In order to expand the use of the Securitisation Internal Ratings-Based Approach (SEC-IRBA), that sits now at the top of the hierarchy of approaches for calculating capital requirements of securitisation positions, the CRR amendment accompanying the Securitisation Regulation introduces the possibility of using the provisions that normally apply to purchased receivables under the general IRB credit risk framework. This way, institutions may calculate the capital requirements of the securitised exposures (KIRB), and the corresponding risk parameters, (probability of default - PD - and loss given default - LGD), under the provisions of the purchased receivables and then use them as input in the SEC-IRBA, along with other information on the securitisation position.
This draft RTS specify the conditions under which institutions may use the provisions on purchased receivables to make them fully workable in the context of securitisation transactions. For these purposes, retail securitised exposures shall be treated as purchased retail receivables and non-retail securitised exposures as purchased corporate receivables.
The main areas that the draft RTS covers are the following:
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General approach to the relationship between the IRB rules on purchased receivables and the SEC-IRBA framework
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Eligibility conditions to compute KIRB
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IRB permissions and prior experience
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Eligibility to use the retail risk quantification standards
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Use of proxy data
Responses to this consultation can be sent to the EBA by 19 September 2018. A public hearing will take place at the EBA premises on 4 September 2018 from 14:00 to 16:00 UK time.
Press release
Consultation paper
© EBA
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