Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms
Date: 2015-09-30
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: approximation of laws, banking, credit institution, financial legislation, financial market, financial requirements, investment company, monetary crisis, private-sector liquidity

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   EUROPEAN COMMISSION  Brussels, 30.9.2015  COM(2015) 473 final 2015/0225 (COD)   Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms (Text with EEA relevance) {SWD(2015) 185 final} {SWD(2015) 186 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Promoting  the  development  of  a  securitisation  market  based  on  sound  practices  will 
contribute to a return to sustainable growth and job creation, consistent with the Commission's 
priority  objective.  Furthermore,  a  common,  high  quality  EU  securitisation  framework  will 
promote further integration of financial markets in the Union, help diversify funding sources 
and  unlock  capital,  making  it  easier  for  credit  institutions  to  lend  to  households  and 
businesses. In order to attain this objective, the following two steps must be taken.  

The  first  step  is  to  develop  a  common  substantive  framework  for  securitisations  for  all 
participants  in  this  market  and  identify  a  subset  of  transactions  meeting  certain  eligibility 
criteria: simple, transparent and standardised securitisations or STS securitisations. This is the 
subject  of  the  Commission  Proposal  for  a  Securitisation  Regulation.  The  second  step  is  to 
make amendments to the regulatory framework of securitisations in EU law, including in the 
area of capital charges for credit institutions and investment firms originating, sponsoring or 
investing  in  these  instruments,  to  provide  for  a  more  risk-sensitive  regulatory  treatment  for 
STS securitisations.   

Such  differentiated  regulatory  treatment  already  exists  in  certain  legislative  instruments,  in 
particular  in  the  Delegated  Act  on  the  prudential  requirements  the  liquidity  of  banks 
(Liquidity  Coverage  Ratio)1.  This  must  now  be  complemented  by  an  amendment  to  the 
regulatory capital treatment for securitisations in Regulation No. 575/2013 (the "CRR")2. The 
current securitisation framework in the CRR is essentially based on the standards developed 
by the Basel Committee on Banking Supervision ("BCBS") more than a decade ago and these 
do not make any distinction between STS securitisations and other more complex and opaque 
transactions.  

The  global  financial  crisis  revealed  a  number  of  shortcomings  in  the  current  securitisation 
framework. These include: 

• mechanistic reliance on external ratings in determining capital requirements; 

•  insufficient  risk-sensitivity  due  to  the  lack  of  sufficient  risk  drivers  across  approaches  in 
determining risk weights; 

• procyclical cliff effects in capital requirements. 

In  order  to  address  these  shortcomings  and  contribute  to  enhancing  the  resilience  of 
institutions  to  market  shocks,  the  BCBS  adopted  a  recommendation  for  a  revised 
securitisation framework in December 20143 ("the Revised Basel Framework"). The Revised 

Commission  Delegated  Regulation  (EU)  No  2015/61  of  10  October  2014  to  supplement  Regulation 

1 
(EU) 575/2013 with regard to liquidity coverage requirement for Credit Institutions (OJ L 11, 17.1.2015, p; 1). 
2 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 
(OJ L 176, 27.6.2013, p. 1). 
3 

http://www.bis.org/bcbs/publ/d303.pdf 

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Basel Framework has been designed to reduce the complexity of the current regulatory capital 
requirements, reflect better the risks of positions in a securitisation and allow the use of the 
information  available  to  institution  to  allocate  capital  requirements  based  on  their  own 
calculations, thus reducing reliance on external ratings. Under the Revised Basel Framework, 
institutions may calculate capital requirements for their securitisation positions in accordance 
with a single hierarchy of approaches, which starts with the Internal Ratings Based Approach 
at the top. If an institution cannot use the approach based on internal ratings, it must use an 
External  Ratings  Based  Approach,  provided  the  exposure  has  an  external  credit  assessment 
which  meets  a  series  of  operational  requirements.  In  case  the  Institution  cannot  use  the 
External  Ratings  Based  Approach,  either  because  is  located  in  a  jurisdiction  that  doesn't 
permit  its  use  or  because  it  lacks  the  information  needed  to  use  that  approach,  shall  use  a 
Standardised Approach based on a supervisory-provided formula.  

The Revised Basel Framework does not currently provide for a more risk-sensitive treatment 
for STS securitisations. However the BCBS is currently working on the incorporation in the 
new  framework4  of  the  STS  criteria  adopted  jointly  with  the  International  Organisation  of 
Securities  Commission  (IOSCO)  on  23  July  2015.  No  outcome  is  expected  from  this 
workstream before mid-2016. 

At  an  European  level,  following  a  call  for  advice  from  the  Commission,  the  European 
Banking  Authority  ("EBA")  issued  a  report  on  qualifying  securitisations  on  7  July  20155 
which  recommended  lowering  capital  charges  for  STS  securitisations  to  a  prudent  level 
relative  to  those  set  out  in  the  Revised  Basel  Framework  and  amend  the  regulatory  capital 
requirements for securitisations set out in the CRR in line with the Revised Basel Framework 
to address the weaknesses of the current rules. For STS securitisations, the EBA re-calibrated 
downwards the 3 approaches developed by the BCBS for the Revised Basel Framework.  

In  order  to  contribute  to  the  overarching  objectives  of  the  Commission  Proposal  for  a 
Securitisation Regulation of restarting securitisation markets on a more sustainable basis and 
making this a safe and efficient instrument for funding and risk management, it is proposed to 
amend the regulatory capital requirements for securitisations in the CRR in order to: 

-  implement  the  regulatory  capital  calculation  approaches  set  out  in  the  Revised  Basel 
Framework (Articles 254 to 268); and  

- introduce a re-calibration for STS securitisations, consistent with the recommendation of the 
EBA (Articles 243, 260, 262, and 264).  

In  the  first instance  and  to  remove  any  form  of  mechanistic  reliance  on  external  ratings,  an 
institution  should  use  its  own  calculation  of  regulatory  capital  requirements  where  the 
institution  has  permission  to  use  the  Internal  Ratings  Based  approach  (IRB)  in  relation  to 
exposures  of  the  same  type  as  those  underlying  the  securitisation  and  is  able  to  calculate 
regulatory capital requirements in relation to the underlying exposures as if these had not been 
securitised ("Kirb"), in each case subject to certain pre-defined inputs (the "SEC-IRBA"). A 
Securitisation External Ratings-Based Approach ("SEC-ERBA") should then be available to 

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http://www.bis.org/press/p150723.htm 

See 
https://www.eba.europa.eu/documents/10180/950548/EBA+report+on+qualifying+securitisation.pdf 

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the  SEC-ERBA,  capital  requirements  should  be  assigned 

institutions  that  may  not  use  the  SEC-IRBA  in  relation  to  their  positions  in  a  given 
to 
securitisation.  Under 
securitisation tranches on the basis of their external rating. When the first two approaches are 
not available or the use of the SEC-ERBA would result in incommensurate regulatory capital 
requirements  relative  to  the  credit  risk  embedded  in  the  underlying  exposures,  institutions 
should  be  able  to  apply  the  Securitisation  Standardised  Approach  (the  "SEC-SA")  which 
should rely on a supervisory-provided formula using as an input the capital requirements that 
would be calculated under the SA in relation to the underlying exposures if these had not been 
securitised ("Ksa").  

In  addition  to  contributing  to  the  re-launch  of  securitisation  markets,  this  proposal  will  also 
allow the Commission to act as a front-runner with regard to potential future developments of 
the  BCBS  workstream  on  the  regulatory  treatment  of  STS  securitisations  and  contribute  to 
achieving the objectives of such workstream from an EU perspective.  

No later than 3-years from the entry into force of this Regulation the Commission will review 
the  proposed  approach  to  capital  requirements  for  securitisation  exposures,  including  the 
hierarchy  of  approaches, 
impact  on  securitisation  markets 
developments and the need to preserve financial stability in the EU.  

into  account 

taking 

its 

• 

Consistency with existing policy provisions in the policy area 

The revisions to the regulatory capital treatment of securitisation in the CRR are part of the 
Commission  proposed  legislative  package  which  includes  the  Securitisation  Regulation  and 
which is intended to identify STS criteria and establish a common set of rules for all financial 
services sectors in the areas of risk retention, due diligence and disclosure requirements. The 
development of a safer and more sustainable EU securitisation market constitutes a building 
block  of  the  Capital  Markets  Union  project  and  will  contribute  to  achieving  the  project's 
objectives in terms of higher integration of financial markets and more diversified sources of 
funding for the EU economy. 

• 

Consistency with other Union policies 

In  the  Investment  Plan  for  Europe  presented  by  the  Commission  on  26  November  2014, 
creating a sustainable market for high-quality securitisation was identified as one of the five 
areas  where  short-term  action  was  needed.  This  amending  Regulation  will  contribute  to  the 
Commission's  priority  objective  of  supporting  job  creation  and  sustainable  growth  without 
repeating  the  mistakes  made  before  the  crisis.  Moreover  this  revised  prudential  framework 
will promote further integration of EU financial markets and help diversify funding sources 
and  unlock  capital  for  EU  businesses.  Finally,  the  revised  prudential  framework  will 
contribute to a more efficient capital allocation and portfolio diversification for investors and 
will enhance overall efficiency of EU capital markets. 

2. 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

The  legal  basis  for  this  proposal  is  Article  114(1)  of  the  Treaty  on  the  Functioning  of  the 
European  Union  ("TFEU")  which  empowers  the  Parliament  and  the  Council  to  adopt 
measures  for  the  approximation  of  the  provisions  laid  down  by  law,  regulation  or 
administrative  action  in  Member  States  which  have  as  their  object  the  establishment  and 
functioning of the internal market.   

The CRR, as amended in accordance with the present proposal, lays down a harmonised EU 
prudential framework for credit institutions and investment firms through the establishment of 

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uniform  and  directly  applicable  rules  to  those  institutions,  including  in  the  area  of  capital 
charges  for  credit  risk  attached  to  securitisation  positions.  This  harmonisation  will  ensure  a 
level playing field for EU credit institutions and investment firms and will boost confidence in 
the stability of institutions across the EU, including with respect to their activity as investors, 
originators or sponsors in securitisation markets. 

• 

Subsidiarity (for non-exclusive competence)  

Only  EU  legislation  can  ensure  that  the  regulatory  capital  treatment  for  securitisation  is  the 
same for all credit institutions and investment firms operating in more than one Member State. 
Harmonised  regulatory  capital  requirements  ensure  a  level  playing  field,  reduce  regulatory 
complexity, avoid unwarranted compliance costs for cross-border  activities,  promote further 
integration  in  the  EU  markets  and  contribute  to  the  elimination  of  regulatory  arbitrage 
opportunities. Action at an EU level also ensures a high level of financial stability across the 
EU.  For  these  reasons,  regulatory  capital  requirements  for  securitisations  are  set  out  in  the 
CRR  and  only  amendments  to  that  Regulation  would  achieve  the  purpose  sought  by  this 
proposal.  Accordingly,  this  proposal  complies  with  the  principles  of  subsidiarity  and 
proportionality set out in Article 5 TFEU. 

• 

Proportionality 

The  proposal  only  makes  targeted  amendments  to  the  CRR  insofar  as  such  changes  are 
necessary to address the problem described in Section 1. 

• 

Choice of the instrument 

A regulation was chosen because the proposal requires amending the CRR. 

3. 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

• 

Stakeholder consultations 

The Commission services have closely followed and participated in the work of European and 
international fora, with particular regard to the relevant EBA and BCBS workstreams.  

The  Commission  also  conducted  a  public  consultation  in  February  2015,  covering  the  main 
elements of this proposal. The Commission received comments from a variety of respondents, 
including  a  relevant  number  of  stakeholders  in  the  banking  sector  (supervisory  authorities, 
central banks, industry), which highlighted the wide consensus on the need for EU action in 
this  field  and  provided  input  on  the  specific  actions  to  be  implemented  and  their  potential 
benefits and costs. Responses to the public consultation are summarised in the accompanying 
impact  assessment.  Individual  responses  are  available  on  the  Commission's  "EUSurvey" 
webpage6. 

In  addition,  the  Commission  conducted  separate  consultations  with  Member  States  through 
the Expert Group on Banking, Payments and Insurance at its meeting of 22 July, 2015.   

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See https://ec.europa.eu/eusurvey/publication/securitisation-2015?language=en  

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Collection and use of expertise 

• 
As  a  follow-up  to  the  Green  Paper  on  long-term  financing  of  the  European  economy7,  the 
Commission  issued  a  call  for  advice  addressed  to  the  EBA  in  order  to  gather  evidence  and 
collect the input on the most appropriate characteristics to identify STS securitisations and on 
the  appropriateness,  from  a  prudential  perspective,  of  granting  a  differentiated  preferential 
treatment to STS securitisations in order to foster EU securitisation markets.  

EBA replied to Commission's call through the publication on 7 July, 2015 of the EBA report 
on qualifying securitisations. 

• 

Impact assessment 

For the preparation of this proposal an Impact Assessment was prepared and discussed with 
an Interservices Steering Group.  

The impact assessment accompanying the Securitisation Regulation clearly shows the benefits 
in terms of efficiency and effectiveness of a) introducing a revised regulatory framework on 
capital  charges  for  exposures  to  securitisations,  and  b)  differentiating  the  treatment  of  STS 
securitisations having regard to the overall objectives of the Commission legislative package 
on  securitisation,  i.e.  remove  stigma  attached  to  securitisations  among  investors;  remove 
regulatory disadvantages for STS products; and reduce or eliminate unduly high operational 
costs  for  issuers  and  investors.  Introducing  a  clear  distinction  between  STS  and  non-STS 
securitisations in the area of capital charges will bring a number of positive effects, namely:  

– 

– 

– 

the  resulting  securitisation  framework  would  be  more  risk-sensitive  and  better 
balanced; 

preferential  capital  requirements  would 
differentiated STS criteria;  

incentivise  banks 

to  comply  with 

investors  would  be  encouraged  to  re-enter  the  securitisation  market,  as  a 
differentiated  framework  would  send  a  clear  signal  that  risks  are  now  better 
calibrated and, therefore, the likelihood of a systemic crisis reoccurring would have 
been reduced. 

The  Impact  Assessment  report  was  submitted  to  the  Regulatory  Scrutiny  Board  on  17  June 
2015. The board meeting took place on 15 July 2015. The Board gave a positive opinion on 
the  suggested  amendments  to  the  regulatory  capital  treatment  for  institutions  subject  to  the 
CRR. 

• 

Regulatory fitness and simplification 

This  proposal  would  deliver  a  substantial  simplification  of  the  prudential  regulatory  capital 
framework  applicable  to  credit  institutions  and  investment  firms  investing,  originating  or 
sponsoring  securitisations  through  a  single  hierarchy  of  approaches  applicable  to  all 
institutions,  regardless  of  the  approach  used  for  the  calculation  of  capital  requirements 
associated with the underlying exposures, and the deletion of several specific treatments for 
certain  categories  of  securitisation  positions.  Comparability  across  institutions  would  be 
enhanced and compliance costs substantially reduced. 

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d9d6be7099fb.0009.03/DOC_1&format=PDF  

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http://eur-lex.europa.eu/resource.html?uri=cellar:9df9914f-6c89-48da-9c53-

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• 

Fundamental rights 

The proposal does not have consequences for the protection of fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

This proposal does not have any budgetary implications. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

A  close  monitoring  of  the  impact  of  the  new  framework  will  be  carried  out  in  cooperation 
with the EBA and competent supervisory authorities on the basis of the supervisory reporting 
arrangements  and  disclosure  requirements  by  institutions  provided  for  in  the  CRR. 
Monitoring and evaluation of the new framework will be also implemented at a global level, 
with particular regard to the BCBS as part of its mission. 

• 

Explanatory documents (for directives) 

Not applicable. 

6. 

