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Capital Requirements Regulation (CRR)
Article 255

Article 255 — Determination of KIRB and KSA

  1. Where an institution applies the SEC-IRBA under Subsection 3, the institution shall calculate KIRB in accordance with paragraphs 2 to 5.
  2. Institutions shall determine KIRB by multiplying the risk-weighted exposure amounts that would be calculated under Chapter 3 in respect of the underlying exposures as if they had not been securitised by 8 % divided by the exposure value of the underlying exposures. KIRB shall be expressed in decimal form between zero and one.
  3. For KIRB calculation purposes, the risk-weighted exposure amounts that would be calculated under Chapter 3 in respect of the underlying exposures shall include:
    1. the amount of expected losses associated with all the underlying exposures of the securitisation including defaulted underlying exposures that are still part of the pool in accordance with Chapter 3; and
    2. the amount of unexpected losses associated with all the underlying exposures including defaulted underlying exposures in the pool in accordance with Chapter 3.
  4. Institutions may calculate KIRB in relation to the underlying exposures of the securitisation in accordance with the provisions set out in Chapter 3 for the calculation of capital requirements for purchased receivables. For these purposes, retail exposures shall be treated as purchased retail receivables and non-retail exposures as purchased corporate receivables.
  5. Institutions shall calculate KIRB separately for dilution risk in relation to the underlying exposures of a securitisation where dilution risk is material to such exposures.

    Where losses from dilution and credit risks are treated in an aggregate manner in the securitisation, institutions shall combine the respective KIRB for dilution and credit risk into a single KIRB for the purposes of Subsection 3. The presence of a single reserve fund or overcollateralisation available to cover losses from either credit or dilution risk may be regarded as an indication that these risks are treated in an aggregate manner.

    Where dilution and credit risk are not treated in an aggregate manner in the securitisation, institutions shall modify the treatment set out in the second subparagraph to combine the respective KIRB for dilution and credit risk in a prudent manner.

  6. Where an institution applies the SEC-SA under Subsection 3, it shall calculate KSA by multiplying the risk-weighted exposure amounts that would be calculated under Chapter 2 in respect of the underlying exposures as if they had not been securitised by 8 % divided by the value of the underlying exposures. KSA shall be expressed in decimal form between zero and one.

    For the purposes of this paragraph, institutions shall calculate the exposure value of the underlying exposures without netting any specific credit risk adjustments and additional value adjustments in accordance with Articles 34 and 110 and other own funds reductions.

  7. For the purposes of paragraphs 1 to 6, where a securitisation structure involves the use of an SSPE, all the SSPE’s exposures related to the securitisation shall be treated as underlying exposures. Without prejudice to the preceding, the institution may exclude the SSPE’s exposures from the pool of underlying exposures for KIRB or KSA calculation purposes if the risk from the SSPE’s exposures is immaterial or if it does not affect the institution’s securitisation position.

    In the case of funded synthetic securitisations, any material proceeds from the issuance of credit-linked notes or other funded obligations of the SSPE that serve as collateral for the repayment of the securitisation positions shall be included in the calculation of KIRB or KSA if the credit risk of the collateral is subject to the tranched loss allocation.

  8. For the purposes of the third subparagraph of paragraph 5 of this Article, the EBA shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 on the appropriate methods to combine KIRB for dilution and credit risk where these risks are not treated in an aggregate manner in a securitisation.
  9. The EBA shall develop draft regulatory technical standards to further specify the conditions to allow institutions to calculate KIRB for the pools of underlying exposures in accordance with paragraph 4, in particular with regard to:
    1. internal credit policy and models for calculating KIRB for securitisations;
    2. use of different risk factors relating to the pool of underlying exposures and, where sufficient accurate or reliable data on that pool are not available, of proxy data to estimate PD and LGD; and
    3. due diligence requirements to monitor the actions and policies of sellers of receivables or other originators.

    The EBA shall submit those draft regulatory technical standards to the Commission by 18 January 2019.

    Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the second subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.