in the case of a synthetic securitisation, calculate risk weighted exposure amounts and, as relevant, expected loss amounts in respect of such exposures, in accordance with the provisions of BIPRU 9.5.
Where the originator fails to transfer significant credit risk in accordance with (1), it need not calculate risk weighted exposure amounts for any positions it may hold in the securitisation in question.
[Note: BCD Article 95]
[Note: BCD, Article 122a, paragraph 8]
the risk weighted exposure amounts of the mezzanine securitisation positions held by the originator in the securitisation do not exceed 50% of the risk weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;
where there are no mezzanine securitisation positions in a given securitisation and the originator can demonstrate that the exposure value of the securitisation positions that would be subject to deduction from capital resources or a 1250% risk weight exceeds a reasoned estimate of the expected loss on the securitised exposures by a substantial margin, the originator does not hold more than 20% of the exposure values of the securitisation positions that would be subject to deduction from capital resources or a 1250% risk weight.
[Note: BCD, Annex IX, Part 2, Point 1, paragraph 1a and Point 2 paragraph 2a]
1An originator must notify the FSA that it is relying on the deemed transfer of significant credit risk under BIPRU 9.3.7R within a reasonable period before or after a relevant transfer, not being later than one month after the date of the transfer. The notification must include the following information:
any relevant supporting documents, for example, a summary of the transaction.
1In the event that the FSA decides that the possible reduction in risk weighted exposure amounts which the originator would achieve by the securitisation referred to in BIPRU 9.3.7R is not justified by a commensurate transfer of credit risk to third parties, it will use its powers under section 45 of the Act (Variation etc on the Authority's own initiative) to require the firm to increase its risk weighted exposure amount to an amount commensurate with the FSA's assessment of the transfer of credit risk to third parties.
it has policies and methodologies in place which ensure that the possible reduction of capital requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties; and
that such transfer of credit risk to third parties is also recognised for the purposes of the originator's internal risk management and its internal capital allocation.
[Note: BCD, Annex IX, Part 2, Point 1, paragraph 1c and Point 2 paragraph 2c]
1BIPRU 1.3.10 G sets out the FSA's approach to the granting of waivers. The conditions in BIPRU 9.3.11D are minimum requirements. Satisfaction of those does not automatically mean the FSA will grant the relevant waiver. The FSA will in addition also apply the tests in section 148 (Modification or waiver of rules) of the Act.
1When considering an application for a waiver of the requirements in BIPRU 9.3.7R and BIPRU 9.3.8R, the FSA may undertake a visit to the firm in order to examine the firm's risk management and governance arrangements. Before such a visit, the FSA may request information from the firm additional or supplementary to that provided in the waiver application.
1An originator should clearly state the scope of the waiver of the requirements in BIPRU 9.3.7R and BIPRU 9.3.8R it is seeking in its application. For example, residential mortgage backed securities may be subdivided into prime and sub-prime with only one sub-category within the scope of the waiver. Relevant asset classes may therefore be defined according to a firm's internal usage of terms.
1Subject to BIPRU 9.3.22G, BIPRU 9.15.9R and BIPRU 9.15.10R, where the originator or sponsor of a securitisation fails to meet any of the requirements in BIPRU 9.3.18R to BIPRU 9.3.20R (disclosure requirements) in any material respect by reason of its negligence or omission, the FSA will use its powers under section 45 (Variation etc on the Authority's own initiative) of the Act to impose an additional risk weight of no less than 250% (capped at 1250%) of the risk weight that would otherwise apply to the relevant securitisation positions under the rules in BIPRU 9.11 to BIPRU 9.14. The additional risk weight imposed will be progressively increased with each relevant, subsequent infringement of the requirements in BIPRU 9.3.18R to BIPRU 9.3.20R.
[Note: BCD, Article 122a, paragraph 5]
1When calculating the additional risk weight it will impose, the FSA will take into account the exemption of certain securitisations from the scope of BIPRU 9.15.3R under BIPRU 9.15.9R and BIPRU 9.15.10R and, if those exemptions are relevant, reduce the risk weight it would otherwise impose.
[Note: BCD, Article 122a, paragraph 5]