DETAILED  EXPLANATION  OF  THE  SPECIFIC  PROVISIONS  OF  THE 
PROPOSAL 

(a) 

Interaction and consistency between elements of the package 

This Regulation forms a legislative package with the proposed Securitisation Regulation. As 
pointed  out  by  many  stakeholders  during  the  consultation  process,  the  development  of  STS 
eligibility  criteria  would  not  be  sufficient  'per  se'  to  achieve  the  objective  of  reviving  EU 
securitisation  markets  if  not  accompanied  with  a  new  prudential  treatment,  including  in  the 
area of capital requirements, better reflecting their specific features.   

Capital  requirements  for  positions  in  securitisation,  including  the  more  risk-sensitive 
treatment for STS securitisations, are set out in the present proposal while eligibility criteria 
for  STS  securitisations,  together  with  other  cross-sectoral  provisions,  are  contained  in  the 
Securitisation  Regulation.  These  notably  encompass  all  provisions  on  risk  retention,  due 
diligence  and  disclosure  requirements,  previously  included  in  Part  V  of  CRR.  The  same 
applies  to  some  definitions  originally  included  in  Article  4  which  are  of  general  nature  and 
therefore have been moved to the cross-sectoral legislative framework. 

The current proposal will be followed at a later stage by an amendment to the LCR Delegated 
Act in order to align it with the Securitisation Regulation. In particular the eligibility criteria 
for securitisations as Level 2B assets in Article 13 of the LCR Delegated Act will be amended 
to  make  it  consistent  with  the  general  STS  criteria  as  laid  down  in  the  Securitisation 
Regulation.  Amendments  of  this  Delegated  Act  could  not  be  made  at  this  time  since  they 
follow a different procedure and depend on the outcome of the legislative negotiations on this 
package. 

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(b) 

Calculation of risk weighted amounts for securitisation positions 

In  order  to  preserve  and  enhance internal  consistency  and overall  coherence  of  the  text,  the 
entire  Chapter  5  of  Title  II,  Part  Three  of  CRR  is  replaced  through  the  current  proposal 
although  several  Articles  are  subject  to  limited  refinements.  This  in  particular  concerns 
Section 2 (Recognition of significant risk transfer), part of Section 3 (Subsection 1: General 
Provisions) and Section 4 (External credit Assessments). 

The  most  relevant  changes  are  contained  in  new  Articles  254  to  270a.  On  the  basis  of    the 
revised BCBS framework a new sequence of applicable approaches for the calculation of Risk 
Weighted Assets (RWAs) for securitisation exposures is implemented. The use of each of the 
approaches depends on the information available to the institution holding the securitisation 
position.  This  single  hierarchy  of  approaches  will  apply  to  both  institutions  using  the 
standardised approach (SA) or the internal ratings based approach (IRB) for credit risk. 

(c) 

A new Hierarchy of approaches (New Articles 254 to 270bis) 

The Internal Ratings-Based Approach (SEC-IRBA) is at the top of the revised hierarchy and 
uses KIRB information as a key input. KIRB is the capital charge for the underlying exposures 
using the IRB framework (either the advanced or foundation approaches). In order to use the 
SEC-IRBA,  the  bank  shall  have:  (i)  a  supervisory-approved  IRB  model  for  the  type  of 
underlying  exposures  in  the  securitisation  pool;  and  (ii)  sufficient  information  to  estimate 
KIRB.  Since  the  relevant  effects  of  maturity  are  not  fully  captured  through  KIRB  alone,  the 
SEC-IRBA  explicitly  incorporates  tranche  maturity  as  an  additional  risk  driver.  Tranche 
maturity definition is based on the weighted-average maturity of the contractual cash flows of 
the tranche. Instead of calculating the weighted-average maturity an institution is allowed to 
choose simply to use the final legal maturity (with the application of a haircut). A 5-year cap 
and a 1-year floor are applicable in all cases. 

An institution that cannot calculate KIRB for a given securitisation position will have to use the 
External  Ratings-Based  Approach  (SEC-ERBA)  for  the  calculation  of  the  risk-weighted 
exposure  amounts.  Under  the  ERBA,  RWs  are  assigned according  to  credit  assessments  (or 
inferred  ratings),  the  seniority  of  the  position  and  the  granularity  of  the  underlying  pool. 
Where  an  institution  cannot  use  the  SEC-ERBA,  it  shall  apply  instead  the  Securitisation 
Standardised  Approach  (SEC-SA).  The  SA  uses  KSA,  that  is,  the  capital  charge  for  the 
underlying  exposures  under  the  SA,  and  a  factor  “W”,  which  is  the  ratio  of  the  sum  of  the 
amount  of  all  underlying  pool  of  exposures  that  are  delinquent  to  the  total  amount  of 
underlying exposures. Where the SEC-ERBA results in regulatory capital requirements which 
are  not  commensurate  to  the  credit  risk  embedded  in  the  exposures  underlying  a 
securitisation, institutions may apply the SEC-SA directly in relation to the positions of that 
securitisation, subject to the competent authority's review.      

An institution that cannot use SEC-IRBA, SEC-ERBA, or SEC-SA for a given securitisation 
exposure will have to assign the exposure a risk weight of 1,250%. 

A  risk  weight  floor  of  15%  is  set  for  all  securitisation  exposures  and  for  all  the  three 
approaches.  The  risk  weight  floor  is  justified  by  certain  risks,  including  model  and  agency 
risks, which are arguably more acute for securitisations exposures than for other categories of 

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exposures and can lead to a certain amount of uncertainty in capital estimates despite overall 
enhanced risk-sensitivity of the new framework. 

(d) 

A more risk-sensitive treatment of STS securitisations 

A more risk-sensitive prudential treatment is provided for STS securitisations in line with the 
methodology proposed by the EBA in the report on qualifying securitisations under all the 3 
new  approaches  for  the  calculation  of  RWAs  (New  Articles  260,  262,  and  264).  The  3 
approaches  are  re-calibrated  for  all  tranches  in  order  to  generate  lower  capital  charges  for 
positions in transactions qualifying as STS securitisations. 

In  addition  to  the  re-calibration  of  the  3  approaches,  senior  positions  in  STS  securitisations 
will also benefit from a lower floor of 10% (instead of 15% which will remain applicable to 
both non-senior positions in STS securitisations and to non-STS securitisations generally). It 
has  been  set  in  order  to  recognise,  on  the  basis  of  EBA  analysis,  the  materially  better 
historical performance of STS senior tranches with respect to non-senior qualifying tranches, 
which is fully justified by the fact that STS features are able to materially reduce model and 
agency risks. 

For the purposes of calculating risk-weighted exposure amounts, eligible STS securitisations, 
as  defined  in  accordance  with  the  Securitisation  Regulation,  shall  fulfil  additional 
requirements related to the underlying exposures, namely credit granting standards, minimum 
granularity  and  maximum  Risk  Weights  (RWs)  under  the  SA  approach.  Specific  additional 
criteria are set also for Asset Backed Commercial Paper ("ABCP"). 

(e) 

• 

Caps 

The maximum risk weight for senior securitisation positions (new Article 267) 

Under the so-called 'look-trough' approach a securitisation position receives a maximum RW 
equal to the average RW applicable to the underlying exposures. According to existing rules 
the  look-through  approach  can  be  used  for  the  calculation  of  risk-weighted  exposure  of 
unrated  positions  (Article  253  CRR).  It  is  now  proposed,  in  line  with  the  revised  BCBS 
framework,  to  allow  the  look-through  approach  only  for  senior  securitisation  positions 
whether  or  not  the  relevant  position  is  rated  and  regardless  of  the  approach  used  for  the 
underlying pool of exposures (SA or IRBA), provided that the bank is able to determine KIRB 
or  KSA  for  underlying  exposures.  In  light  of  the  credit  enhancement  the  senior  tranches 
receive  from  subordinated  tranches,  an  institution  should  not  have  to  apply  to  a  senior 
securitisation  position  a  higher  risk  weight  than  if  it  held  in  relation  to  the  underlying 
exposures directly. 

• 

Maximum capital requirements (new article 268) 

An  overall  cap  in  terms  of  maximum  risk-weighted  exposure  amounts  is  currently  foreseen 
for  institutions  that  can  calculate  KIRB  (Article  260).  It  is  now  proposed  to  a)  keep  this 
treatment,  i.e.    institutions  that  use  the  SEC-IRBA  for  a  securitisation position  may  apply a 
maximum  capital  requirements  for  that  position  equal  to  the  capital  requirement  that  would 
have been held against the underlying exposures under the IRB had they not been securitised; 

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and b) extend the same treatment to originator and sponsor institutions using SEC-ERBA and 
SEC-SA.  This  can  be  justified  on  the  grounds  that,  from  an  originator's  standpoint,  the 
securitisation process can be viewed as similar to credit risk mitigation, i.e. it has the effect of 
transferring at least some of the risks of the underlying exposures to another party. From this 
perspective, provided the conditions for significant risk transfer are fulfilled, it would be not 
justified for an institution to have to hold more capital after securitisation than before, as the 
risks attached to the underlying exposures are reduced through the process of securitisation.  

(f) 

Elimination of special treatment for certain exposures  

In  order to  further  reduce  complexity  in  the  framework  and  improve  consistency  within the 
securitisation  framework,  it  is  proposed  to  eliminate  a  series  of  special  treatments  currently 
provided for in CRR  

– 

– 

– 

(g) 

• 

Second-loss or better positions in ABCP programs (current Article 254); 

Treatment of unrated liquidity facilities (current Article 255);  

Additional own funds securitisations of revolving exposures with early amortisation 
provisions (current Article 256). 

Treatment of specific exposures 

Re-securitisations (New Article 269) 

A  more  conservative  version  of  the  SEC-SA  will  be  the  only  approach  available  for  re-
securitisation positions which will be subject to significantly higher risk weight floor (100%). 

• 

Senior positions in SME securitisations (New Article 270) 

Taking  into  account  that  the  overarching  objective  of  the  securitisation  package  is  to 
contribute to generating an adequate flow of funding to support EU economic growth and that 
the  SMEs  constitute  the  backbone  of  the  EU  economy,  a  specific  provision  on  SME 
securitisations is included in the present Regulation (Article 270). It targets in particular those 
securitisations  of  SME  loans  where  the  credit  risk  related  to  the  mezzanine  tranche  (and  in 
some cases the junior tranche) is guaranteed by a restricted list of third parties, including in 
particular the central government or central bank of a Member State, or counter-guaranteed by 
one  of  those  (this  scheme  is  usually  defined  'tranched  cover').  Given  the  relevance  of  these 
schemes in order to free capital to be used to increase lending to SMEs, it is proposed to grant 
a  more  risk-sensitive  treatment,  equivalent  to  that  foreseen  for  STS  securitisations,  to  the 
senior tranche retained by the originator institution. In order to qualify for this treatment the 
securitisation  shall  comply  with  a  series  of  operational  requirements,  including  applicable 
STS criteria. Where such transactions benefit from this type of guarantee or counterguarantee, 
the preferential regulatory capital treatment that would be available to them under Regulation 
(EU) No 575/2013 is without prejudice to compliance with the State Aid rules.   

EN 

10 

   EN 

 
 
(h) 

• 

Other main elements 

Amendments to Part Five (Exposures to Transferred Credit Risk) 

Taking  into  account  the  parallel  introduction  in  the  Securitisation  Regulation  of  a  general 
framework on requirements for originator, sponsor and investor institutions applicable to all 
financial sectors, all the provisions included in Part Five (Articles 404 to 410) are repealed. 
Only  the  contents  of  Article  407  (Additional  risk  weight)  and  the  correspondent 
empowerment of the Commission for the adoption of an ITS8 are kept and this shall be found 
in new Article 270bis. 

• 

Amendments to Article 456 

It is proposed to amend the Article 456 to empower the Commission, as it is the case of other 
categories  of  own  funds  requirements,  to  adopt  delegated  act  in  order  to  incorporate  any 
relevant  developments  at  international  level  with  particular  regard  to  the  on-going  BCBS 
workstream. 

• 

Review clause (Article 519a) 

Within three years from the date of entry into force of this Regulation, the Commission will 
report  to  the  Council  and  the  Parliament  on  the  impact  of  the  new  regulatory  capital 
framework on EU securitisation markets. On the basis of its analysis and taking into account 
international  regulatory  developments  and  the  need  to  safeguard  financial  stability,  the 
Commission  may  propose  further  amendments  to  the  CRR  in  relation  to,  inter  alia,  the 
hierarchy of approaches in accordance with Article 456.  

• 

Entry into force 

The entry into force of the new provisions is set at […].  

8 
Commission  Implementing  Regulation  (EU) No 602/2014 of 4  June  2014  laying down  implementing 
technical standards for facilitating the convergence of supervisory practices with regard to the implementation of 
additional risk weights according to Regulation (EU) No 575/2013 (OJ L 166, 5.6.2014, p. 22–24) 

EN 

11 

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2015/0225 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EU) No 575/2013 on prudential requirements for credit 
institutions and investment firms 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee9, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

Securitisations are an important constituent part of well-functioning financial markets 
insofar  as  they  contribute  to  diversifying  institutions'  funding  sources  and  releasing 
regulatory  capital  which  can  then  be  reallocated  to  support  further  lending. 
Furthermore,  securitisations  provide  institutions  and  other  market  participants  with 
additional  investment  opportunities,  thus  allowing  portfolio  diversification  and 
facilitating  the  flow  of  funding  to  businesses  and  individuals  both  within  Member 
States  and  on  a  cross-border  basis  throughout  the  Union.  These  benefits,  however, 
should  be  weighed  against  their  potential  costs.  As  seen  during  the  first  phase  of 
financial  crisis  starting  in  the  summer  of  2007,  unsound  practices  in  securitisation 
markets resulted in significant threats to the integrity of the financial system, namely 
due  to  excessive  leverage,  opaque  and  complex  structures  that  made  pricing 
problematic,  mechanistic  reliance  on  external  ratings  or  misalignment  between  the 
interests of investors and originators ("agency risks"). 

In  recent  years,  securitisation  issuance  volumes  in  the  Union  have  remained  below 
their  pre-crisis  peak  for  a  number  of  reasons,  among  them  the  stigma  generally 
associated  with  these  transactions.  The  recovery  of  securitisation  markets  should  be 
based  on  sound  and  prudent  market  practices  to  prevent  a  recurrence  of  the  set  of 
circumstances 
that  end,  Regulation 
[Securitisation  Regulation]  lays  down  the  substantive  elements  of  an  overarching 
securitisation  framework,  with  ad-hoc  criteria  to  identify  simple,  transparent  and 
standardised ("STS") securitisations and a system of supervision to monitor the correct 
application of these criteria by originators, sponsors, issuers and institutional investors. 
Furthermore,  Regulation  [Securitisation  Regulation]  provides  for  a  set  of  common 

financial  crisis.  To 

triggered 

that 

the 

9 

OJ C68, 6.3.2012, p. 39. 

EN 

12 

   EN 

 
                                                 
(3) 

(4) 

(5) 

(6) 

requirements  on risk retention,  due diligence and disclosure for all financial services 
sectors.  

Consistent  with  the  objectives  of  Regulation  [Securitisation  Regulation],  the 
regulatory  capital  requirements  laid  down  in  Regulation  (EU)  No  575/2013  for 
institutions originating, sponsoring or  investing in  securitisations  should be amended 
to  reflect  adequately  the  specific  features  of  STS  securitisations  and  address  the 
shortcomings  of  the  framework  which  became  apparent  during  the  financial  crisis, 
namely  its  mechanistic  reliance  on  external  ratings,  excessively  low  risk  weights  for 
highly-rated securitisation tranches and, conversely, excessively high risk weights for 
low-rated tranches, and insufficient risk sensitivity. On 11 December 2014 the Basel 
Committee  for  Banking  Supervision  ("BCBS")  published  its  “Revisions  to  the 
securitisation  framework”  (the  “Revised  Basel  Framework”)  setting  out  various 
changes  to  the  regulatory  capital  standards  for  securitisations  to  address  specifically 
those  shortcomings.  The  amendments  to  Regulation  (EU)  No  575/2013  should  take 
into account the provisions of the Revised Basel Framework.   

