Related provisions for BIPRU 5.6.21

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BIPRU 4.3.16RRP
The areas of responsibility for the credit risk control unit(s) must include the following:(1) testing and monitoring grades and pools;(2) production and analysis of summary reports from the firm'srating systems;(3) implementing procedures to verify that grade and pool definitions are consistently applied across departments and geographic areas;(4) reviewing and documenting any changes to the rating process, including the reasons for the changes;(5) reviewing the rating criteria
BIPRU 4.3.17RRP
Notwithstanding BIPRU 4.3.16 R, a firm using pooled data according to BIPRU 4.3.92 R - BIPRU 4.3.94 R (Overall requirements for estimation) may outsource the following tasks:(1) production of information relevant to testing and monitoring grades and pools;(2) production of summary reports from the firm'srating systems;(3) production of information relevant to review of the rating criteria to evaluate if they remain predictive of risk;(4) documentation of changes to the rating
BIPRU 4.3.24RRP
Where a firm employs statistical models in the rating process, the firm must document its methodologies. This material must:(1) provide a detailed outline of the theory, assumptions and/or mathematical and empirical basis of the assignment of estimates to grades, individual obligors, exposures, or pools, and the data source(s) used to estimate the model;(2) establish a rigorous statistical process (including out-of-time and out-of-sample performance tests) for validating the model;
BIPRU 4.3.51RRP
(1) This paragraph applies to the use of statistical models and/or other mechanical methods to assign exposures to obligor grades, obligor pools, facility grades or facility pools.(2) A firm must be able to demonstrate to the FSA that the model has good predictive power and that capital requirements are not distorted as a result of its use.(3) The input variables to the model must form a reasonable and effective basis for the resulting predictions. The model must not have material
BIPRU 4.4.58RRP

Table: Formulae for the calculation of risk weighted exposure amounts

This table belongs to BIPRU 4.4.57 R

Correlation (R)

0.12 × (1 - EXP(-50*PD))/(1-EXP(-50)) + 0.24*

[1-(1-EXP(-50*PD))/(1-EXP(-50))]

Maturity factor (b)

(0.11852-0.05478*1n(PD))2

(LGD*N[(1-R)-0.5*G(PD)+(R/(1-R))0.5 *G(0.999)]-PD*LGD)*

(1-1.5*b)-1*(1+(M-2.5)*b)*12.5*1.06

N(x)

denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x). G(z) denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that N(x) = z).

PD = 0

For PD = 0, RW shall be: 0

PD = 1

For PD = 1:

(i)

for defaultedexposures where a firm applies the LGD values set out in BIPRU 4.4.32R and BIPRU 4.8.25R RW shall be: 0;

(ii)

for defaultedexposures where a firm uses its own estimates of LGDs, RW shall be: Max {0, 12.5 *(LGD-ELBE)};

where ELBEmust be the firm's best estimate of expected loss for the defaultedexposure according to BIPRU 4.3.122 R.

[Note:BCD Annex VII Part 1 point 3]

BIPRU 4.7.24RRP
The risk weighted exposure amount is the potential loss on the firm'sequity exposures as derived using internal value-at-risk models subject to the 99th percentile, one-tailed confidence interval of the difference between quarterly returns and an appropriate risk-free rate computed over a long-term sample period, multiplied by 12.5. The risk weighted exposure amounts at the equity exposure portfolio2 level must not be less than the total of the sums2 of the minimum risk weighted
BIPRU 4.7.27RRP
(1) A firm must meet the standards set out in (2) to (9) for the purpose of calculating capital requirements.(2) The estimate of potential loss must be robust to adverse market movements relevant to the long-term risk profile of the firm's specific holdings. The data used to represent return distributions must reflect the longest sample period for which data is available and be meaningful in representing the risk profile of the firm's specific equity exposures. The data used must
BIPRU 4.7.28RRP
(1) With regard to the development and use of internal models for capital requirement purposes, a firm must establish policies, procedures, and controls to ensure the integrity of the model and modelling process. These policies, procedures, and controls must include the ones set out in the rest of this paragraph.(2) There must be full integration of the internal model into the overall management information systems of the firm and in the management of the non-trading bookequity
BIPRU 9.12.3RRP
For an unrated position the supervisory formula method must be used except where a firm uses the ABCP internal assessment approach.[Note:BCD Annex IX Part 4 point 39]
BIPRU 9.12.6RRP
Subject to any IRB permission of the type described in BIPRU 9.12.28 G, in the case of an originator or sponsor unable to calculate KIRB and which has not obtained approval to use the ABCP internal assessment approach, and in the case of other firms where they have not obtained approval to use the supervisory formula method or, for positions in ABCP programmes, the ABCP internal assessment approach, a risk weight of 1250% must be assigned to securitisation positions which are
BIPRU 5.6.19RRP
(1) A firm must be able to satisfy the FSA that the firm's risk management system for managing the risks arising on the transactions covered by the master netting agreement is conceptually sound and implemented with integrity and that, in particular, the minimum qualitative standards in (2) – (11) are met.(2) The internal risk-measurement model used for calculation of potential price volatility for the transactions is closely integrated into the daily risk-management process of
BIPRU 11.5.17RRP
A firm calculating risk weighted exposure amounts in accordance with BIPRU 9 must disclose the following information:(1) a description of the firm's objectives in relation to securitisation activity;(2) the roles played by the firm in the securitisation process;(3) an indication of the extent of the firm's involvement in each of them;(4) the approaches to calculating risk weighted exposure amounts that the firm follows for its securitisation activities;(5) a summary of the firm's
BIPRU 3.6.17RRP
Any short-term credit assessment may only apply to the item the short-term credit assessment refers to, and it must not be used to derive risk weights for any other item.[Note: BCD Annex VI Part 3 point 13]