EBA · 2023_6957 Final Q&A

Simple Transparent and Standardised securitisation

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
243
Topic
Securitisation and Covered Bonds
Submitted by
Credit institution
Submitted
2023-12-21
Answered
2024-10-25
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

How does the value-weighted average referred in Article 243.2.b)i) of CRR should be calculated? Should we: Option A: calculate first a “Loan to Value” average and then map it to the applicable value-weighted average according to CRR or; Option B: calculate a risk weighted average calculated from each exposure multiplied by its corresponding risk weight divided by the sum of the total exposure value?

Background

Positions in a securitisation, other than an ABCP programme or ABCP transaction, that qualify as positions in an STS securitisation, shall be eligible for the treatment set out in Articles 260, 262 and 264 of the Regulation 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investment firms, as amended or superseded from time to time, (hereinafter “CRR”), where certain requirements set in Article 243(2) CRR are met. One of those requirements,  establishes that at the time of the inclusion of the referred positions 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 point (e) of Article 129(1) CRR.

Answer

Article 243 (2)(b) sets the maximum risk weight that the  underlying exposures of an STS securitisation should have to qualify for the treatment set out in Articles 260, 262 and 264.  These maximum risk weights are set according to the exposure class. Article 243(2)(b)(i) refers to exposures in the form of loans secured by residential mortgages or fully guaranteed residential loans, as referred to in point (e) of Article 129(1), for which the basis of the calculation of the maximum risk weight is the exposure value-weighted average risk weight. Consistently also with Article 267(1), which defines the calculation for the maximum risk weight for senior securitisation positions, the exposure value-weighted average basis referred to in Article 243(2)(b)(i) is to be intended as the exposure-weighted-average risk weight, and shall therefore be calculated with the following formula: Where is the risk weight of the individual exposure , and is the value associated with the individual exposure .

Original source: European Banking Authority, Q&A ID 2023_6957

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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