Capital  requirements  for  positions  in  a  securitisation  under  Regulation  (EU)  No 
575/2013 should be subject to the same calculation methods for all institutions. In the 
first instance and to remove any form of mechanistic reliance on external ratings, an 
institution should use its own calculation of regulatory capital requirements where the 
institution  has  permission  to  use  the  Internal  Ratings  Based  approach  (the  "IRB")  in 
relation to exposures of the same type as those underlying the securitisation and is able 
to calculate regulatory capital requirements in relation to the underlying exposures as 
if these had not been securitised ("Kirb"), in each case subject to certain pre-defined 
inputs  (the  "SEC-IRBA").  A  Securitisation  External  Ratings-Based  Approach  (the 
"SEC-ERBA") should then be available to institutions that may not use the SEC-IRBA 
in  relation  to  their  positions  in  a  given  securitisation.  Under  the  SEC-ERBA,  capital 
requirements should be assigned to securitisation tranches on the basis of their external 
rating. When the first two approaches are not available or the use of the SEC-ERBA 
would result in incommensurate regulatory capital requirements relative to the credit 
risk  embedded  in  the  underlying  exposures,  institutions  should  be  able  to  apply  the 
Securitisation  Standardised  Approach  (the  "SEC-SA")  which  should  rely  on  a 
supervisory-provided formula using as an input the capital requirements that would be 
calculated under the Standardised Approach to credit risk (the "SA") in relation to the 
underlying exposures if these had not been securitised ("Ksa").  

Agency and model risks are more prevalent for securitisations than for other financial 
assets  and  give  rise  to  some  degree  of  uncertainty  in  the  calculation  of  capital 
requirements for securitisations even after all appropriate risk drivers have been taken 
into account. In order to capture those risks adequately, Regulation (EU) No. 575/2013 
should  be  amended  to  provide  for  a  minimum  15%  risk  weight  floor  for  all 
securitisation  positions.  Re-securitisations,  however,  exhibit  greater  complexity  and 
riskiness and, accordingly, positions in them, should be subject to a more conservative 
regulatory capital calculation and a 100% risk weight floor.  

Institutions  should  not  be  required  to  apply  to  a  senior  position  a  higher  risk  weight 
than  that  which  would  apply  if  it  held  the  underlying  exposures  directly,  thus 
reflecting the benefit of  credit enhancement that  senior  positions receive from junior 
tranches in the securitisation structure. Regulation (EU) No 575/2013 should therefore 
provide for a 'look-trough' approach according to which a senior securitisation position 
should be assigned a maximum risk weight equal to the average risk weight applicable 
to  the  underlying  exposures,  and  such  approach  should  be  available  irrespective  of 

EN 

13 

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(7) 

(8) 

(9) 

whether  the  relevant  position  is  rated  or  unrated  and  the  approach  used  for  the 
underlying pool (Standardised Approach or IRB), subject to certain conditions.  

An  overall  cap  in  terms  of  maximum  risk-weighted  exposure  amounts  is  available 
under the current framework for institutions that can calculate the capital requirements 
for  the  underlying  exposures  in  accordance  with  the  IRB  approach  as  if  those 
exposures had not been securitised (KIRB). Insofar as the securitisation process reduces 
the  risk  attached  to  the  underlying  exposures,  this  cap  should  be  available  to  all 
originator  and  sponsor  institutions,  regardless  of  the  approach  they  use  for  the 
calculation of regulatory capital requirements for the positions in the securitisation. . 

As  pointed  out  by  the  European  Banking  Authority  (the  "EBA")  in  its  "Report  on 
Qualifying Securitisations" of June 201510, empirical evidence on defaults and losses 
shows that STS securitisations exhibited better performance than other securitisations 
during the financial crisis, reflecting the use of simple and transparent structures and 
robust execution practices in STS securitisation which deliver lower credit, operational 
and agency risks. It is therefore appropriate to amend Regulation (EU) No 575/2013 to 
provide  for  an  appropriately  risk-sensitive  calibration  for  STS  securitisations  in  the 
manner recommended by the EBA in its Report which involves, in particular, a lower 
risk weight floor of 10% for senior positions.   

institutions  retaining  senior  positions 

The definition of STS securitisations for regulatory capital purposes under Regulation 
(EU)  No  575/2013  should  be  limited  to  securitisations  where  the  ownership  of  the 
underlying  exposures  is  transferred  to  the  Special  Purpose  Entity  ("traditional 
in  synthetic 
securitisations").  However, 
securitisations  backed  by  an  underlying  pool  of  loans  to  small  and  medium-size 
enterprises  ("SMEs") should  be  allowed to  apply to  these  positions the lower capital 
requirements available for STS securitisations where such transactions are regarded as 
of  high  quality  in  accordance  with  certain  strict  criteria.  In  particular,  where  such 
subset of synthetic securitisations benefits from the guarantee or counterguarantee by 
the central government or central bank of a Member State, the preferential regulatory 
capital treatment that would be available to them under Regulation (EU) No 575/2013 
is  without prejudice to compliance with the State Aid rules.   

(10)  Only consequential changes should be made to the remainder of the regulatory capital 
requirements for securitisations in Regulation (EU) No 575/2013 insofar as necessary 
to  reflect  the  new  hierarchy  of  approaches  and  the  special  provisions  for  STS 
securitisations.  In  particular,  the  provisions  related  to  the  recognition  of  significant 
risk  transfer  and  the  requirements  on  external  credit  assessments  should  continue  to 
apply  in  substantially  the  same  terms  as  they  do  currently.  However,  Part  Five  of 
Regulation (EU) No 575/2013 should be deleted in its entirety with the exception of 
the  requirement  to  hold  additional  risk  weights  which  should  be  imposed  on 
institutions  found  in  breach  of  the  provisions  in  Chapter  2  of  Regulation 
[Securitisation Regulation]. 

(11) 

In light of the on-going debate within the BCBS on the convenience of recalibrating 
the  Revised  Basel  Framework  to  reflect  the  specific  features  of  STS  securitisations, 
the  Commission  should  be  empowered  to  adopt  a  delegated  act  to  make  further 
amendments  to  the  regulatory  capital  requirements  for  securitisation  in  Regulation 
(EU) No 575/2013 to take account of the outcome of such discussions.  

10 

See 
https://www.eba.europa.eu/documents/10180/950548/EBA+report+on+qualifying+securitisation.pdf 

EN 

14 

   EN 

 
                                                 
(12) 

It is appropriate for the amendments to Regulation (EU) No 575/2013 provided for in 
this Regulation to apply to securitisations issued on or after the date of application of 
this  Regulation  and  to  securitisations  outstanding  as  of  that  date.  However,  for  legal 
certainty purposes and to mitigate transitional costs in as much as possible, institutions 
should be allowed to grandfather all outstanding securitisation positions that they hold 
on that date for a period ending on [31 December 2019]. Where an institution makes 
use  of  this  option,  outstanding  securitisations  should  continue  to  be  subject  to  the 
regulatory capital requirements set out in Regulation (EU) No 575/2013 in the version 
that applied prior to the date of application of this Regulation.  

HAVE ADOPTED THIS REGULATION: 

Article 1 
Amendment of Regulation (EU) No 575/2013 

Regulation (EU) No 575/2013 is amended as follows: 

(1) 

Article 4(1) is amended as follows: 

(a)  Points (13) and (14) are replaced by the following: 

'(13)  'originator' means originator as defined in Article 2(3) of [Securitisation 

Regulation]; 

(14)   'sponsor'  means  sponsor  as  defined  in  Article  2(5)  of  [Securitisation 

Regulation]; 

(b)  Points (61) and (63) are replaced by the following: 

(61)   'securitisation'  means  securitisation  as  defined  in  Article  2(1)  of 

[Securitisation Regulation]; 

 (63)  're-securitisation'  means  re-securitisation  as  defined  in  Article  2(4)  of 

[Securitisation Regulation]; 

(c)  Points (66) and (67) are replaced by the following: 

(66)   'securitisation  special  purpose  entity'  or  'SSPE'  means  securitisation 
in  Article  2(2)  of 

special  purpose  entity  or  SSPE  as  defined 
[Securitisation Regulation]; 

(67)   'tranche'  means  tranche  as  defined  in  Article  2(6)  of  [Securitisation 

Regulation];' 

(2) 

In Article 36(1)(k), point (ii) is replaced by the following: 

'(ii)   securitisation positions, in accordance with Article 244(1)(b), Article 245(1)(b) 

and Article 253;' 

(3) 

Article 109 is replaced by the following: 

'Article 109 

Treatment of securitisation positions  

Institutions  shall  calculate  the  risk-weighted  exposure  amount  for  a  position  they  hold  in  a 
securitisation in accordance with Chapter 5.' 

(4) 

In Article 153, paragraph 7 is replaced by the following: 

EN 

15 

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(7) 

'For purchased corporate receivables, refundable purchase discounts, collateral 
or partial guarantees that provide first loss protection for default losses, dilution 
losses, or both, may be treated as a first loss tranche under Chapter 5.' 

(5) 

In Article 154, paragraph 6 is replaced by the following: 

(6) 

'For purchased corporate receivables, refundable purchase discounts, collateral 
or partial guarantees that provide first loss protection for default losses, dilution 
losses, or both, may be treated as a first loss tranche under Chapter 5.' 

(6) 

In Article 197(1), point (h) is replaced by the following: 

(h) 

'securitisation  positions  that  are  not  re-securitisation  positions  and  which  are 
subject  to  a  100%  risk-weight  or  lower  in  accordance  with  Article  261  to 
Article 264;’ 

(7) 

Chapter 5 of Title II, Part Three is replaced by the following: 

'CHAPTER 5 

SECTION 1 
DEFINITIONS AND CRITERIA FOR STS SECURITISATIONS 

Article 242 
Definitions 

For the purposes of this Chapter, the following definitions shall apply: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

'clean-up call option' means a contractual option that entitles the originator to call the 
securitisation  positions  before  all  of  the  securitised  exposures  have  been  repaid, 
either by repurchasing the underlying exposures remaining in the pool in the case of 
traditional  securitisations  or  by  terminating  the  credit  protection  in  the  case  of 
synthetic  securitisations,  in  both  cases  when  the  amount  of  outstanding  underlying 
exposures falls to or below certain pre-specified level; 

'credit-enhancing interest-only strip' means an on-balance sheet asset that represents 
a  valuation  of  cash  flows  related  to  future  margin  income  and  is  a  subordinated 
tranche in the securitisation;  

'liquidity  facility'  means  the  securitisation  position  arising  from  a  contractual 
agreement to provide funding to ensure timeliness of cash flows to investors; 

'unrated  position'  means  a  securitisation  position  which  does  not  have  an  eligible 
credit assessment by an ECAI as referred to in Section 4; 

'rated  position'  means  a  securitisation  position  which  has  an  eligible  credit 
assessment by an ECAI as referred to in Section 4; 

'senior securitisation 'position' means  a position backed or secured by a first claim on 
the whole of the underlying exposures, disregarding for these purposes amounts due 
under interest rate or currency derivative contracts, fees or other similar payments; 

'IRB pool'  means a pool  of underlying  exposures  of a  type  in  relation to  which the 
institution  has  permission  to  use  the  IRB  Approach  and  is  able  to  calculate  risk 
weighted exposure amounts in accordance with Chapter 3 for all of these exposures; 

EN 

16 

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(8) 

'standardised Approach (SA) pool' means a pool of underlying exposures  in relation 
to which the institution:  

(a)  does not have permission to use the IRB Approach to calculate risk weighted 

exposure amounts in accordance with Chapter 3; 

(b) 

(c) 

is unable to determine KIRB; 

is  otherwise  precluded  from  using  the  IRB  Approach  by  its  competent 
authority; 

'mixed pool' means a pool of underlying exposures of a type in relation to which the 
institution  has  permission  to  use  the  IRB  Approach  and  is  able  to  calculate  risk 
weighted  exposure  amounts  in  accordance  with  Chapter  3  for  some,  but  not  all, 
exposures; 

'credit  enhancement'  means  any  arrangement  which  provides  support  for  a 
securitisation  position  and  serves  to  increase  the  likelihood  that  any  such 
securitisation position will be repaid; 

'overcollateralisation'  means  any  form  of  credit  enhancement  by  virtue  of  which 
underlying  exposures  are  posted  in  value  which  is  higher  than  the  value  of  the 
securitisation positions'; 

'STS  securitisation'  means  a  securitisation  meeting  the  requirements  set  out  in 
Chapter 3 of [Securitisation regulation] and the requirements set out in Article 243; 

(ABCP)  programme'  means  asset  backed 
'asset-backed  commercial  paper 
commercial paper (ABCP) programme as defined in Article 2(7)  of [Securitisation 
Regulation]; 

'traditional securitisation' means traditional securitisation as defined in Article 2(9) of 
[Securitisation Regulation]; 

'synthetic securitisation' means synthetic securitisation as defined in Article 2(10) of 
[Securitisation Regulation];' 

'revolving  exposure'  means  revolving  exposure  as  defined  in  Article  2(15)  of 
[Securitisation Regulation];' 

'early  amortisation  provision'  means  early  amortisation  provision  as  defined  in 
Article 2(17) of [Securitisation Regulation]; 

'first  loss  tranche'  means  first  loss  tranche  as  defined  in  Article  2(18)  of 
[Securitisation Regulation]; 

(9) 

(10) 

(11) 

(12) 

(13) 

(14) 

(15) 

(16) 

(17) 

(18) 

(19) 

'servicer' means servicer as defined in Article 2(13) of [Securitisation Regulation]; 

Article 243 
Criteria for STS Securitisations 

(1) 

Positions in an ABCP programme shall qualify as positions in an STS securitisation 
for the purposes of Articles 260, 262 and 264 where the following requirements are 
met: 

(a) 

for  all  transactions  within  the  ABCP  programme  the  underlying  exposures  at 
origination  meet  the  conditions  for  being  assigned,  under  the  Standardised 
Approach  and  taking  into  account  any  eligible  credit  risk  mitigation,  a  risk 

EN 

17 

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weight equal to or smaller than 75% on an individual exposure basis where the 
exposure is a retail exposure or 100% for any other exposures; 

(b) 

the  aggregate  exposure  value  of  all  exposures  to  a  single  obligor  at  ABCP 
programme  level  does  not  exceed  1%  of  the  aggregate  exposure  value  of  all 
exposures within the ABCP programme at the time the exposures were added 
to the ABCP programme. For the purposes of this calculation, loans or leases 
to a group of connected clients as referred to in Article 4(1) point (39) shall be 
considered as exposures to a single obligor.  

In the case of trade receivables, point (b) shall not apply where the credit risk 
of  those  trade  receivables  is  fully  covered  by  eligible  credit  protection  in 
accordance with Chapter 4, provided that in that case the protection provider is 
an  institution,  an  insurance  undertaking  or  a  reinsurance  undertaking.  For  the 
purposes  of  this  subparagraph,  only  the  portion  of  the  trade  receivables 
remaining  after  taking  into  account  the  effect  of  any  purchase  price  discount 
shall be used to determine whether they are fully covered.  

