Securitisation – Significant Risk Transfer

Supervisory Statement 9/13

First published on 19 December 2013

This supervisory statement (SS) is aimed at firms to which CRD IV applies. The statement’s primary focus is on the PRA’s expectations of firms claiming significant risk transfer (SRT) through securitisation under Article 243 or 244 of the CRR. The PRA reviews transactions where firms claim SRT and the supervisory statement sets out the PRA’s expectations of firms notifying it of relevant transactions in accordance with Credit Risk Rule in the PRA rulebook. It sets out the PRA’s expectations of firms in respect of securitisation in the following chapters:

2. ‘High-level Significant Risk Transfer considerations’  — general expectations of firms seeking to obtain significant risk transfer through securitisation;

3. ‘Significant  Risk Transfer notifications  and permissions’ — process for notifying the PRA of SRT transactions and for obtaining permission to undertake  own assessments of SRT;

4. ‘Regulatory capital calculation methodology and SRT’ — methodologies  firms use to calculate post-securitisation risk weights in SRT transactions;

5. ‘Implicit Support and SRT’ — the PRA’s approach  to implicit support;

6. ‘High cost credit protection and other SRT considerations’ — factors likely to affect the assessment of SRT transactions.

It also outlines a number of issues relevant to the determination of whether the capital relief achieved through securitisation is matched by a commensurate transfer of risk to third parties. The SS sets out our expectations in several areas including the:

  • PRA’s general expectations of firms claiming SRT;
  • PRA’s transaction notification and permissions process;
  • considerations around regulatory capital calculation, implicit support and the cost of credit protection as they relate to SRT; and
  • mapping of external credit assessments which the PRA expects firms to apply until such time as the European Commission adopts a mapping which supersedes this. 

This SS supplements the rules in the Benchmarking of Internal Approaches and Credit Risk Part of the PRA Rulebook.

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