EBA Publishes Standards on Conditions for Calculating KIRB Under CRR
EBA published the final draft regulatory technical standards (RTS) setting out conditions to allow institutions to calculate capital requirements of the securitized exposures (KIRB) in accordance with the purchased receivables approach laid down in the amended Capital Requirements Regulation (CRR). The draft RTS aim to strike the right balance between the need to acknowledge the circumstances under which institutions calculate capital requirements in the context of a securitization transaction and the need to maintain appropriately safe and prudent requirements on the internal modeling of capital requirements. The RTS are part of the 28 mandates assigned to EBA within its important role in the implementation of the new securitization framework.
To expand the use of the Securitization Internal Ratings-Based Approach (SEC-IRBA), which sits now at the top of the hierarchy of approaches for calculating capital requirements of securitization positions, the CRR amendment accompanying the Securitization Regulation introduces the possibility of using the provisions that normally apply to purchased receivables under the general internal ratings-based (IRB) credit risk framework. This way, eligible institutions may calculate the KIRB and the corresponding risk parameters, (probability of default: PD and loss given default: LGD), under the provisions of the purchased receivables and then use them as input in the SEC-IRBA, along with other information on the securitization position. The draft RTS specify the conditions under which institutions may use the provisions on purchased receivables to make them fully workable in the context of securitization transactions. For this purpose, retail securitized exposures shall be treated as purchased retail receivables and non-retail securitized exposures as purchased corporate receivables.
The draft RTS covers are the following key areas:
- General approach to the relationship between the IRB rules on purchased receivables and the SEC-IRBA framework
- Eligibility conditions to compute KIRB under the RTS
- IRB permissions and prior experience
- Eligibility to use the retail risk quantification standards
- Use of proxy data
Related Links
Keywords: Europe, EU, Banking, Securitization Framework, KIRB, CRR, SEC-IRBA, IRB, Regulatory Capital, Credit Risk, Basel, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
BCBS Amends Capital Treatment of Non-Performing Loan Securitizations
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
BoE to Move Statistical Data Collection to BEEDs Portal
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.
APRA Updates Reporting Standards and Guidance for EFS Data Collection
APRA published the updated reporting standards and guidance for the collection of Economic and Financial Statistics (EFS), following a consultation process. Also published was a response letter to the feedback received on the proposal for amending the EFS reporting standards and guidance.
EC Consults on Criteria for Environmentally Sustainable Activities
EC is consulting on a draft delegated regulation to supplement the Taxonomy Regulation (2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as environmentally sustainable.
IFRS Examines Incorporation of Climate Risk Issues into IFRS Standards
The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements.
EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB Begins First Phase of Post-Implementation Review of IFRS 9
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB Report Examines Progress in Resolvability of Systemic Institutions
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA Benchmarks National Insolvency Frameworks Across EU
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