(2) 

Positions  in  a  securitisation  other  than  an  ABCP  programme  shall  qualify  as 
positions  in  an  STS  securitisation  for  the  purposes  of  Articles  260,  262  and  264 
where the following requirements are met: 

(a) 

(b) 

(c) 

the underlying exposures are originated in accordance with sound and prudent 
credit granting criteria as required under Article 79 of Directive 2013/36/EU; 

at the time of inclusion in the securitisation, the aggregate exposure value of all 
exposures to a single obligor in the pool does not exceed 1% of the exposure 
values of the aggregate outstanding exposure values of the pool of underlying 
exposures.  For  the  purposes  of  this  calculation,  loans  or  leases  to  a  group  of 
connected  clients,  as  referred  to  in  point  (39)  of  Article  4(1),  shall  be 
considered as exposures to a single obligor; 

at  the  time  of  their  inclusion  in  the  securitisation,  the  underlying  exposures 
meet the conditions for being assigned, under the Standardised Approach and 
taking into account any eligible credit risk mitigation, a risk weight equal to or 
smaller than: 

(i) 
40%  on  an  exposure  value-weighted  average  basis  for  the 
portfolio where the exposures are loans secured by residential mortgages 
or  fully  guaranteed  residential  loans,  as  referred  to  in  paragraph  1(e)  of 
Article 129; 

(ii) 
loan secured by a commercial mortgage;  

50%  on  an  individual  exposure  basis  where  the  exposure  is  a 

(iii) 
retail exposure;  

75%  on  an  individual  exposure  basis  where  the  exposure  is  a 

(iv) 

for any other exposures, 100% on an individual exposure basis; 

(d)  where points (c)(i) and (ii) apply, the loans secured by lower ranking security 
rights  on  a  given  asset  shall  only  be  included  in  the  securitisation  where  all 
loans secured by prior ranking security rights on that asset are also included in 
the securitisation;  

EN 

18 

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(e)  where  point  (c)(i)  applies,  no  loan  in  the  pool  of  underlying  exposures  shall 
have  a  loan-to-value  ratio  higher  than  100%,  measured  in  accordance  with 
paragraph 1(d)(i) of Article 129 and paragraph 1 of Article 229. 

SECTION 2 
RECOGNITION OF SIGNIFICANT RISK TRANSFER 

Article 244 
Traditional securitisation 

(1) 

The  originator  institution  of  a  traditional  securitisation  may  exclude  underlying 
exposures from the calculation of risk-weighted exposure amounts and expected loss 
amounts if either of the following conditions is fulfilled: 

(a) 

(b) 

significant  credit  risk  associated  with  the  underlying  exposures  has  been 
transferred to third parties; 

the  originator  institution  applies  a  1,250 %  risk  weight  to  all  securitisation 
positions it holds in the securitisation or deducts these securitisation positions 
from Common Equity Tier 1 items in accordance with Article 36(1)(k). 

(2) 

Significant  credit  risk  shall  be  considered  as  transferred  in  either  of  the  following 
cases: 

(a) 

(b) 

the  risk-weighted  exposure  amounts  of  the  mezzanine  securitisation  positions 
held by the originator institution in the securitisation do not exceed 50 % of the 
risk-weighted  exposure  amounts  of  all  mezzanine  securitisation  positions 
existing in this securitisation; 

the originator institution does not hold more than 20 % of the exposure value of 
the  first  loss  tranche  in  the  securitisation,  provided  that  the  following 
conditions are met: 

(i) 
the  originator  can  demonstrate  that  the  exposure  value  of  the 
first loss tranche exceeds a reasoned estimate of the expected loss on the 
underlying exposures by a substantial margin; 

(ii) 

there are no mezzanine positions in the securitisation. 

Where  the  possible  reduction  in  risk-weighted  exposure  amounts,  which  the 
originator  institution  would  achieve  by  the  securitisation  under  points  (a)  or  (b),  is 
not  justified  by  a  commensurate  transfer  of  credit  risk  to  third  parties,  competent 
authorities may decide on a case-by-case basis that significant credit risk shall not be 
considered as transferred to third parties. 

For the purposes of this paragraph, a position in a securitisation shall be considered a 
mezzanine securitisation position where it meets the following requirements:  

(a) 

it is subject to a risk weight lower than 1,250% in accordance with this Section 
or, in the absence of a position with that risk weight, it is more senior than the 
first loss tranche; and 

(b) 

it is subordinated to the senior securitisation position. 

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(3) 

By  derogation  from  paragraph  2,  competent  authorities  may  allow  originator 
institutions to recognise significant credit risk transfer in relation to a securitisation 
where the originator institution demonstrates in each case that the reduction in own 
funds requirements which the originator achieves by the securitisation is justified by 
a  commensurate  transfer  of  credit  risk  to  third  parties.  Permission  may  only  be 
granted where the institution meets the following conditions: 

(a) 

(b) 

institution  has  adequate 

the 
methodologies to assess the transfer of credit risk; 

internal 

risk  management  policies  and 

the institution has also recognised the transfer of credit risk to third parties in 
each case for the purposes of the institution's internal risk management and its 
internal capital allocation. 

(4) 

In addition to the requirements set out in paragraphs 1 to 3,the following conditions 
shall be met: 

(a) 

(b) 

(c) 

(d) 

the  transaction  documentation  reflects  the  economic  substance  of  the 
securitisation; 

the  securitisation  positions  do  not  constitute  payment  obligations  of  the 
originator institution; 

the  underlying  exposures  are  placed  beyond  the  reach  of  the  originator 
institution  and  its  creditors  in  a  manner  that  meets  the  requirement  set  out  in 
Article 6(2)(a) of [Securitisation Regulation]; 

the originator institution does not retain control over the underlying exposures. 
It  shall  be  considered  that  control  is  retained  over  the  underlying  exposures 
where  the  originator  has  the  right  to  repurchase  from  the  transferee  the 
previously  transferred  exposures  in  order  to  realise  their  benefits  or  if  it  is 
otherwise  required  to  re-assume  transferred  risk.  The  originator  institution's 
retention  of  servicing  rights  or  obligations  in  respect  of  the  underlying 
exposures shall not of itself constitute control of the exposures; 

(e) 

the securitisation documentation does not contain terms or conditions that: 

(i) 
exposures to improve the average quality of the pool; 

require  the  originator  institution  to  alter  the  underlying 

(ii) 
increase  the  yield  payable  to  holders  of  positions  or  otherwise 
enhance the positions in the securitisation in response  to a deterioration 
in the credit quality of the underlying exposures; 

(f)  where  applicable  the  transaction  documentation  makes  it  clear  that  the 
originator  or  the  sponsor  may  only  purchase  or  repurchase  securitisation 
positions  or  repurchase,  restructure  or  substitute  the  underlying  exposures 
beyond their contractual obligations where such arrangements are executed in 
accordance  with  prevailing  market  conditions  and  the  parties  to  them  act  in 
their own interest as free and independent parties (arm's length); 

(g)  where there is a clean-up call option, that option shall also meet the following 

conditions: 

(i) 

it can be exercised at the discretion of the originator institution; 

(ii) 
of the underlying exposures remains unamortised; 

it may only be exercised when 10 % or less of the original value 

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(5) 

(6) 

(iii) 
it  is  not  structured  to  avoid  allocating  losses  to  credit 
enhancement  positions  or  other  positions  held  by  investors  and  is  not 
otherwise structured to provide credit enhancement; 

(h) 

the originator institution has received an opinion from a qualified legal counsel 
confirming that the securitisation complies with the conditions set out in points 
(b) to (g) of this paragraph. 

The competent authorities shall inform EBA of those cases where they have decided 
that the possible reduction in risk-weighted exposure amounts was not justified by a 
commensurate transfer of credit risk to third parties in accordance with paragraph 2, 
and the cases where institutions have chosen to apply the provisions in paragraph 3. 

EBA shall monitor the range of supervisory practices in relation to the recognition of 
significant  risk  transfer  in  traditional  securitisations  in  accordance  with  this  Article 
and report its findings to the Commission by 31 December 2017. The Commission, 
where appropriate after having taken into account the Report from EBA, may adopt a 
Delegated Act to specify further the following items: 

(a) 

(b) 

(c) 

the  conditions  for  the  transfer  of  significant  credit  risk  to  third  parties  in 
accordance with paragraphs 2, 3 and 4;     

the interpretation of "commensurate transfer of credit risk to third parties" for 
the  purposes  of  the  competent  authorities'  assessment  provided  for  in  the 
penultimate subparagraph of paragraph 2 and paragraph 3;   

the  requirements  for  the  competent  authorities'  assessment  of  securitisation 
transactions in relation to which the originator seeks recognition of significant 
credit risk transfer to third parties in accordance with paragraphs 2 or 3. 

Article 245 
Synthetic securitisation 

(1) 

The  originator  institution  of  a  synthetic  securitisation  may  calculate  risk-weighted 
exposure  amounts,  and,  where  relevant,  expected  loss  amounts,  for  the  securitised 
exposures in accordance with Article 251, where either of the following conditions is 
met: 

(a) 

(b) 

significant credit risk has been transferred to third parties either through funded 
or unfunded credit protection; 

the  originator  institution  applies  a  1,250 %  risk  weight  to  all  securitisation 
positions  that  it  retains  in  the  securitisation  or  deducts  these  securitisation 
positions  from  Common  Equity  Tier  1  items  in  accordance  with  Article 
36(1)(k). 

(2) 

Significant  credit  risk  shall  be  considered  as  transferred  in  either  of  the  following 
cases: 

(a) 

(b) 

the  risk-weighted  exposure  amounts  of  the  mezzanine  securitisation  positions 
held by the originator institution in the securitisation do not exceed 50 % of the 
risk-weighted  exposure  amounts  of  all  mezzanine  securitisation  positions 
existing in this securitisation;  

the originator institution does not hold more than 20 % of the exposure value of 
the  first  loss  tranche  in  the  securitisation,  provided  that  the  following 
conditions are met:   

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(i) 
the  originator  can  demonstrate  that  the  exposure  value  of  the 
first loss tranche exceeds a reasoned estimate of the expected loss on the 
underlying exposures by a substantial margin; 

(ii) 

there are no mezzanine positions in the securitisation. 

Where  the  possible  reduction  in  risk-weighted  exposure  amounts,  which  the 
originator  institution  would  achieve  by  the  securitisation,  is  not  justified  by  a 
commensurate  transfer  of  credit  risk  to  third  parties,  competent  authorities  may 
decide on a case-by-case basis that significant credit risk shall not be considered as 
transferred to third parties.  

For the purposes of this paragraph, a position in a securitisation shall be considered a 
mezzanine  securitisation  position  where  it  meets  the  requirements  laid  down  in  the 
last subparagraph of Article 244(2)  

By  derogation  from  paragraph  2,  competent  authorities  may  allow  originator 
institutions to recognise significant credit transfer in relation to a securitisation where 
the  originator  institution demonstrates  in  each case that the reduction in  own funds 
requirements  which  the  originator  achieves  by  the  securitisation  is  justified  by  a 
commensurate transfer of credit risk to third parties. Permission may only be granted 
where the institution meets the following conditions: 

(a) 

(b) 

institution  has  adequate 

the 
internal 
methodologies to assess the transfer of risk; 

risk-management  policies  and 

the institution has also recognised the transfer of credit risk to third parties in 
each case for the purposes of the institution's internal risk management and its 
internal capital allocation. 

(3) 

(4) 

In addition to the requirements set out in paragraphs 1 to 3, the following conditions 
shall be met: 

(a) 

(b) 

the  transaction  documentation  reflects  the  economic  substance  of  the 
securitisation; 

the credit protection by virtue of which credit risk is transferred complies with 
Article 249; 

(c) 

the securitisation documentation does not contain terms or conditions that: 

(i) 
protection is deemed not to be triggered if a credit event occurs; 

impose  significant  materiality  thresholds  below  which  credit 

(ii) 
of the credit quality of the underlying exposures; 

allow for the termination of the protection due to  deterioration 

(iii) 
underlying exposures to improve the average quality of the pool; 

require the originator institution to alter the composition of the 

(iv) 
increase  the  institution's  cost  of  credit  protection  or  the  yield 
payable  to  holders  of  positions  in  the  securitisation  in  response  to  a 
deterioration in the credit quality of the underlying pool;  

(d) 

the credit protection is enforceable in all relevant jurisdictions; 

(e)  where  applicable,  the  transaction  documentation  makes  it  clear  that  the 
originator  or  the  sponsor  may  only  purchase  or  repurchase  securitisation 
positions  or  repurchase,  restructure  or  substitute  the  underlying  exposures 
beyond  their  contractual  obligations  where  such  transactions  are  executed  in 

EN 

22 

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accordance  with  prevailing  market  conditions  and  the  parties  to  them  act  in 
their own interest as free and independent parties (arm's length); 

(f)  where  there  is  a  clean-up  call  option,  that  option  meets  all  the  following 

conditions: 

(i) 

it can be exercised at the discretion of the originator institution; 

(ii) 
of the underlying exposures remains unamortised; 

it may only be exercised when 10 % or less of the original value 

it  is  not  structured  to  avoid  allocating  losses  to  credit 
(iii) 
enhancement  positions  or  other  positions  held  by  investors  in  the 
securitisation  and 
to  provide  credit 
is  not  otherwise  structured 
enhancement; 

(g) 

the originator institution has received an opinion from a qualified legal counsel 
confirming that the securitisation complies with the conditions set out in points 
(b) to (f) of this paragraph; 

The  competent  authorities  shall  inform  EBA  of  the  cases  where  they  have  decided 
that the possible reduction in risk-weighted exposure amounts was not justified by a 
commensurate transfer of credit risk to third parties in accordance with paragraph 2, 
and the cases where institutions have chosen to apply the provisions in paragraph 4.  

EBA shall monitor the range of supervisory practices in relation to the recognition of 
significant  risk  transfer  in  synthetic  securitisations  in  accordance  with  this  Article 
and report its findings to the Commission by 31 December 2017. The Commission, 
where appropriate after having taken into account the Report from EBA, may adopt a 
Delegated Act to specify further the following items: 

(a) 

(b) 

(c) 

the  conditions  for  the  transfer  of  significant  credit  risk  to  third  parties  in 
accordance with paragraphs 2, 3 and 4;     

the interpretation of "commensurate transfer of credit risk to third parties" for 
the  purposes  of  the  competent  authorities'  assessment  provided  for  in  the 
penultimate subparagraph of paragraph 2 and paragraph 3;   

the  requirements  for  the  competent  authorities'  assessment  of  securitisation 
transactions in relation to which the originator seeks recognition of significant 
credit risk transfer to third parties in accordance with paragraphs 2 or 3. 

(5) 

(6) 

Article 246 
Operational requirements for Early Amortisation provisions 

Where  the  securitisation  includes  revolving  exposures  and  early  amortisation  or  similar 
provisions,  significant  credit  risk  shall  only  be  considered  transferred  by  the  originator 
institution where the requirements laid down in Articles 244 and 245 are met and the early 
amortisation provision, once triggered, does not: 

(d) 

(e) 

(f) 

subordinate  the  institution's  senior  or  pari  passu  claim  on  the  underlying 
exposures to the other investors' claims;  

subordinate further the institution’s claim on the underlying exposures relative 
to other parties' claims;  

otherwise  increase  the  institution’s  exposure  to  losses  associated  with  the 
underlying revolving exposures.  

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SECTION 3 
CALCULATION OF THE RISK-WEIGHTED EXPOSURE AMOUNTS 

SUB-SECTION 1 
GENERAL PROVISIONS 

Article 247 
Calculation of risk-weighted exposure amounts 

(1) 

Where an originator institution has transferred significant credit risk associated with 
the  underlying  exposures  of  the  securitisation  in  accordance  with  Section  2,  that 
institution may: 

(a) 

(b) 

in  the  case  of  a  traditional  securitisation,  exclude  the  underlying  exposures 
from  its  calculation  of  risk-weighted  exposure  amounts,  and,  as  relevant, 
expected loss amounts,; 

in  the  case  of  a  synthetic  securitisation,  calculate  risk-weighted  exposure 
amounts,  and,  where  relevant,  expected  loss  amounts,  with  respect  to  the 
underlying exposures in accordance with Articles 251 and 252. 

(2) 

Where  the originator institution has decided to  apply  paragraph 1, it shall calculate 
the risk-weighted exposure amounts as set out in this Chapter for the positions that it 
may hold in the securitisation. 

Where  the  originator  institution  has  not  transferred  significant  credit  risk  or  has 
decided  not  to  apply  paragraph  1,  it  shall  continue  including  the  underlying 
exposures  in  its  calculation  of  risk-weighted  exposure  amounts  as  if  they  had  not 
been securitised. 

