Guidance

SS9/13 – Securitisation: Significant Risk Transfer

Chapter

Assessment of Commensurate Risk Transfer (CRT) for portfolios of Standardised Approach (SA) exposures

Printed on: 18/10/2024

Rulebook at: 22/07/2020

8

Assessment of Commensurate Risk Transfer (CRT) for portfolios of Standardised Approach (SA) exposures

8.1

The PRA expects firms to consider the thickness of tranches sold to third parties or tranches on which protection is purchased, for portfolios of SA exposures, in a prudent manner. When justifying that commensurate risk has been transferred, the PRA expects firms to compare the detachment point (D) of tranches sold, or on which protection is purchased, against the KSA (RWEA in respect of the underlying exposures as if they had not been securitised multiplied by 8% and divided by the value of the underlying exposures) of the portfolio.

  • 22/07/2020

8.2

The PRA considers it prudent for firms to apply a scalar of 1.5 to KSA to determine the minimum value of D for the purpose of justifying commensurate transfer of risk. The PRA considers the 1.5 scalar to KSA to be a prudent fall-back and will consider a lower scalar to KSA, if firms can evidence this is more appropriate for a particular transaction. The PRA will remain flexible in assessing firms’ evidence for a reduced scalar to KSA and will consider the use of external data sources where it is comparable and representative.

(CRR Articles 243 and 244)

  • 22/07/2020