• Calculation of Credit RWA arising from securitisations

    • PRU 4.14.8 PRU 4.14.8

      An Authorised Person must calculate the Credit RWA amounts for Exposures arising from securitisations according to the requirements in this Section.

      • Guidance

        1. An Authorised Person should apply the securitisation framework set out in this Section for determining the Capital Requirements on Exposures arising from traditional and Synthetic Securitisations or similar structures that contain features common to both.
        2. This Section sets out the requirements for Originators, Authorised Persons which transfer Credit Risk from their balance sheets and Sponsors in a securitisation transaction involving Non-Trading Book Exposures. This Section also sets out the methodologies for calculation of RWA amounts for securitisation Exposures. The Rules setting out the methodologies for calculation of Market Risk Capital Requirement amounts for securitisation Exposures held in the Trading Book are specified in Chapter 5 and App5 of these Rules.
        3. As securitisations may be structured in many different ways, an Authorised Person engaging in the activities relating to securitisations (whether traditional or a Synthetic Securitisation) must ensure that the economic substance of the transaction is fully considered, and reflected, in determining the capital treatment of a securitisation, rather than relying on the legal form of the Securitisation.

    • PRU 4.14.9

      An Authorised Person is required, subject to Rule 4.14.12, to include all securitisation Exposures in its calculation of Credit RWAs relating to securitisations, including the following:

      (a) those arising from the provision of Credit Risk mitigants to a securitisation;
      (b) investments in asset backed Securities;
      (c) retention of a subordinated tranche;
      (d) extension of a liquidity facility; and
      (e) extension of Credit Enhancement.

    • PRU 4.14.10

      An Authorised Person must include in its calculation of Credit RWA all of its securitisation Exposures held in the Non-Trading Book, except for those securitisation Exposures which the Authorised Person is required to include as deductions from T1 Capital and deductions from T2 Capital.

    • PRU 4.14.11

      Repurchased securitisation transactions must be treated as retained securitisation Exposures.