Where there is an exposure to positions in different tranches in a securitisation, the 
exposure  to each tranche shall  be considered a  separate  securitisation  position.  The 
providers  of  credit  protection  to  securitisation  positions  shall  be  considered  as 
holding  positions  in  the  securitisation.  Securitisation  positions  shall  include 
exposures  to  a  securitisation  arising  from  interest  rate  or  currency  derivative 
contracts that the institution has entered into with the transaction. 

Unless  a  securitisation  position  is  deducted  from  Common  Equity  Tier  1  items 
pursuant to Article 36(1)(k), the risk-weighted exposure amount shall be included in 
the institution's total of risk-weighted exposure amounts for the purposes of Article 
92(3). 

The risk-weighted exposure amount of a securitisation position shall be calculated by 
multiplying the exposure value of the position, calculated as set out in Article 248, 
by the relevant total risk weight. 

The total risk weight shall be determined as the sum of the risk weight set out in this 
Chapter and any additional risk weight in accordance with Article 270a.  

(3) 

(4) 

(5) 

(6) 

(1) 

The exposure value of securitisation positions shall be calculated as follows: 

Article 248 
Exposure value 

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(a) 

(b) 

(c) 

the  exposure  value  of  an  on-balance  sheet  securitisation  position  shall  be  its 
accounting  value  remaining  after  the  relevant  credit  risk  adjustments  on  the 
securitisation position have been applied in accordance with Article 110; 

the  exposure  value  of  an  off-balance  sheet  securitisation  position  shall  be  its 
nominal  value  less  any  applicable  credit  risk  adjustments  in  accordance  with 
Article  110,  multiplied  by  the  relevant  conversion  factor  as  set  out  in  this 
Chapter. The conversion factor shall be 100 %, unless otherwise specified;  

the exposure value  for the  counterparty  credit  risk of a securitisation  position 
that results from a derivative instrument listed in Annex II, shall be determined 
in accordance with Chapter 6. 

(2) 

Where  an  institution  has  two  or  more  overlapping  positions  in  a  securitisation,  it 
shall  include  only  one  of  the  positions  in  its  calculation  of  risk-weighted  exposure 
amounts.  

Where  the  positions  are  partially  overlapping,  the  institution  may  split  the  position 
into  two  parts  and  recognise  the  overlap  in  relation  to  one  part  only  in  accordance 
with the first subparagraph.. Alternatively, the institution may treat the positions as if 
they  were  fully  overlapping  by  expanding  for  capital  calculation  purposes  the 
position that produces the higher risk-weighted exposure amounts. 

The  institution  may  also  recognise  an  overlap  between  the  specific  risk  own  funds 
requirements  for  positions  in  the  trading  book  and  the  own  funds  requirements  for 
securitisation positions in the non-trading book, provided that the institution is able 
to calculate and compare the own funds requirements for the relevant positions. 

For the purposes of this paragraph, two positions shall be deemed overlapping where 
they are mutually offsetting in such a manner that the institution is able to preclude 
the losses arising from one position by performing the obligations required under the 
other position. 

Where  Article  270c  applies  to  positions  in  ABCP,  the  institution  may  use  the  risk-
weight assigned to a liquidity facility in order to calculate the risk-weighted exposure 
amount for the ABCP, provided that the liquidity facility covers 100 % of the ABCP 
issued by the programme and the liquidity facility ranks pari passu with the ABCP in 
a  manner  that  they  form  an  overlapping  position.  The  institution  shall  notify  the 
competent authorities where it has applied the provisions laid down in this paragraph. 
For  the  purposes  of  determining  the  100%  coverage  set  out  in  this  paragraph,  the 
institution may take into account other liquidity facilities in the ABCP programme, 
provided that they form an overlapping position with the ABCP.  

Article 249 
Recognition of credit risk mitigation for securitisation positions 

An institution may recognise funded or unfunded credit protection with respect to a 
securitisation position where the requirements for credit risk mitigation laid down in 
this Chapter and in Chapter 4 are met. 

Eligible  funded  credit  protection  shall  be  limited  to  financial  collateral  which  is 
eligible  for  the  calculation  of  risk-weighted  exposure  amounts  under  Chapter  2  as 
laid down under Chapter 4 and recognition of credit risk mitigation shall be subject 
to compliance with the relevant requirements as laid down under Chapter 4.  

(3) 

(1) 

(2) 

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(3) 

Eligible unfunded credit protection and unfunded credit protection providers shall be 
limited to those which are eligible in accordance with Chapter 4 and recognition of 
credit risk mitigation shall be subject to compliance with the relevant requirements as 
laid down under Chapter 4. 

By  way  of  derogation  from  paragraph  2,  the  eligible  providers  of  unfunded  credit 
protection  listed  in  points  (a)  to  (h)  of  Article  201(1)  shall  have  been  assigned  a 
credit assessment by a recognised ECAI which is credit quality step 2 or above at the 
time  the  credit  protection  was  first  recognised  and  credit  quality  step  3  or  above 
thereafter. The requirement set out in this subparagraph shall not apply to qualifying 
central counterparties.  

Institutions which are allowed to apply the IRB Approach to a direct exposure to the 
protection provider may assess eligibility in accordance with the first sub-paragraph 
based on the equivalence of the PD for the protection provider to the PD associated 
with the credit quality steps referred to in Article 136.  

(4) 

By way of derogation from paragraph 2, SSPEs shall be eligible protection providers 
where all of the following conditions are met: 

(a) 

(b) 

the SSPE owns assets that qualify as eligible financial collateral in accordance 
with Chapter 4;  

the  assets  referred  to  in  (a)  are  not  subject  to  claims  or  contingent  claims 
ranking ahead or pari passu with the claim or contingent claim of the institution 
receiving unfunded credit protection; and  

(c) 

all the requirements for the recognition of financial collateral in Chapter 4 are 
met.  

For  the  purposes  of  this  paragraph,  the  amount  of  the  protection  adjusted  for  any 
currency  and  maturity  mismatches  in  accordance  with  Chapter  4  (GA)  shall  be 
limited to the volatility adjusted market value of those assets and the risk weight of 
exposures  to  the  protection  provider  as  specified  under  the  Standardised  Approach 
(g) shall be determined as the weighted-average risk weight that would apply to those 
assets as financial collateral under the Standardised Approach. 

(5) 

(6) 

Where  a  securitisation  position  benefits  from  full  credit  protection,  the  following 
requirements shall apply: 

(a) 

the  institution  providing  credit  protection  shall  calculate  risk-weighted 
exposure  amounts  for  the  securitisation  position  benefiting  from  credit 
protection in accordance with Subsection 3 as if it held that position directly;  

(b) 

the  institution  buying  protection  shall  calculate  risk-weighted  exposure 
amounts in accordance with Chapter 4.  

(7) 

In the event of partial protection, the following requirements shall apply:  

(a) 

(b) 

the institution providing credit protection shall treat the portion of the position 
benefiting from credit protection as a securitisation position and shall calculate 
risk-weighted  exposure  amounts  as  if  it  held  that  position  directly  in 
accordance with Subsection 3, subject to paragraphs 8 and 9; 

the  institution  buying  credit  protection  shall  calculate  risk-weighted  exposure 
amounts for the protected position referred to in (a) in accordance with Chapter 
4.  The  institution  shall  treat  the  portion  of  the  securitisation  position  not 
benefiting from credit protection as a separate securitisation position and shall 

EN 

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calculate  risk-weighted  exposure  amounts  in  accordance  with  Subsection  3, 
subject to paragraphs 8 and 9. 

(8) 

Institutions using the Securitisation Internal Ratings Based Approach (SEC-IRBA) or 
the  Securitisation  Standardised  Approach  (SEC-SA)  under  Subsection  3  shall 
determine the attachment point (A) and detachment point (D) separately for each of 
the positions derived in accordance with paragraph 7 as if these had been issued as 
separate  securitisation  positions  at  the  time  of  origination  of  the  transaction.  The 
value of KIRB or KSA, respectively, shall be calculated taking into account the original 
pool of exposures underlying the securitisation. 

(9) 

Institutions using the Securitisation External Ratings Based Approach (SEC-ERBA) 
under Subsection 3 shall calculate risk-weighted exposure amounts for the positions 
derived in accordance with paragraph 7 as follows: 

(a)  where the derived position has the higher seniority, it shall be assigned the risk-

weight of the original securitisation position; 

(b)  where  the  derived  position  has  the  lower  seniority,  it  may  be  assigned  an 
inferred  rating  in  accordance  with  Article  261(7).  Where  a  rating  may  not  be 
inferred, the institution shall apply the higher of the risk-weight resulting from 
either:  

(i) 
Subsection 3; or 

applying  the  SEC-SA  in  accordance  with  paragraph  8  and 

(ii) 
SEC-ERBA.  

the risk-weight  of the original securitisation position  under  the 

Article 250 
Implicit support 

(1) 

(2) 

An originator institution which has transferred significant credit risk associated with 
the  underlying  exposures  of  the  securitisation  in  accordance  with  Section  2  and  a 
sponsor  institution  shall  not  provide  support  to  the  securitisation  beyond  its 
contractual obligations with a view to reducing potential or actual losses to investors. 

A  transaction  shall  not  be  considered  as  support  for  the  purposes  of  paragraph  1 
where  the  transaction  has  been  duly  taken  into  account  in  the  assessment  of 
significant risk transfer and both parties have executed the transaction acting in their 
own interest as  free and independent  parties (arm's  length). For these  purposes,  the 
institution shall undertake a full credit review of the transaction and, at a minimum, 
take into account all of the following items: 

(a) 

(b) 

(c) 

(d) 

(e) 

the repurchase price; 

the institution's capital and liquidity position before and after repurchase; 

the performance of the underlying exposures; 

the performance of the securitisation positions; 

the  impact  of  support  on  the  losses  expected  to  be  incurred  by  the  originator 
relative to investors. 

(3) 

The  originator  institution  and  the  sponsor  institution  shall  notify  the  competent 
authority of any transaction entered into in relation to the securitisation in accordance 
with paragraph 2.       

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(4) 

(5) 

EBA  shall,  in  accordance  with  Article  16  of  Regulation  (EU)  No 1093/2010,  issue 
guidelines  on  what  constitutes  "arm's  length"  for  the  purposes  of  this  Article  and 
when a transaction is not structured to provide support. 

If an originator institution or a sponsor institution fails to comply with paragraph 1 in 
respect of a securitisation, the institution shall include all of the underlying exposures 
of that securitisation in its calculation of risk-weighted exposure amounts as if they 
had not been securitised and disclose: 

(a) 

(b) 

that it has provided support to the securitisation in breach of paragraph 1; and 

the impact of the support provided in terms of own funds requirements.   

Article 251 
Originator institutions' calculation of risk-weighted exposure amounts securitised in a 
synthetic securitisation 

(1) 

(2) 

For  the  purpose  of  calculating  risk-weighted  exposure  amounts  for  the  underlying 
exposures,  the  originator  institution  of  a  synthetic  securitisation  shall  use  the 
calculation  methodologies  set  out  in  this  Section  where  applicable  instead  of  those 
set out in Chapter 2. For institutions calculating risk-weighted exposure amounts and 
expected loss amounts under Chapter 3, the expected loss amount in respect of such 
exposures shall be zero. 

The  requirements  set  out  in  the  first  paragraph  shall  apply  to  the  entire  pool  of 
exposures backing the securitisation. Subject to Article 252, the originator institution 
shall  calculate  risk-weighted  exposure  amounts  with  respect  to  all  tranches  in  the 
securitisation  in  accordance  with  the  provisions  of  this  Section,  including  the 
positions in relation to which the institution is able to recognise credit risk mitigation 
in  accordance  with  Article  249.  The  risk-weight  to  be  applied  to  positions  which 
benefit from credit risk mitigation may be amended in accordance with Chapter 4. 

Article 252 
Treatment of maturity mismatches in synthetic securitisations 

For  the  purposes  of  calculating  risk-weighted  exposure  amounts  in  accordance  with  Article 
251,  any  maturity  mismatch  between  the  credit  protection  by  which  the  transfer  of  risk  is 
achieved and the underlying exposures shall be calculated as follows: 

(a) 

(b) 

the  maturity  of  the  underlying  exposures  shall  be  taken  to  be  the  longest 
maturity  of  any  of  those  exposures  subject  to  a  maximum  of  five  years.  The 
maturity  of  the  credit  protection  shall  be  determined  in  accordance  with 
Chapter 4; 

an originator institution shall ignore any maturity mismatch in calculating risk-
weighted exposure amounts for securitisation positions subject to a risk weight 
of  1,250 %  in  accordance  with  this  Section.    For  all  other  positions,  the 
maturity  mismatch  treatment  set  out  in  Chapter  4  shall  be  applied  in 
accordance with the following formula: 

RW* = ((RWSP · ((t – t*)/(T – t*))) + (RWAss · ((T – t)/(T – t*)))) 

where: 

RW* 

= 

risk-weighted exposure amounts for the purposes of Article 92(3)(a); 

EN 

28 

   EN 

 
 
RWAss 

RWSP 

= 

= 

risk-weighted exposure amounts for the underlying exposures if they had 
not been securitised, calculated on a pro-rata basis; 

risk-weighted exposure amounts calculated under Article 251 if there was 
no maturity mismatch; 

T 

t 

t* 

(1) 

(2) 

(1) 

(2) 

=  maturity of the underlying exposures expressed in years; 

=  maturity of credit protection. expressed in years; 

= 

0,25. 

Article 253 
Reduction in risk-weighted exposure amounts 

Where a securitisation position is assigned a 1,250% risk weight under this Section, 
institutions  may  deduct  the  exposure  value  of  such  position  from  Common  Equity 
Tier 1 capital in accordance with Article 36(1)(k) as an alternative to including the 
position in their calculation of risk-weighted exposure amounts. For these purposes, 
the  calculation  of  the  exposure  value  may  reflect  eligible  funded  protection  in 
accordance with Article 249.   

Where  an  institution  makes  use  of  the  alternative  set  out  in  paragraph  1,  it  may 
subtract  the  amount  deducted  in  accordance  with  Article  36(1)(k)  from  the  amount 
specified in Article 268 as maximum capital requirement that would be calculated in 
respect of the underlying exposures as if they had not been securitised.  

SUBSECTION 2 
HIERARCHY OF METHODS AND COMMON PARAMETERS 

Article 254 
Hierarchy of methods 

Institutions  shall  use  one  of  the  methods  set  out  in  Subsection  3  to  calculate  risk-
weighted  exposure  amounts  in  relation  to  all  the  positions  they  hold  in  a 
securitisation. 

The  methods  set  out  in  Subsection  3  shall  be  applied  in  accordance  with  the 
following hierarchy: 

(a) 

an  institution  shall  use  the  Internal  Ratings-Based  Approach  (SEC-IRBA) 
where the conditions set out in Article 258 are met;  

(b)  where the SEC-IRBA may not be used, institutions shall use the Securitisation 
External Ratings-Based Approach (SEC-ERBA) for rated positions or positions 
in respect of which an inferred rating may be used in accordance with Articles 
261 and 262; 

(c)  where the SEC-ERBA may not be used, institutions shall use the Securitisation 

Standardised Approach (SEC-SA) in accordance with Articles 263 and 264.  

(3) 

By derogation from paragraph 2(b), institutions may use the SEC-SA instead of the 
SEC-ERBA  in  relation  to  all  the  positions  they  hold  in  a  securitisation  where  the 
risk-weighted exposure amounts resulting from the application of the SEC-ERBA is 

EN 

29 

   EN 

 
not  commensurate  to  the  credit  risk  embedded  in  the  exposures  underlying  the 
securitisation. Where the institution has decided to apply the SEC-SA in accordance 
with  this  paragraph,  it  shall  promptly  notify  the  competent  authority.  Where  an 
institution has applied the SEC-SA in accordance with this paragraph, the competent 
authority may require the institution to apply a different method.  

