• Requirements in order for a Synthetic Securitisation to be excluded from the calculation of RWA

    • PRU 4.14.18 PRU 4.14.18

      (1) An Authorised Person which is an Originator or a Sponsor of a Synthetic Securitisation may recognise the effects of CRM of the Synthetic Securitisation in calculating its SE Exposure RWAs, only if:
      (a) all of the conditions detailed in Rule A4.10.2 have been complied with;
      (b) the effects of CRM are obtained through eligible credit protection, eligible financial Collateral or both; and
      (c) Credit Risk is transferred to third parties.
      (2) In relation to (b), the CRM techniques used must meet the requirements of Section 4.13.

      • Guidance

        In relation to (1)(c) the transferor is deemed to have effective control over the transferred Credit Risk Exposures if it has the ability to repurchase the assets, or is obliged to retain the risk of the transferred assets. This does not include the retention of servicing rights.

    • PRU 4.14.19

      (1) An Authorised Person meeting the conditions in Rule 4.14.18 must still hold regulatory capital against any securitisation Exposures it retains.
      (2) The Authorised Person may recognise the effects of CRM of eligible financial Collateral pledged by any SPE, but it may not recognise any SPE which is an Issuer of securitisation Exposures as an eligible protection provider.