Eligible liquidity positions
PRU 4.14.42(1) An off balance sheet SE Exposure will receive a 100% CCF unless:(a) the Exposure qualifies as an eligible liquidity facility, or(b) the Exposure is an eligible Servicer cash advance facility.(2) In relation to (1), an eligible Servicer cash advance facility is a facility provided to a securitisation in order to ensure uninterrupted flow of payments to investors. As long as the Servicer is entitled to full reimbursement and this right is senior to all other claims on cash flows from the underlying pool of Exposures, and where these facilities meet the requirements of 4.14.44 and are unconditionally cancellable at any time, any undrawn commitments can then have a 0% CCF applied.
(1) For the purposes of Rule 4.14.42, an Authorised Person may treat an Exposure as an eligible liquidity facility provided the following requirements are met:
(a) the liquidity facility documentation must clearly identify and limit the circumstances under which it may be drawn;
(b) draws must be limited to the amount that is likely to be repaid from the liquidation of the underlying Exposures and any seller provided Credit Enhancements;
(c) the facility must not provide credit support by covering for any losses incurred in the underlying pool of Exposures prior to drawdown;
(d) the facility must not be structured to provide regular or permanent funding;
(e) the facility must be subject to an asset quality test to preclude it being used to cover Credit Risk Exposures that are in default;
(f) where the facility is used to fund externally rated Securities the facility can only be used to fund Securities that are externally rated Investment Grade at the time of funding;
(g) the facility cannot be drawn after all Credit Enhancements from which the liquidity facility would benefit have been exhausted; and
(h) repayment of draws of the facility cannot be subordinated to any interests of any note holder in the programme or be subject to deferral or waiver.
(2) Where the Exposure meets the requirements as set out in (1), the following CCF will apply:
(a) 50% to the eligible liquidity facility regardless of maturity; and
(b) 100% if an external rating of the liquidity facility is used for the risk weighting.
PRU 4.14.44(1) An Authorised Person which provides credit protection for a basket of reference Exposures through an unrated first-to-default Credit Derivative may apply to the securitisation Exposure the aggregate of the risk weights that would be assigned to the reference Exposures, provided that the resulting Capital Requirement does not exceed the notional amount of the credit protection.(2) An Authorised Person which provides credit protection for a basket of reference Exposures through an unrated second-to-default Credit Derivative may apply the treatment referred to in (1), except that in aggregating the risk weights, the reference Exposure with the lowest risk-weighted amount may be excluded.
PRU 4.14.45(1) Where an Authorised Person has two or more overlapping Exposures to a securitisation, the firm must, to the extent that the positions overlap, include in its calculation of Credit RWA amounts only the Exposure, or portion of the Exposure, producing the higher Credit RWA amounts.(2) For the purposes of (1), overlapping Exposures result where an Authorised Person provides two or more facilities (whether they are liquidity facilities or Credit Enhancements) in relation to a securitisation that can be drawn under various conditions with different triggers, with the result that the Authorised Person provides duplicate coverage to the underlying Exposures. The facilities provided by the Authorised Person may overlap since a draw on one facility may preclude (in part) a draw on the other facility.(3) Where the overlapping Exposures are subject to different conversion factors the Authorised Person must apply the higher of the conversion factors to the Exposure.