Without  prejudice  to  paragraph  2,  institutions  may  use  the  Internal  Assessment 
Approach  (IAA)  to  calculate  risk-weighted  exposure  amounts  in  relation  to  an 
unrated  position  in  an  ABCP  programme  in  accordance  with  Article  266,  provided 
that the conditions set out in Article 265 are met. 

For  a  position  in  a  re-securitisation,  institutions  shall  apply  the  SEC-SA  in 
accordance with Article 263, with the modifications set out in Article 269. 

In  all  other  cases,  a  risk  weight  of  1,250  %  shall  be  assigned  to  securitisation 
positions. 

The  competent  authorities  shall  inform  EBA  of  any  notifications  received  and 
decisions  made  in  accordance  with  paragraph  3.  EBA  shall  monitor  the  range  of 
practices  in  connection  with  paragraph  3  and  issue  guidelines  in  accordance  with 
Article 16 of Regulation (EU) No 1093/2010.    

Article 255 
Determination of KIRB and KSA 

Where an institution applies the SEC-IRBA under Subsection 3, the institution shall 
calculate KIRB in accordance with paragraphs 2 to 5.  

Institutions shall determine KIRB by multiplying the risk-weighted exposure amounts 
that would be calculated under Chapter 3 in respect of the underlying exposures as if 
they  had  not  been  securitised  by  the  applicable  capital  ratio  in  accordance  with 
Chapter 1 divided by the value of the underlying exposures. KIRB shall be expressed 
in decimal form between zero and one.  

(4) 

(5) 

(6) 

(7) 

(1) 

(2) 

(3) 

For  KIRB  calculation  purposes,  the  risk-weighted  exposure  amounts  that  would  be 
calculated under Chapter 3 in respect of the underlying exposures shall include: 

(a) 

(b) 

the amount of expected losses associated with all the underlying exposures of 
the securitisation including defaulted underlying exposures that are still part of 
the pool in accordance with Chapter 3; and 

the  amount  of  unexpected  losses  associated  with  the  all  the  underlying 
exposures including defaulted underlying exposures in the pool in accordance 
with Chapter 3;  

Institutions  may  calculate  KIRB  in  relation  to  the  underlying  exposures  of  the 
securitisation  in  accordance  with  the  provisions  set  out  in  Chapter  3  for  the 
calculation  of  capital  requirements  for  purchased  receivables.  For  these  purposes, 
retail  exposures  shall  be  treated  as  purchased  retail  receivables  and  non-retail 
exposures as purchased corporate receivables. 

Institutions  shall  calculate  KIRB  separately  for  dilution  risk  in  relation  to  the 
underlying  exposures  of  a  securitisation  where  dilution  risk  is  material  to  such 
exposures.  

Where losses from dilution and credit risks are treated in an aggregate manner in the 
securitisation,  institutions  shall  combine  the  respective  KIRB  for  dilution  and  credit 

(4) 

(5) 

EN 

30 

   EN 

 
(6) 

(7) 

risk  into  a  single  KIRB  for  the  purposes  of  Subsection  3.  The  presence  of  a  single 
reserve  fund  or  overcollateralisation  available  to  cover  losses  from  either  credit  or 
dilution  risk  may  be  regarded  as  an  indication  that  these  risks  are  treated  in  an 
aggregate manner. 

Where  dilution  and  credit  risk  are  not  treated  in  an  aggregate  manner  in  the 
securitisation,  institutions  shall  modify  the  treatment  set  out  in  the  previous 
paragraph  to  combine  the  respective  KIRB  for  dilution  and  credit  risk  in  a  prudent 
manner. 

Where  an  institution  applies  the  SEC-SA  under  Subsection  3,  the  institution  shall 
calculate  KSA  by  multiplying  the  risk-weighted  exposure  amounts  that  would  be 
calculated under Chapter 2 in respect of the underlying exposures as if they had not 
been securitised by 8% divided by the value of the underlying exposures.  KSA shall 
be expressed in decimal form between zero and one. 

For the purposes of this paragraph, institutions shall calculate the exposure value of 
the  underlying  exposures  without  netting  any  specific  credit  adjustments  and 
additional value adjustments in accordance with Articles 34 and 110 and other own 
funds reductions. 

For the purposes  of paragraphs  1 to 6, where a securitisation structure involves the 
use of an SSPE, all the SSPE’s exposures related to the securitisation shall be treated 
as  underlying  exposures.  Without  prejudice  to  the  preceding,  the  institution  may 
exclude the SPE’s exposures from the pool of underlying exposures for KIRB or KSA  
calculation purposes if the risk from the SPE’s exposures is immaterial or if it does 
not affect the institution’s securitisation position.  

In  the  case  of  funded  synthetic  securitisations,  any  material  proceeds  from  the 
issuance of credit-linked notes or other funded obligations of the SPE that serve as 
collateral  for  the  repayment  of  the  securitisation  positions  shall  be  included  in  the 
calculation of KIRB or KSA if the credit risk of the collateral is subject to the tranched 
loss allocation. 

(8) 

For  the  purposes  of  the  third  subparagraph  of  paragraph  5,  EBA  shall  issue 
guidelines  in  accordance  with  Article  16  of  Regulation  (EU)  No 1093/2010  on  the 
appropriate  methods  to  combine  KIRB  for  dilution  and  credit  risk  where  these  risks 
are not treated in an aggregate manner in a securitisation. 

Article 256 
Determination of attachment point (A) and detachment point (D) 

(1) 

For the purposes of Subsection 3, institutions shall set the attachment point (A) at the 
threshold at which losses within the pool of underlying exposures would start to be 
allocated to the relevant securitisation position.  

The attachment point (A) shall be expressed as a decimal value between zero and one 
and shall be equal to the greater of zero and the ratio of the outstanding balance of 
the pool of underlying exposures in the securitisation minus the outstanding balance 
of  all  tranches  that  rank  senior  or  pari  passu  to  the  tranche  containing  the  relevant 
securitisation position to the outstanding  balance  of all the underlying exposures in 
the securitisation. 

(2) 

For  the  purposes  of  Subsection  3,  institutions  shall  set  the  detachment  point  (D)  at 
the threshold at which losses within the pool of underlying exposures would result in 

EN 

31 

   EN 

 
  
a  complete  loss  of  principal  for  the  tranche  containing  the  relevant  securitisation 
position.  

The  detachment  point  (D)  shall  be  expressed  as  a  decimal  value  between  zero  and 
one and shall be equal to the greater of zero and the ratio of the outstanding balance 
of  the  pool  of  underlying  exposures  in  the  securitisation  minus  the  outstanding 
balance  of  all  tranches  that  rank  senior  to  the  tranche  containing  the  relevant 
securitisation position to the outstanding  balance  of all the underlying exposures in 
the securitisation. 

For  the  purposes  of  paragraphs  1  and  2,  institutions  shall treat  overcollateralisation 
and  funded  reserve  accounts  as  tranches  and  the  assets  comprising  such  reserve 
accounts as underlying exposures.  

For the purposes of paragraphs 1 and 2, institutions shall disregard unfunded reserve 
accounts and assets that do not provide credit enhancement, such as those that only 
provide liquidity support, currency or interest rate swaps and cash collateral accounts 
related to those positions in the securitisation. For funded reserve accounts and assets 
providing  credit  enhancement,  the  institution  shall  only  treat  as  securitisation 
positions the part of those accounts or assets that are loss-absorbing.    

(3) 

(4) 

Article 257 
Determination of tranche maturity (MT) 

(1) 

For  the  purposes  of  Subsection  3  and  subject  to  paragraph  3,  institutions  may 
measure the maturity of a tranche (MT) as either: 

(a) 

the  weighted–average  maturity  of  the  contractual  payments  due  under  the 
tranche in accordance with the following formula: 

     ∑        

⁄

∑     

where  CFt  denotes  all  contractual  payments  (principal,  interests  and  fees) 
payable by the borrower during period t; or  

(b) 

the  final  legal  maturity  of  the  tranche  in  accordance  with  the  following 
formula: 

where ML is the final legal maturity of the tranche.  

MT = 1 + (ML – 1) * 80%, 

(2) 

(3) 

(4) 

By derogation from paragraph 1, institutions shall only use the final legal maturity of 
the tranche to determine its maturity (MT) in accordance with point (b) of paragraph 
1 where the contractual payments due under the tranche are conditional or dependent 
upon the actual performance of the underlying exposures.  

For the purposes of paragraphs 1 and 2, the determination of a tranche maturity (MT) 
shall be subject in all cases to a floor of one year and a cap of five years.  

Where  an  institution  may  become  exposed  to  potential  losses  from  the  underlying 
exposures  by  virtue  of  contract,  the  institution  shall  determine  the  maturity  of  the 
securitisation position by taking into account the longest maturity of such underlying 
exposures.  For  revolving  exposures,  the  longest  contractually  possible  remaining 
maturity of the exposure that might be added during the revolving period shall apply.  

EN 

32 

   EN 

 
  
 
 
 
 
SUBSECTION 3 
METHODS TO CALCULATE RISK-WEIGHTED EXPOSURE AMOUNTS 

Article 258 
Conditions for the use of the Internal Ratings-Based Approach (SEC-IRBA) 

(1) 

Institutions shall use the SEC-IRBA to calculate risk-weighted exposure amounts in 
relation to a securitisation position where the following conditions are met:  

(a) 

(b) 

the  position  is  backed  by  an  IRB  pool  or  a  mixed  pool,  provided  that,  in  the 
latter case, the institution is able to calculate KIRB in accordance with Section 3 
on at a minimum of 95% of the underlying risk-weighted exposure amount; 

there  is  sufficient  information  publicly  available  in  relation  to  the  underlying 
exposures  of  the  securitisation  for the  institution  to  be  able  to  calculate  KIRB; 
and 

(c) 

the institution has not been precluded from using the SEC-IRBA in relation to 
a specified securitisation position in accordance with paragraph 2.  

(2) 

Competent  authorities  may  on  a  case-by-case  basis  preclude  the  use  of  the  SEC-
IRBA  where  securitisations  have  highly  complex  or  risky  features.  For  these 
purposes, the following may be regarded as highly complex or risky features:   

(a) 

credit  enhancement  that  can  be  eroded  for  reasons  other  than  portfolio  losses 
resulting from non-payment of principal or interest;  

(b)  pools  of  underlying  exposures  with  high  degree  of  internal  correlation  as  a 

result of concentrated exposures to single sectors or geographical areas 

(c) 

transactions  were  the  repayment  of  the  securitisation  positions  are  highly 
dependent on risk drivers not reflected in KIRB; or 

(d)  highly complex loss allocations between tranches. 

Article 259 
Calculation of risk-weighted exposure amounts under the SEC-IRBA 

(1) 

Under  the  SEC-IRBA,  the  risk  weighted  exposure  amount  for  a  securitisation 
position  shall  be  calculated  by  multiplying  the  exposure  value  of  the  position 
calculated in accordance with  Article 248 by the applicable risk weight determined 
as follows, in all cases subject to a floor of 15%:  

RW = 1,250% 

RW = 12.5KSSFA(KIRB) 

where: 

when D ≤ KIRB 

        when A ≥ KIRB 

  when A˂ KIRB˂D 

KIRB is the capital charge of the pool of underlying exposures as defined in Article 
255 

D is the detachment point as determined in accordance with Article 256 

EN 

33 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
A is the attachment point as determined in accordance with Article 256 

     (    )    

 (     )

where:  

a = –(1 / (p * KIRB)) 

u = D – KIRB 

l = max (A - KIRB; 0) 

where: 

p = max [0.3; (A + B*(1/N) + C* KIRB + D*LGD + E*MT)] 

where: 

N  is  the  effective  number  of  exposures  in  the  pool  of  underlying  exposures, 
calculated in accordance paragraph 4 

LGD is the exposure-weighted average loss-given-default of the pool of underlying 
exposures, calculated in accordance with paragraph 5 

MT is the maturity of the tranche as determined in accordance with Article 257 

the  parameters  A,  B,  C,  D,  and  E  shall  be  determined  according  to  the  following 
look-up table: 

Senior, granular (N ≥ 25) 

Senior,  non-granular  (N  < 
25) 

A 

0 

B 

C 

D 

E 

3.56 

–1.85 

0.55 

0.07 

0.11 

2.61 

–2.91 

0.68 

0.07 

Wholesale 

Non-senior,  granular  (N  ≥ 
25) 

0.16 

2.87 

–1.03 

0.21 

0.07 

Non-senior,  non-granular 

(N < 25) 

0.22 

2.35 

–2.46 

Retail 

Senior 

Non-senior 

0 

0 

0 

0 

0.48 

0.71 

0.07 

0.24 

–7.48 

–5.78 

0.55 

0.27 

(2) 

(3) 

If the underlying IRB pool comprises both retail and non-retail exposures, the pool 
shall be  divided  into one retail and one non-retail subpool and, for each subpool, a 
separate  p-parameter  (and  the  corresponding  input  parameters  N,  KIRB  and  LGD) 
shall be estimated. Subsequently, a weighted average p-parameter for the transaction 
shall be calculated on the basis of the p-parameters of each subpool and the nominal 
size of the exposures in each subpool. 

Where an institution applies the SEC-IRBA to a mixed pool, the calculation of the p-
parameter shall be based on the underlying exposures subject to the IRB Approach 
only.  The  underlying  exposures  subject  to  the  Standardised  Approach  shall  be 
ignored for these purposes. 

(4) 

The effective number of exposures (N) shall be calculated as follows: 

EN 

34 

   EN 

 
             
 
 
 
where  EADi  represents  the  exposure-at-default  associated  with  the  ith  instrument  in 
the pool.  

Multiple exposures to the same obligor shall be consolidated and treated as a single 
exposure. 

(5) 

The exposure-weighted average LGD shall be calculated as follows: 

where  LGDi  represents  the  average  LGD  associated  with  all  exposures  to  the  ith 
obligor.  

Where  credit  and  dilution  risks  for  purchased  receivables  are  managed  in  an 
aggregate manner in a securitisation, the LGD input shall be construed as a weighted 
average of the LGD for credit risk and 100% LGD for dilution risk. The risk weights 
shall  be  the  stand-alone  IRB  capital  charges  for  credit  risk  and  dilution  risk, 
respectively.  For  these  purposes,  the  presence  of  a  single  reserve  fund  or 
[overcollateralisation] available to cover losses from either credit or default risk may 
be regarded as an indication that these risks are managed in an aggregate manner. 

(6) 

Where the share of the largest underlying exposure in the pool (C1) is no more than 
3%,  institutions  may  use  the  following  simplified  method  to  calculate  N  and  the 
exposure-weighted average LGDs: 

LGD = 0.50 

where  

Cm denotes the share of the pool corresponding to the sum of the largest m exposures 
(e.g. a 15% share corresponds to a value of 0.15); and  

m is set by the institution. 

If only C1 is available and this amount is no more than 0.03, then the institution may 
set LGD as 0.50 and N as 1/C1. 

(7) 

Where the position is backed by a mixed pool and the institution is able to  calculate 
KIRB on at least 95% of the underlying exposure amounts in accordance with Article 
258(1)(a), the institution shall calculate the capital charge for the underlying pool of 
exposures as: 

where 

dˑ KIRB + (1–d)ˑ KSA,  

d  is  the  percentage  of  the  exposure  amount  of  underlying  exposures  for  which  the 
bank can calculate KIRB over the exposure amount of all underlying exposures; and 

KIRB and KSA are as defined in Article 255. 

EN 

35 

   EN 

 
 
 
 
 
(8) 

Where  an  institution  has  a  securitisation  position  in  the  form  of  a  derivative,  the 
institution  may  attribute  to  the  derivative  an  inferred  risk  weight  equivalent  to  the 
risk weight of the reference position calculated in accordance with this Article.  

For  the  purposes  of  the  first  Subparagraph,  the  reference  position  shall  be  the 
position that is pari passu in all respects to the derivative or, in the absence of such 
pari passu position, the position that is immediately subordinate to the derivative.  

