Credit Risk mitigation
Where an Authorised Person provides credit protection to a securitisation Exposure it must calculate a Capital Requirement as if it were an investor in the securitisation in line with Section 4.13.
An Authorised Person must not recognise any SPE which is an Issuer of securitisation Exposures, as an eligible credit protection provider. Guarantees provided must meet the requirements of Section 4.13.
For the purpose of setting regulatory capital against a Maturity Mismatch, the Capital Requirement must be determined in accordance with Section 4.13. When Exposures being hedged have different maturities, the longest maturity must be used. Maturity of credit protection must be calculated in accordance with Section 4.13.
An Authorised Person which is the Originator or Sponsor of a securitisation involving revolving Exposures as well as an Early Amortisation provision, must calculate an additional RWA amount in accordance with Rule 4.14.57 to address the possibility that its Credit Risk Exposure levels may increase following the operation of the Early Amortisation provision.