PRU 4.14.37

Past version: effective from 21/10/2015 - 20/10/2015
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(1) Where an Authorised Person holds or guarantees unrated securitisation Exposure from the most senior tranche in a securitisation, the Authorised Person may apply the "look through" treatment, provided the composition of the underlying pool of Exposures securitised is known at all times and the Authorised Person is able to determine the applicable risk weights for the underlying Exposures.
(2) An Authorised Person applying the look-through treatment to an unrated securitisation Exposure, pursuant to (1), must apply to that securitisation Exposure the weighted average of the risk weights of the underlying Exposures determined in accordance with the Rules in this Chapter, multiplied by a concentration factor.
(3) For the purposes of (2), the concentration factor is calculated as the sum of the nominal amounts of all the tranches in that securitisation divided by the sum of the nominal amounts of the tranches junior to, or pari-passu with, the tranche in which the position is held, including that tranche itself. The resulting weighted average risk weight must not be higher than 1000% or lower than the risk weight applicable to a more senior tranche which is rated.
(4) Where the Authorised Person is unable to determine the risk weights for the underlying Exposures in accordance with this Rule, the unrated securitisation position will not be eligible for the relief and must be deducted from CET 1 Capital of the Authorised Person.