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June 19, 2018

EBA launched a public consultation on draft regulatory technical standards specifying the 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). For this purpose, retail securitized exposures shall be treated as purchased retail receivables and non-retail securitized exposures as purchased corporate receivables. The consultation runs until September 19, 2018.

To expand the use of the Securitization Internal Ratings-Based Approach (SEC-IRBA), which now sits 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 IRB credit risk framework. This way, institutions may calculate the KIRB, and the corresponding risk parameters, (probability of default and loss given default), 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 main areas that the draft standards cover are the following: 

  • General approach to the relationship between the IRB rules on purchased receivables and the SEC-IRBA framework
  • Eligibility conditions to compute KIRB 
  • IRB permissions and prior experience 
  • Eligibility to use the retail risk quantification standards 
  • Use of proxy data

 

Related Links

Comment Due Date: September 19, 2018

Keywords: Europe, EU, Banking, Securities, CRR, Securitization Regulation, KIRB, SEC-IRBA, Capital Requirements, EBA

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