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    NBB Issues Circular on Determining WAM Under Securitization Tranche

    July 28, 2020

    NBB published a circular related to the EBA guidelines (EBA/GL/2020/04) on determination of the weighted average maturity (WAM) of the contractual payments due under the tranche of a securitization transaction, as laid down in the Capital Requirements Regulation (CRR). The scope of this circular includes credit institutions not subject to direct prudential supervision by ECB, brokerage firms, branches of credit institutions in Belgium, and brokerage firms governed by the law of a non-European Economic Area country, both on a consolidated and solo basis. With this circular, NBB intends to indicate that the EBA guidelines (EBA/GL/2020/04) have been integrated into its supervisory practice. This circular contains an explanation of the guidelines and comes into force on September 01, 2020.

    The maturity of the tranche is an additional parameter introduced by the revised Securitization Regulation that is needed by institutions using internal or the external rating-based approach (SEC-IRBA or SEC-ERBA, respectively) for the calculation of the risk-weighted exposure amounts of their securitization positions. The EBA guidelines will help institutions using the SEC-IRBA or SEC-ERBA and opting for the use of weighted average maturity approach, instead of the final legal maturity approach, when calculating their capital requirements. These guidelines aim to clarify certain aspects of the weighted average maturity approach, including the following:

    • Determination of the contractual payments due under the tranche for conventional and synthetic securitizations
    • Data and information requirements
    • Asset and liability models in conventional securitizations
    • Method for determining the contractual payments due under the tranche in the event of synthetic securitizations
    • Requirements for monitoring and implementing the weighted average maturity approach

     

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    Keywords: Europe, Belgium, Banking, Securitization, CRR, Weighted Average Maturity, Basel, SEC-IRBA, SEC-ERBA, Securitization Regulation, EBA, NBB

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