57]. Delta CSR securitisation (non-CTP) buckets, risk weights and correlations 7.62 For delta CSR securitisations not in the CTP, buckets are set along two dimensions– credit quality and sector – as set out in Table 7. The delta CSR securitisation (non-CTP) sensitivities or risk exposures must first be assigned to a bucket before calculating weighted sensitivities by applying a risk weight. Buckets for delta CSR securitisations (non-CTP) Table 7 Bucket number Credit quality Sector 1 Senior investment grade (IG) RMBS – Prime 2 RMBS – Mid-prime 3 RMBS – Sub-prime 4 CMBS 5 Asset-backed securities (ABS) – Student loans 6 ABS – Credit cards 7 ABS – Auto 8 Collateralised loan obligation (CLO) non-CTP 9 Non-senior IG RMBS – Prime 10 RMBS – Mid-prime 11 RMBS – Sub-prime 12 Commercial mortgage-backed securities (CMBS) 13 ABS – Student loans 14 ABS – Credit cards 15 ABS – Auto 16 CLO non-CTP 17 High yield & non-rated RMBS – Prime 18 RMBS – Mid-prime 19 RMBS – Sub-prime 20 CMBS 21 ABS – Student loans 22 ABS – Credit cards 23 ABS – Auto 24 CLO non-CTP 25 Other Sector 29 7.63 To assign a risk exposure to a sector, banks must rely on a classification that is commonly used in the market for grouping tranches by type. (1) The bank must assign each tranche to one of the sector buckets in above Table 7. (2) Risk positions from any tranche that a bank cannot assign to a sector in this fashion must be assigned to the other sector (ie bucket 25). 7.64 For calculating weighted sensitivities, the risk weights for buckets 1 to 8 (senior IG) are set out in Table 8: Risk weights for buckets 1 to 8 for delta CSR securitisations (non-CTP) Table 8 Bucket number Risk weight (in percentage points) 1 0.9% 2 1.5% 3 2.0% 4 2.0% 5 0.8% 6 1.2% 7 1.2% 8 1.4% 7.65 The risk weights for buckets 9 to 16 (non-senior investment grade) are then equal to the corresponding risk weights for buckets 1 to 8 scaled up by a multiplication by 1.25. For instance, the risk weight for bucket 9 is equal to 1.25 × 0.9% = 1.125%. 7.66 The risk weights for buckets 17 to 24 (high yield and non-rated) are then equal to the corresponding risk weights for buckets 1 to 8 scaled up by a multiplication by 1.75. For instance, the risk weight for bucket 17 is equal to 1.75 × 0.9% = 1.575%. 7.67 The risk weight for bucket 25 is set at 3.5%.