Article 260 
Treatment of STS securitisations under the SEC-IRBA 

Under the SEC-IRBA, the risk weight for position in an STS securitisation shall be 
calculated in accordance with Article 259, subject to the following modifications: 

risk weight floor for senior securitisation positions = 10% 

p = max [0.3; 0.5ˑ (A + Bˑ(1/N) + Cˑ KIRB + D*LGD + EˑMT)] 

(1) 

(2) 

(3) 

Article 261 
Calculation of risk-weighted exposure amounts under the External Ratings-Based 
Approach (SEC-ERBA) 

Under  the  SEC-ERBA,  the  risk  weighted  exposure  amount  for  a  securitisation 
position  shall  be  calculated  by  multiplying  the  exposure  value  of  the  position  as 
calculated in accordance with Article 248 by the applicable risk weight in accordance 
with this Article.  

For exposures with short-term credit assessments or when a rating based on a short-
term  credit  assessment  may  be  inferred  in  accordance  with  paragraph  7,  the 
following risk weights shall apply: 

Table 1 

Credit Quality Step  1 

2 

3 

All other ratings 

Risk weight  15% 

50% 

100% 

1,250% 

For exposures with long-term credit assessments or when a rating based on a long-
term  credit  assessment  may  be  inferred  in  accordance  with  paragraph  7,  the  risk 
weights  set  out  in  Table  2  shall  apply,  adjusted  as  applicable  for  tranche  maturity 
(Mt)  in  accordance  with  Article  257  and  paragraph  4  and  for  tranche  thickness  for 
non-senior tranches in accordance with paragraph 5: 

Table 2 

EN 

36 

   EN 

 
 
Credit    
Quality Step 

1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
All other 

Senior tranche 
Tranche maturity (MT) 
1 year 
15% 
15% 
25% 
30% 
40% 
50% 
60% 
75% 
90% 
120% 
140% 
160% 
200% 
250% 
310% 
380% 
460% 
1,250% 

5 years 
20% 
30% 
40% 
45% 
50% 
65% 
70% 
90% 
105% 
140% 
160% 
180% 
225% 
280% 
340% 
420% 
505% 
1,250% 

Non-senior (thin) tranche 
Tranche maturity (MT) 
5 years 
1 year 
70% 
15% 
90% 
15% 
120% 
30% 
140% 
40% 
160% 
60% 
180% 
80% 
210% 
120% 
260% 
170% 
310% 
220% 
420% 
330% 
580% 
470% 
760% 
620% 
860% 
750% 
950% 
900% 
1050% 
1050% 
1130% 
1130% 
1,250% 
1,250% 
1,250% 
1,250% 

(4) 

(5) 

(6) 

(7) 

In  order to determine the risk weight  for tranches with a maturity  between  1 and 5 
years,  institutions  shall  use  linear  interpolation  between  the  risk  weights  applicable 
for one and five years maturity respectively in accordance with table 2.  

In order to determine the tranche thickness, institutions shall calculate the risk weight 
for non-senior tranches as follows:  

RW  =  [RW  after  adjusting  for  maturity  according  to  paragraph  4]     [1  –  min(T; 
50%)] 

where 

T = tranche thickness measured as D – A 

where 

D is the detachment point as determined in accordance with Article 256 

A is the attachment point as determined in accordance with Article 256 

The  risk  weight  for  non-senior  tranches  resulting  from  paragraphs  3  to  5  shall  be 
subject to a floor of 15%. In addition, the resulting risk weight shall be no lower than 
the  risk  weight  corresponding  to  a  hypothetical  senior  tranche  of  the  same 
securitisation with the same credit assessment and maturity. 

For  the  purposes  of  using  inferred  ratings,  institutions  shall  attribute  to  an  unrated 
position  an  inferred  rating  equivalent  to  the  credit  assessment  of  a  rated  reference 
position which meets all of the following conditions: 

EN 

37 

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(a) 

(b) 

(c) 

the  reference  position  ranks  pari  passu  in  all  respects  to  the  unrated 
securitisation  position  or,  in  the  absence  of  a  pari  passu  ranking  position,  the 
reference position is immediately subordinate to the unrated position; 

the reference position does not benefit from any third-party guarantees or other 
credit enhancements that are not available to the unrated position; 

the maturity of the reference position shall be equal to or longer than that of the 
unrated position in question; 

(d)  on an ongoing basis, any inferred rating shall be updated to reflect any changes 

in the credit assessment of the reference position. 

Article 262 
Treatment of STS securitisations under SEC-ERBA 

Under the SEC-ERBA, the risk weight for a position in an STS securitisation shall be 
calculated in accordance with Article 261, subject to the modifications laid down in 
this Article. 

For exposures with short-term credit assessments or when a rating based on a short-
term  credit  assessment  may  be  inferred  in  accordance  with  Article  261(7),  the 
following risk weights shall apply: 

Table 3 

Credit Quality Step  1 

2 

3 

All other ratings  

Risk weight  10% 

35% 

70% 

1,250% 

For exposures with long-term credit assessments or when a rating  based on a long-
term  credit  assessment  may  be  inferred  in  accordance  with  Article  261(7),  risk 
weights  shall  be  determined  in  accordance  with  Table  4,  adjusted  for  tranche 
maturity  (MT)  in  accordance  with  Article  257  and  Article  261(4)  and  for  tranche 
thickness for non-senior tranches in accordance with Article 261(5): 

(1) 

(2) 

(3) 

Table 4 

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Credit Quality 
Step 

1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
All other 

Senior tranche 
Tranche maturity (MT) 
1 year 
10% 
10% 
15% 
20% 
25% 
35% 
40% 
55% 
65% 
85% 
105% 
120% 
150% 
210% 
260% 
320% 
395% 
1,250% 

5 years 
15% 
20% 
25% 
30% 
35% 
45% 
45% 
65% 
75% 
100% 
120% 
135% 
170% 
235% 
285% 
355% 
430% 
1,250% 

Article 263 

Non-senior (thin) tranche 
Tranche maturity (MT) 
5 years 
1 year 
50% 
15% 
55% 
15% 
75% 
20% 
90% 
25% 
105% 
40% 
120% 
55% 
140% 
80% 
185% 
120% 
220% 
155% 
300% 
235% 
440% 
355% 
580% 
470% 
650% 
570% 
800% 
755% 
880% 
880% 
950% 
950% 
1,250% 
1,250% 
1,250% 
1,250% 

Calculation of risk-weighted exposure amounts under the Standardised Approach                

(SEC-SA) 

(1) 

Under  the  SEC-SA,  the  risk  weighted  exposure  amount  for  a  position  in  a 
securitisation shall be calculated by multiplying the exposure value of the position as 
calculated in accordance with  Article 248 by the  applicable risk weight determined 
as follows, in all cases subject to a floor of 15%: 

RW = 1,250%                 

RW = 12.5 KSSFA(KA)                  

 when D ≤ KA 

 when A ≥ KA 

        when A˂KA˂D 

where: 

D is the detachment point as determined in accordance with Article 256 

A is the attachment point as determined in accordance with Article 256 

KA is a parameter calculated in accordance with paragraph 2 

     (  )    

 (     )

where: 

a = –(1 / (p * KA)) 

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u = D – KA 

l = max (A – KA; 0) 

p = 1 for a securitisation exposure that is not a re-securitisation exposure 

(2) 

For the purposes of paragraph 1, KA  shall be calculated as follows: 

     (     )                 

where: 

     is the capital charge of the underlying pool as defined in Article 255 
W = ratio of the sum of the nominal amount of underlying exposures in default to the 
nominal  amount  of  all  underlying  exposures.  For  these  purposes,  an  exposure  in 
default shall mean an underlying exposure which is either:  (i) 90 days or more past 
due; (ii) subject to bankruptcy or insolvency proceedings; (iii) subject to foreclosure 
or  similar  proceeding;  or  (iv)  in  default  in  accordance  with  the  securitisation 
documentation.  

Where  an  institution  does  not  know  the  delinquency  status  for  5%  or  less  of 
underlying exposures in the pool, the institution may use the SEC-SA subject to the 
following adjustment in the calculation KA: 

     (

                       )    

Where  the  institution  does  not  know  the  delinquency  status  for  more  than  5%  of 
underlying  exposures  in  the  pool,  the  position  in  the  securitisation  must  be  risk 
weighted at 1,250%. 

(3) 

Where  an  institution  has  a  securitisation  position  in  the  form  of  a  derivative,  the 
institution  may  attribute  to  the  derivative  an  inferred  risk  weight  equivalent  to  the 
risk weight of the reference position calculated in accordance with this Article.  

For the purposes of this paragraph, the reference position shall be the position that is 
pari  passu  in  all  respects  to  the  derivative  or,  in  the  absence  of  such  pari  passu 
position, the position that is immediately subordinate to the derivative.  

Article 264 
Treatment of STS securitisations under SEC-SA 

Under  the  SEC-SA  the  risk  weight  for  a  position  in  an  STS  securitisation  shall  be 
calculated in accordance with Article 263, subject to the following modifications 

risk weight floor for senior securitisation positions = 10% 

p = 0,5 

Article 265 
Scope and operational requirements for the Internal Assessment Approach (IAA) 

(1) 

Institutions may calculate the risk-weighted exposure amounts for unrated positions 
in  ABCP  programmes  under  the  IAA  in  accordance  with  Article  266  where  they 
have  been  granted  permission  by  their  competent  authorities  in  accordance  with 
paragraph 2. 

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(2) 

The competent authorities may grant institutions permission to use the IAA within a 
clearly defined scope of application where all of the following conditions are met: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

all  positions  in  the  commercial  paper  issued  from  the  ABCP  programme  are 
rated positions; 

the internal assessment of the credit quality of the position reflects the publicly 
available  assessment  methodology  of  one  or  more  ECAIs  for  the  rating  of 
securitisation positions or underlying exposures of the same type; 

the  institution’s  internal  assessment  process  is  at  least  as  conservative  as  the 
publicly  available  assessments  of  those  ECAIs  which  have  provided  an 
external rating for the commercial paper issued from the ABCP programme, in 
particular with regard to stress factors and other relevant quantitative elements; 

the institution's internal assessment methodology takes into account all relevant 
publicly available rating methodologies of the ECAIs that rate the commercial 
paper of the ABCP programme and includes rating grades corresponding to the 
credit  assessments  of  ECAIs.  The  institution  shall  document  in  its  internal 
records  an  explanatory  statement  describing  how  the  requirements  set  out  in 
this point have been met and shall update such statement on a regular basis;  

the  institution  uses  the  internal  assessment  methodology  for  internal  risk 
management  purposes, 
its  decision  making,  management 
in 
information and internal capital allocation processes; 

including 

internal or external auditors, an ECAI, or the institution's internal credit review 
or  risk  management  function  perform  regular  reviews  of  the  internal 
assessment  process  and  the  quality  of  the  internal  assessments  of  the  credit 
quality of the institution's exposures to an ABCP programme; 

the  institution  tracks  the  performance  of  its  internal  ratings  over  time  to 
evaluate  the  performance  of  its  internal  assessment  methodology  and  makes 
adjustments,  as  necessary,  to  that  methodology  when  the  performance  of  the 
exposures routinely diverges from that indicated by the internal ratings; 

(h) 

the  ABCP  programme  includes  underwriting  and  liability  management  
standards in the form of guidelines to the programme administrator on, at least: 

 (i) 

the asset eligibility criteria, subject to point (i);  

(ii) 
provision of liquidity facilities and credit enhancements;  

the types and monetary value of the exposures arising from the 

(iii) 
ABCP programme;  

the  loss  distribution  between  the  securitisation  positions  in  the 

(iv) 
the entity selling the assets;  

the  legal  and  economic  isolation  of  the  transferred  assets  from 

(i) 

the asset eligibility criteria in the ABCP programme provide for, at least: 

(i) 
due or defaulted; 

exclusion  of  the  purchase  of  assets  that  are  significantly  past 

(ii)  
geographic area; 

limitation  of  excessive  concentration  to  individual  obligor  or 

(iii) 

limitation of the tenor of the assets to be purchased; 

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(j) 

an  analysis  of  the  asset  seller's  credit  risk  and  business  profile  is  performed 
including, at least, an assessment of the seller's: 

(i) 

(ii) 

(iii) 

past and expected future financial performance;  

current market position and expected future competitiveness; 

leverage, cash flow, interest coverage and debt rating; 

(iv) 
processes; 

 underwriting  standards,  servicing  capabilities,  and  collection 

(k) 

the  ABCP  programme  has  collection  policies  and  processes  that  take  into 
account  the  operational  capability  and  credit  quality  of  the  servicer  and 
comprises features that mitigate performance-related risks of the seller and the 
servicer.  For  the  purposes  of  this  point,  performance-related  risks  may  be 
mitigated through triggers based on the seller or servicer's current credit quality 
to  prevent  commingling  of  funds  in  the  event  of  the  seller's  or  servicer's 
default;  

(l) 

the aggregated estimate of loss on an asset pool that may be purchased under 
the ABCP programme takes into account all sources of potential risk, such as 
credit and dilution risk;  

(m)  where  the  seller-provided  credit  enhancement  is  sized  based  only  on  credit-
related  losses  and  dilution  risk  is  material  for  the  particular  asset  pool,  the 
ABCP programme comprises a separate reserve for dilution risk; 

(n) 

(o) 

(p) 

the  size  of  the  required  enhancement  level  in  the  ABCP  programme  is 
calculated taking into account several years of historical information, including 
losses, delinquencies, dilutions, and the turnover rate of the receivables; 

the  ABCP  programme  comprises  structural  features  in  the  purchase  of 
exposures  in  order  to  mitigate  potential  credit  deterioration  of  the  underlying 
portfolio. Such features may include wind-down triggers specific to a pool of 
exposures; 

the institution evaluates the characteristics of the underlying asset pool, such as 
its  weighted-average  credit  score,  and  identifies  any  concentrations  to  an 
individual obligor or geographical region and the granularity of the asset pool. 

Where  the  institution's  internal  audit,  credit  review,  or  risk  management  functions 
perform the review provided for in point (f) of paragraph 2, those functions shall be 
independent from the institution's internal functions dealing with ABCP programme 
business and customer relations.  

Institutions which have received permission to use the IAA shall not revert to the use 
of other methods for positions that fall within scope of application of the IAA unless 
all of the following conditions are met: 

(a) 

the institution has  demonstrated to the satisfaction of the competent authority 
that the institution has good cause to do so; 

(b) 

the institution has received the prior permission of the competent authority. 

(3) 

(4) 

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42 

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(1) 

(2) 

(1) 

(2) 

(3) 

(4) 

(1) 

Article 266 
Calculation of risk-weighted exposure amounts under the IAA 

Under the IAA the institution shall assign the unrated position in the ABCP to one of 
the rating grades laid down in point (d) of Article 265(2) on the basis of its internal 
assessment. The position shall be attributed a derived rating which shall be the same 
as the credit assessments corresponding to that rating grade as laid down in point (d) 
of Article 265(2). 

The  rating  derived  in  accordance  with  paragraph  1  shall  be  at  least  at  the  level  of 
investment grade or better at the time it was first assigned and shall be regarded as an 
eligible credit assessment by an ECAI for the purposes of calculating risk-weighted 
exposure amounts in accordance with Article 261 or Article 262, as applicable.  

SUB-SECTION 4 
CAPS FOR SECURITISATION POSITIONS 

Article 267 
Maximum risk weight for senior securitisation positions: 'Look-through' approach 

An institution which has knowledge at all times of the composition of the underlying 
exposures may assign the senior securitisation position a maximum risk weight equal 
to  the  weighted-average  risk  weight  that  would  be  applicable  to  the  underlying 
exposures if the underlying exposures had not been securitised. 

In  the  case  of  pools  of  underlying  exposures  where  the  institution  uses  exclusively 
the Standardised Approach or the IRB Approach, the maximum risk weight shall be 
equal  to  the  exposure-weighted  average  risk  weight  that  would  apply  to  the 
underlying  exposures  under  Chapter  2  or  3,  respectively,  as  if  they  had  not  been 
securitised.  

