EBA · 2021_6201 Rejected question

FCCM volatility haircuts for eligible rated and unrated securitisation collateral

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
224, para. 1
Topic
Credit risk
Submitted by
Credit institution
Submitted
2021-09-10
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Question

Does the FCCM approach apply to unrated senior securitisation tranches that qualify as eligible collateral?  If so, which supervisory volatility haircuts apply since there is no CQS associated with these under Sec-SA? In addition, the new securtisation mappings of ECAI ratings to CQS 1-17 have not been translated into Table 1 of Article 224, which continues to refer to CQS 1-4 seemingly under the old securitisation rules, which do not reflect maturity and tranche seniority.  Which supervisory volatility haircuts apply under the new CQS mapping for rated securitisation tranches?

Background

With the implementation of the new Securitisation Regulations on 1 January 2019, the definition of eligible collateral ( Article 197(1)(h) ) expanded to include both ECAI rated securitisation tranches and unrated tranches, so long as RWA is at or below 100% (using Sec-ERBA or Sec-SA).  Prior to 2019, only ECAI rated securitisations with CQS 1-3 qualified as eligible collateral.  While the scope of eligible collateral was amended, the FCCM supervisory volatility haircuts (Table 1 in Article 224 ) have not been updated to include haircuts  that correspond to the newly eligible unrated securitisations that under Sec-SA attract a risk weight of 100% of lower. Furthermore, the amended and expanded securitisation CQS ratings, which use a scale of 1-17, have not been translated into Table 1 of Article 224, which continues to refer to CQS 1-4, and does not introduce maturity or seniority into the determination of appropriate haircuts that institutions should apply to these securities.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2021_6201

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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