NBB Issues Circular on Determining WAM Under Securitization Tranche
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
Related Links
Keywords: Europe, Belgium, Banking, Securitization, CRR, Weighted Average Maturity, Basel, SEC-IRBA, SEC-ERBA, Securitization Regulation, EBA, NBB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
ISDA Launches Indicator to Monitor Risk-Free Rate AdoptionRelated Articles
EC Publishes Regulations Supplementing Investment Firms Directive
The European Commission (EC) published three Delegated Regulations (2021/2153, 2021/2154, and 2021/2155) to supplement the Investment Firms Directive (IFD or Directive 2019/2034).
FSB Report Examines Trends in Non-Bank Intermediation in Americas
The Financial Stability Board (FSB) published a report that presents results of the sixth non-bank financial intermediation monitoring exercise in the Americas.
BIS Discusses Regulatory Approach for Non-Bank Intermediation
The Bank for International Settlements (BIS) published the December issue of the Quarterly Review, which analyzes the non-bank financial intermediation mechanisms that could undermine financial stability.
BoE Calls for Vendor Input for Data Collection Transformation Program
The Bank of England (BoE) opened the Alternative Liquidity Facility, or ALF, for deposits from the participating UK-based Islamic banks for the first time.
APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
EBA Proposes Standards on Interest Rate Risk in the Banking Book
The European Banking Authority (EBA) launched three consultations on technical aspects of the revised framework capturing interest rate risks for banking book (IRRBB) positions, with the comment period ending on April 04, 2022.
EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
EBA Sets Out List of Banks for Mandatory Basel III Monitoring Exercise
The European Banking Authority (EBA) published the sample of banks for the mandatory Basel III monitoring exercise, which will refer to the December 2021 data.
FED Revises Complex Institution Liquidity Monitoring Report for Banks
The Board of Governors of the Federal Reserve System (FED) is adopting a proposal to revise and extend for three years the Complex Institution Liquidity Monitoring Report (FR 2052a) for banks.
FSB Sets Out Good Practices for Crisis Management Groups
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
