• Calculation of Credit RWA amounts for securitisation positions subject to Early Amortisation clause

    • PRU 4.14.57 PRU 4.14.57

      (1) An Early Amortisation provision that does not satisfy the conditions for a Controlled Early Amortisation provision will be treated as a non-Controlled Early Amortisation provision.
      (2) For the purpose of (1), the conditions for a Controlled Early Amortisation provision are as follows:
      (a) the Authorised Person must have an appropriate capital/liquidity plan in place to ensure that it has sufficient capital and liquidity available in the event of an Early Amortisation;
      (b) throughout the duration of the transaction, including the amortisation period, there is the same pro rata sharing of interest, principal, expenses, losses and recoveries based on the firm's and investors' relative shares of the receivables outstanding at the beginning of each month;
      (c) the firm must set a period for amortisation that would be sufficient for at least 90% of the total debt outstanding at the beginning of the Early Amortisation period to have been repaid or recognised as in default; and
      (d) the pace of repayment should not be any more rapid than would be allowed by straight-line amortisation over the period set out in (c).

      • Guidance

        In relation to Rule 4.14.57(c), the Authorised Person should also consider whether a line, or facility, is committed or uncommitted. A line is considered to be uncommitted if it is unconditionally cancellable without prior notice by the Authorised Person. They also differ according to whether the securitised Exposures are committed retail credit lines or credit lines (such as revolving credit facilities).

    • PRU 4.14.58

      For uncommitted retail credit lines in securitisations containing Controlled Early Amortisation which is triggered by the Excess Spread level falling to a specified level, an Authorised Person must compare the three month average Excess Spread level with the Excess Spread levels at which the Excess Spread is required to be trapped.

    • PRU 4.14.59

      Where the securitisation does not require Excess Spread to be trapped, the trapping point is deemed to be 4.5 percentage points greater than the Excess Spread level at which Early Amortisation is triggered.

    • PRU 4.14.60

      An Authorised Person must divide the Excess Spread level by the transaction's Excess Spread trapping point to determine the appropriate segments and apply corresponding conversion factors as set out in the following table:

      Controlled Early Amortisation Features
        Uncommitted Committed
      Retail Credit Lines 3 Month average Excess Spread CCF 90%
      133.33% of trapping point or more 0%
      <133.33% to 100% of trapping point 1%
      <100% to 75% of trapping point 2%
      <75% to 50% trapping point 10%
      <50% to 25% of trapping point 20%
      <25% 40%
      Non-retail credit lines 90% 90%

    • PRU 4.14.61

      In regard to non-Controlled Early Amortisation, an Authorised Person must apply the same steps as set out at Rules 4.14.59 to 4.14.61 and determine appropriate segments and apply the corresponding conversion factors as set out in the following table:

      Non-Controlled Early Amortisation Features
        Uncommitted Committed
      Retail Credit Lines 3 Month average Excess Spread CCF 100%
      133.33% of trapping point or more 0%  
      <133.33% to 100% of trapping point 5%  
      <100% to 75% of trapping point 15%  
      <75% to 50% trapping point 50%  
      <50% of trapping point 100%  
      Non-retail credit lines 100% 100%