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Status: You are viewing the version of the handbook as on 2009-03-31.

BIPRU 9.1 Application and purpose

Application

BIPRU 9.1.1RRP

1BIPRU 9.1 applies to a BIPRU firm.

Purpose

BIPRU 9.1.2GRP

The purpose of BIPRU 9 is to implement:

  1. (1)

    Articles 94 to 96, paragraphs (1) and (5) of Article 97 , Article 99, Article 100(1) and Article 101;

  2. (2)

    Points 8 and 9 of Annex V; and

  3. (3)

    Parts 2, 3 (in part) and 4 of Annex IX;

of the Banking Consolidation Directive.

General obligations: Risk-weighted exposures

BIPRU 9.1.3RRP

A firm must calculate the risk weighted exposure amount for securitisation positions in accordance with BIPRU 9.

BIPRU 9.1.4GRP

A firm should apply the securitisation framework set out in this chapter for determining regulatory capital requirements on exposures arising from traditional securitisations and from synthetic securitisations and from structures that contain features of both.

BIPRU 9.1.5GRP

Since transactions may be structured in many different ways, the capital treatment of a position should be determined on the basis of its economic substance rather than merely its legal form. A firm should look to the economic substance of a transaction to determine whether the securitisation framework is applicable for purposes of determining regulatory capital. A firm should consult the FSA when there is uncertainty about whether a given transaction should be considered a securitisation.

General obligations: Systems

BIPRU 9.1.6RRP

The risks arising from securitisation transactions in relation to which a firm is originator or sponsor must be evaluated and addressed through appropriate policies and procedures, to ensure in particular that the economic substance of the transaction is fully reflected in the risk assessment and management decisions.

[Note: BCD Annex V point 8]

BIPRU 9.1.7GRP

A firm that is a party to a securitisation should fully understand the risks it has assumed or retained. In particular it should do so in order that it can correctly determine in accordance with BIPRU 9 the capital effects of the securitisation.

BIPRU 9.1.8GRP

The FSA expects an originator to continue to monitor any risks that it may be subject to when it has excluded the securitised exposures from its calculation of risk weighted exposure amounts. The originator should consider capital planning implications where risks may return and the impact that securitisation has on the quality of the remaining exposures held by the originator.

Trading book and non-trading book

BIPRU 9.1.9GRP

BIPRU 9 deals with:

  1. (1)

    requirements for originators and sponsors of securitisations of non-trading book exposures; and

  2. (2)

    the calculation of risk weighted exposure amount for securitisation positions for the purposes of calculating either the credit risk capital component or the counterparty risk capital component.

BIPRU 9.1.10GRP

BIPRU 7 sets out the calculation of the market risk capital requirement for securitisation positions held in the trading book.