CP13/6 - CRD IV for Investment Firms - Financial Conduct Authority

FCA 2013/xx
4.4 Securitisation
Recognition of significant risk transfer
4.4.1 R (1) A firm must notify the FCA that it is relying on the deemed transfer of
significant credit risk under article 243(2) of the EU CRR (Traditional
securitisation) or article 244(2) of the EU CRR (Synthetic
securitisation) within a reasonable period before or after a relevant
transfer, not being later than one month after the date of the transfer.
(2) The notification in (1) must include sufficient information to allow the
FCA to assess whether the possible reduction in risk-weighted
exposure amounts which would be achieved by the securitisation is
justified by a commensurate transfer of credit risk to third parties.
Significant risk transfer notifications and permissions
4.4.2 G The EU CRR allows an originator of securitisations to use the securitisation
risk weights (and not calculate own funds requirements on the assets
underlying its securitisation) if it either:
(1) transfers significant credit risk associated with the securitised
exposures to third parties, or
(2) deducts from common equity tier 1 capital or applies a 1250% risk
weight to all positions it holds in the securitisation.
4.4.3 G The significant risk transfer requirements in articles 243 (Traditional
securitisation) or 244 (Synthetic securitisation) of the EU CRR provide three
options for a firm to demonstrate how it transfers significant credit risk for
any given transaction:
(1) the originator does not retain more than 50% of the risk-weighted
exposure amounts of mezzanine securitisation positions, where these
are:
(a)
(b)
positions to which a risk weight lower than 1250% applies; and
more junior than the most senior position in the securitisation
and more junior than any position in the securitisation rated
credit quality step 1 or 2.
(2) where there is no mezzanine position, the originator does not hold
more than 20% of the exposure values of securitisation positions that
are subject to a deduction or 1250% risk weight and where the
originator can demonstrate that the exposure value of such
securitisation positions exceeds a reasoned estimate of the expected
loss on the securitised exposures by a substantial margin; and
(3) the competent authority may grant permission to an originator to
make its own assessment if it is satisfied that the originator can meet
certain requirements.
Options 1 and 2
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