EBA · 2024_7214 Rejected question

Volatility Haircuts for Eligible Securitisation Collateral

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
224, para. 1
Topic
Credit risk
Submitted by
Individual
Submitted
2024-10-08

Question

Does the FCCM approach apply to unrated senior securitisation tranches that qualify as eligible collateral (i.e, as per article 197(1)h, "securitisation positions that are not resecuritisation positions and which are subject to a 100 % risk weight or lower in accordance with Article 261 to Article 264")?  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 CQS 1-18 under Sec-ERBA 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 supervisory volatility haircuts apply under the new CQS mapping for rated securitisation tranches (as described in Commission Implementing Regulation (EU) 2016/1801 of 11 October 2016, as Amended by Commission Implementing Regulation (EU) 2022/2365 of 2 December 2022)?

Background

Question ID 2021_6201 (posing a similar question) was rejected, on the grounds of the issue being explained or addressed in Article 224(6) - on the contrary, article 224(6) refers only to "For unrated debt securities issued by institutions or investment firms and satisfying the eligibility criteria in Article 197(4)," and Article 197(4) refers only to "An institution may use debt securities that are issued by other institutions or investment firms"; this in not generally the case with Securitisation position, which are commonly issued by SPV, which would be classified as Corporate Issuer.  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 1-18, have not been translated into Table 1 of Article 224, which continues to refer to CQS 1-4.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2024_7214

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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