Document ID: chunk:federal_register_of_legislation:F2023L01572:reg:11:p3
Version: federal_register_of_legislation:F2023L01572
Segment Type: reg
Provision Reference: reg 11 (pt 3/5)
Character Range: 67303–70200

underlying exposures (W)
22.         Delinquent underlying exposures are underlying exposures that are 90 days or more past due, subject to bankruptcy or insolvency proceedings, in the process of foreclosure, held as real estate owned or in default, where default is defined within the securitisation transaction documents.
23.         The variable (W) represents the ratio of the sum of the nominal amount of delinquent underlying exposures to the nominal amount of underlying exposures.
24.         The inputs KSA and W are used as inputs to calculate KA, as follows:
25.         In case an ADI is not aware of the delinquency status (paragraphs 22 and 23 of this Attachment) for no more than five per cent of underlying exposures in the pool, the ADI may use the supervisory formula approach by adjusting its calculation of KA as follows:
where:
Exposure is the exposure amount determined under APS 112.
26.         If the ADI is not aware of the delinquency status for more than five per cent of the underlying pool, the securitisation exposure must be deducted from Common Equity Tier 1 Capital.

Definition of attachment point (A) and detachment point (D)[44]
27.         The attachment point (A) represents the threshold at which losses within the underlying pool would first be allocated to the securitisation exposure. This input, expressed in decimal form, is the greater of:
(a)          zero; and
(b)          the ratio of (i) the outstanding balance of all underlying assets in the securitisation less the outstanding balance of all tranches that rank senior or pari passu to the tranche that contains the securitisation exposure of the ADI (including the exposure itself) to (ii) the outstanding balance of all underlying assets in the securitisation.
28.         The detachment point (D) represents the threshold at which losses within the underlying pool result in a total loss of principal for the tranche in which a securitisation exposure resides. This input, expressed in decimal form, is the greater of:
(a)          zero; and
(b)          the ratio of (i) the outstanding balance of all underlying assets in the securitisation less the outstanding balance of all tranches that rank senior to the tranche that contains the securitisation exposure of the ADI to (ii) the outstanding balance of all underlying assets in the securitisation.
29.         Subject to paragraph 28 of this Attachment, for the calculation of A and D:
(a)          overcollateralisation and funded reserve accounts must be recognised as tranches; and
(b)          the assets forming these reserve accounts must be recognised as underlying assets.
30.         Unfunded reserve accounts, such as those to be funded from future receipts from the underlying exposures (e.g. unrealised excess spread) and assets that do not provide credit enhancement, must not be included in the calculation of A and D.
31.