In the case of mixed pools the maximum risk weight shall be calculated as follows: 

(a)  where  the  institution  applies  the  SEC-IRBA,  the  Standardised  Approach 
portion and the IRB portion of the underlying pool shall each be assigned the 
corresponding  Standardised  Approach  risk  weight  and  IRB  risk  weight 
respectively;  

(b)  where the institution applies the SEC-SA or the SEC-ERBA, the maximum risk 
weight  for  senior  securitisation  positions  shall  be  equal  to  the  Standardised 
Approach weighted-average risk weight of the underlying exposures.  

For the purposes of this Article, the risk weight that would be applicable under the 
IRB Approach in accordance with Chapter 3 shall include the ratio of expected losses 
to exposure at default of the underlying exposures multiplied by 12.5. 

Where the maximum risk weight calculated in accordance with paragraph 1 results in 
a  lower  risk  weight  than  the  floor  risk  weights  set  out  in  Articles  259  to  264,  as 
applicable, the former shall be used instead. 

Article 268 
Maximum capital requirements  

An  originator  institution,  a  sponsor  institution  or  other  institution  using  the  SEC-
IRBA or an originator institution or sponsor institution using the SEC-ERBA or the 
SEC-SA may apply a maximum capital requirement for the securitisation position it 

EN 

43 

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holds equal to the capital requirements that would be calculated under Chapter 2 or 3 
in  respect  of  the  underlying  exposures  had  they  not  been  securitised.  For  the 
purposes of this Article, the IRB capital requirement shall include the amount of the 
expected losses associated with those exposures calculated under Chapter 3 and that 
of unexpected losses multiplied by a factor of 1.06.  

(2) 

(3) 

In the case of mixed pools, the maximum capital requirement shall be determined by 
calculating the exposure-weighted average of the capital requirements of the IRB and 
Standardised  Approach  portions  of  the  underlying  exposures  in  accordance  with 
paragraph 1.  

The  maximum  capital  requirement  shall  be  the  result  of  multiplying  the  amount 
calculated in accordance with paragraphs 1 or 2 by the P factor calculated as follows: 

(a) 

(b) 

for  an  institution  that  has  one  or  more  securitisation  positions  in  a  single 
tranche,  the  P  factor  shall  be  equal  to  the  ratio  of  the  nominal  amount  of  the 
securitisation  positions  that  the  institution  holds  in  that  given  tranche  to  the 
nominal amount of the tranche; 

for  an  institution  that  has  securitisation  positions  in  different  tranches,  the               
P factor shall be equal to the maximum proportion of interest across tranches. 
For these purposes, the proportion of interest for each of the different tranches 
shall be calculated as set out in point (a). 

(4) 

When  calculating  the  maximum  capital  requirement  for  a  securitisation  position  in 
accordance  with  this  Article,  the  entire  amount  of  any  gain  on  sale  and  credit-
enhancing  interest-only  strips  arising  from  the  securitisation  transaction  shall  be 
deducted from Common Equity Tier 1 items in accordance with Article 36(1)(k). 

SUB-SECTION 5 
MISCELLANEOUS PROVISIONS 

Article 269 
Re-securitisations 

(1) 

For  a  position  in  a  re-securitisation,  institutions  shall  apply  the  SEC-SA  in 
accordance with Article 263, with the following changes: 

(a)  W = 0 for any exposure to a securitisation tranche within the underlying pool 

pf exposures;  

(b)  p = 1.5; 

(2) 

(3) 

(4) 

(c) 

the resulting risk weight shall be subject to a floor risk weight of 100%. 

KSA  for  the  underlying  securitisation  exposures  shall  be  calculated  in  accordance 
with Subsection 2. 

The maximum capital requirements set out in Sub-Section 4 shall not be applied to 
re-securitisation positions. 

Where the pool of underlying exposures consists in a mix of securitisation tranches 
and  other  types  of  assets,  the  KA  parameter  shall  be  determined  as  the  nominal 
exposure  weighted-average  of  the  KA  calculated  individually  for  each  subset  of 
exposures. 

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Article 270 
Senior positions in SME securitisations 

An originator institution may calculate the risk-weighted exposure amounts in respect of a 
securitisation position in accordance with Articles 260, 262 or 264, as applicable, where the 
following conditions are met:  

(a) 

(b) 

(c) 

(d) 

(e) 

the  securitisation  meets  the  requirements  set  out  in  Article  6(2)  of  the 
[Securitisation Regulation], other than point (a) of that paragraph; 

the position qualifies as the senior securitisation position; 

the  securitisation  is  backed  by  a  pool  of  exposures  to  undertakings,  provided 
that  at  least  80%  of  those  in  terms  of  portfolio  balance  qualify  as  SMEs  as 
defined in Art 501 at the time of issuance of the securitisation;  

the  credit  risk  associated  with  the  positions  not  retained  by  the  originator 
institution  is  transferred  through  a  guarantee  or  a  counter-guarantee  meeting 
the  requirements  for  unfunded  credit  protection  set  out  in  Chapter  4  for  the 
Standardised Approach to credit risk;   

the guarantor or counter-guarantor, as applicable, is the central government or 
the  central  bank  of  a  Member  State,  a  multilateral  development  bank  or  an 
international  organisation,  provided  that  the  exposures  to  the  guarantor  or 
counter-guarantor  qualify  for  a  0%  risk  weight  under  Chapter  Two  of  Part 
Three. 

Article 270a 
Additional risk weight 

(1) 

(2) 

(3) 

Where  an  institution  does  not  meet  the  requirements  in  Chapter  2  of  the 
[Securitisation  Regulation]  in  any  material  respect  by  reason  of  the  negligence  or 
omission  of  the  institution,  the  competent  authorities  shall  impose  a  proportionate 
additional risk weight of no less than 250 % of the risk weight (capped at 1,250 %) 
which shall apply to the relevant securitisation positions in the manner specified in 
Article  247(6)  or  Article  337(3)  respectively.  The  additional  risk  weight  shall 
progressively  increase  with  each  subsequent  infringement  of  the  due  diligence 
provisions.  The  competent  authorities  shall  take  into  account  the  exemptions  for 
certain securitisations provided in Article 4(4) of the [Securitisation Regulation] by 
reducing the risk weight it would otherwise impose under this Article in respect of a 
securitisation to which Article 4(4) of the [Securitisation Regulation] applies. 

EBA  shall  develop  draft  implementing  technical  standards  to  facilitate  the 
convergence of supervisory practices with regard to the implementation of paragraph 
1 of the present Article, including the measures to be taken in the case of breach of 
the  due  diligence  and  risk  management  obligations.  EBA  shall  submit  those  draft 
implementing technical standards to the Commission by 1 January 2014. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

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SECTION 4 
EXTERNAL CREDIT ASSESSMENTS 

Article 270b 
Use of Credit Assessments by ECAIs 

Institutions may use  only  credit assessments to determine the risk weight  of a securitisation 
position in accordance with this Chapter where the credit assessment has been issued or has 
been endorsed by an ECAI in accordance with Regulation (EC) No 1060/2009. 

Article 270c 
Requirements to be met by the credit assessments of ECAIs 

For  the  purposes  of  calculating  risk-weighted  exposure  amounts  in  accordance  with                    
Section  3,  institutions  shall  only  use  a  credit  assessment  of  an  ECAI  where  the  following 
conditions are met: 

(a) 

(b) 

(c) 

(d) 

there  is  no  mismatch  between  the  types  of  payments  reflected  in  the  credit 
assessment and the types of payments to which the institution is entitled under 
the contract giving rise to the securitisation position in question; 

the  ECAI  publishes  the  credit  assessments  and  information  on  loss  and  cash-
flow  analysis,  sensitivity  of  ratings  to  changes  in  the  underlying  ratings 
assumptions,  including  the  performance  of  underlying  exposures,  and  on  the 
procedures,  methodologies,  assumptions,  and  key  elements  underpinning  the 
credit assessments in accordance with Regulation (EC) No 1060/2009. For the 
purposes  of  this  point,  information  shall  be  considered  as  publicly  available 
where  it is  published  in  accessible  format.  Information  that is  made  available 
only  to  a  limited  number  of  entities  shall  not  be  considered  as  publicly 
available; 

the credit assessments are included in the ECAI's transition matrix; 

the  credit  assessments  are  not  based  or  partly  based  on  unfunded  support 
provided by the institution itself. Where a position is based or partly based on 
unfunded  support,  the  institution  shall  consider  that  position  as  if  it  were 
unrated for the purposes of calculating risk-weighted exposure amounts for this 
position in accordance with Section 3; 

(e) 

the ECAI has committed to publishing explanations on how the performance of 
underlying exposures affects the credit assessment. 

Article 270d 
Use of credit assessments 

(1) 

(2) 

An  institution  may  nominate  one  or  more  ECAIs  the  credit  assessments  of  which 
shall  be  used  in  the  calculation  of  its  risk-weighted  exposure  amounts  under  this 
Chapter (a 'nominated ECAI'). 

An  institution  shall  use  the  credit  assessments  of  its  securitisation  positions  in  a 
consistent  and  non-selective  manner  and,for  these  purposes,  shall  comply  with  the 
following requirements: 

(a) 

an  institution  shall  not  use  an  ECAI's  credit  assessments  for  its  positions  in 
some tranches and another ECAI's credit assessments for its positions in other 

EN 

46 

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tranches within the same securitisation that may or may not be rated by the first 
ECAI; 

(b)  where  a  position  has  two  credit  assessments  by  nominated  ECAIs,  the 

institution shall use the less favourable credit assessment; 

(c)  where a position has three or more credit assessments by nominated ECAIs, the 
two  most  favourable  credit  assessments  shall  be  used.  Where  the  two  most 
favourable  assessments  are  different,  the  less  favourable  of  the  two  shall  be 
used; 

(d) 

an institution shall not actively solicit the withdrawal of less favourable ratings. 

Where the exposures underlying a securitisation benefit from full or partial eligible 
credit protection in accordance with Chapter 4,and the effect of such protection has 
been  reflected  in  the  credit  assessment  of  a  securitisation  position  by  a  nominated 
ECAI, the institution shall use the risk weight associated with that credit assessment. 
Where the credit protection referred to in this paragraph is not eligible under Chapter 
4, the credit assessment shall not be recognised and the securitisation position shall 
be treated as unrated.  

Where a securitisation position benefits from eligible credit protection in accordance 
with  Chapter  4  and  the  effect  of  such  protection  has  been  reflected  in  its  credit 
assessment by a nominated ECAI, the institution shall treat the securitisation position 
as if it were unrated and calculate the risk weighted exposure amounts in accordance 
with Chapter 4.   

(3) 

(4) 

Article 270e 
Securitisation Mapping 

EBA  shall  develop  draft  implementing  technical  standards  to  map  in  an  objective  and 
consistent manner the credit quality steps set out in this Chapter relative to the relevant credit 
assessments of all ECAIs. For the purposes of this Article, EBA shall in particular: 

(a)  differentiate between the relative degrees of risk expressed by each assessment; 

(b) 

(c) 

(d) 

consider  quantitative  factors,  such  as  default  or  loss  rates  and  the  historical 
performance of credit assessments of each ECAI across different asset classes; 

consider  qualitative  factors  such  as  the  range  of  transactions  assessed  by  the 
ECAI, its methodology and the meaning of its credit assessments in particular 
whether  such  assessments  take  into  account  expected  loss  or  first  Euro  loss, 
and timely payment of interests or ultimate payment of interests; 

seek  to  ensure  that  securitisation  positions  to  which  the  same  risk  weight  is 
applied  on  the  basis  of  the  credit  assessments  of  ECAIs  are  subject  to 
equivalent degrees of credit risk.  

EBA shall submit those draft implementing technical standards to the Commission by 1 July 
2014. 

Power is conferred on the Commission to adopt the implementing technical standards referred 
to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010'. 

EN 

47 

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(5) 

Article 337 is replaced by the following: 

'Article 337 

(1) 

(2) 

(3) 

(4) 

(5) 

Own funds requirement for securitisation instruments 

For  instruments  in  the  trading  book  that  are  securitisation  positions,  the  institution 
shall  weight  the  net  positions  as  calculated  in  accordance  with  Article  327(1)  with 
8 % of the risk weight the institution would apply to the position in its non-trading 
book according to Chapter 5 of Title II, Part Three, Section 3. 

When determining risk weights for the purposes of paragraph 1, estimates of PD and 
LGD may be determined based on estimates that are derived from an IRC approach 
of  an  institution  that  has  been  granted  permission  to  use  an  internal  model  for 
specific risk of debt instruments. The latter alternative may be used only subject to 
permission  by  the  competent  authorities,  which  shall  be  granted  if  those  estimates 
meet the quantitative requirements for the IRB Approach set out in Title II, Chapter 
3. 

In  accordance  with  Article  16  of  Regulation  (EU)  No 1093/2010,  EBA  shall  issue 
guidelines on the use of estimates of PD and LGD as inputs when those estimates are 
based on an IRC approach. 

For securitisation positions that are subject to an additional risk weight in accordance 
with Article 247(6), 8 % of the total risk weight shall be applied. 

The  institution  shall  sum  its  weighted  positions  resulting  from  the  application  of 
paragraphs  1,  2  and  3  regardless  of  whether  they  are  long  or  short,  in  order  to 
calculate  its  own  funds  requirement  against  specific  risk,  except  for  securitisation 
positions subject to Article 338(4). 

Where  an  originator  institution  of  a  traditional  securitisation  does  not  meet  the 
conditions for significant risk transfer set out in Article 244, the originator institution 
shall  include  the  exposures  underlying  the  securitisation  in  its  calculation  of  own 
funds requirement as if those exposures had not been securitised. 

Where  an  originator  institution  of  a  synthetic  securitisation  does  not  meet  the 
conditions for significant risk transfer set out in Article 245, the originator institution 
shall  include  the  exposures  underlying  the  securitisation  in  its  calculation  of  own 
funds requirements as if those exposures had not been securitised and shall ignore the 
effect of the synthetic securitisation for credit protection purposes.' 

(9) 

Part Five is deleted. 

(10) 

In Article 456(1), the following point (k) is added: 

(a) 

amendment  of  the  provisions  concerning  the  calculation  of  the  risk-weighted 
exposure amounts of securitisation positions as set out in Articles 247 to 270a 
to take account of developments or amendments to international standards on 
securitisations. 

(11) 

In Article 457, point (c) is replaced by the following: 

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(a) 

'the  own  funds  requirements  for  securitisation  laid  down  in  Articles  242  to 
270a'. 

(12) 

The following Article 519bis is inserted: 

'Article 519a 

Report 

By  no  later  than  3  years  from  [insert  date  of  entry  into  force  of  this  Regulation],  the 
Commission  shall  report  to  the  European  Parliament  and  Council  on  the  application  of  the 
provisions in Chapter 5 of  Title II, Part Three in the light  of developments in  securitisation 
markets. In particular, the report shall assess the impact of the hierarchy of methods set out in 
Article 254 on issuance and investment activity by institutions in securitisation markets in the 
Union and the effects on the financial stability of the Union and Member States. 

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Article 2 
Transitional provisions concerning outstanding securitisation positions 

In  respect  of securitisation positions outstanding as  of [the date set out in Article 3(2)/fixed 
date], institutions may continue to apply the provisions in Chapter 5 of Title II, Part Three and 
Article  337  of  Regulation  (EU)  No  575/2013  until  31  December  2019  in  the  version 
applicable on [day before the date set out in Article 3(2)], provided that the institution: 

(a)  notifies its intention to apply this Article to the competent authority by no later 

than [fixed date];  

(b) 

applies  this  Article  to  all  the  outstanding  securitisation  positions  that  the 
institution holds on [the date set out in Article 3(2)/fixed date]. 

Article 3 
Entry into force and date of application 

(1) 

This  Regulation  shall  enter  into  force  on  the  twentieth  day  following  that  of  its 
publication in the Official Journal of the European Union. 

(2) 

This Regulation shall apply from [the date of entry into force]. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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