Related provisions for MIPRU 4.2F.55

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MIPRU 4.2F.51RRP
Where value adjustments are taken against the secured part of an exposure secured by a mortgage on residential property and that is past due, the secured part net of value adjustments must be assigned a risk weight of: (1) 100% if value adjustments are less than 20% of the secured part of the exposure gross of value adjustments; or(2) 50% if value adjustments are no less than 20% of the secured part of the exposure gross of value adjustments.
MIPRU 4.2F.56GRP

The application of value adjustments to either the secured or the unsecured component of an exposure secured on residential property may be illustrated on the basis of a £110,000 loan on a property valued at £100,000, where £80,000 of the loan is secured, £30,000 of the exposure is unsecured and a value adjustment of £20,000 is taken.

  1. (1)

    Value adjustment applied to unsecured component:

    1. (a)

      Value adjustment of £20,000 taken on £30,000 unsecured exposure.

    2. (b)

      Value adjustment exceeds 20%, so the firm should risk weight the remaining £10,000 unsecured exposure at 100% (as per MIPRU 4.2F.55 R).

    3. (c)

      The risk weight to be applied to the secured exposure of £80,000 is 100% (as per MIPRU 4.2F.51 R).

  2. (2)

    Value adjustment applied to secured component:

    1. (a)

      Value adjustment of £20,000 taken on £80,000 secured exposure.

    2. (b)

      Value adjustment exceeds 20%, so the firm should risk weight the remaining £60,000 secured exposure at 50% (as per MIPRU 4.2F.51 R).

    3. (c)

      The risk weight to be applied to the unsecured exposure of £30,000 is 150% (as per MIPRU 4.2F.55 R).

  3. (3)

    A diagrammatic illustration of how MIPRU 4.2F.56G (1) and MIPRU 4.2F.56G (2) operate is as follows:

    Value adjustment applied to unsecured component (MIPRU 4.2F.51 R)

    Risk weightings

    Exposure

    Risk weightings

    Value adjustment to secured component (MIPRU 4.2F.55 R)

    £20,000

    Unsecured component of £30,000

    £30,000 risk weighted at 150%

    £10,000 risk weighted at 100%

    £80,000 risk weighted at 100%

    Secured component of £80,000

    £20,000

    £60,000 risk weighted at 50%
BIPRU 9.10.6RRP
The risk weighted exposure amount of a securitisation position may be reduced by 12.5 times the amount of any value adjustments made by the firm in respect of the position.[Note:BCD Annex IX Part 4 point 73]