Capital Requirements Regulation

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Article 4 Definitions 1. For the purposes of this Regulation, the following definitions shall apply: (1) credit institution means an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own … 505 unchanged words … Article 3(1) of Directive 2013/36/EU; (11) systemic risk means systemic risk as defined in point (10) of Article 3(1) of Directive 2013/36/EU; (12) model risk means model risk as defined in point (11) of Article 3(1) of Directive 2013/36/EU; (13) originator means an entity which: (a) itself or through related entities, directly or indirectly, was involved originator as defined in the original agreement which created the obligations or potential obligations point (3) of Article 2 of Regulation (EU) 2017/2402Regulation (EU) 2017/2402 of the debtor or potential debtor giving rise to European Parliament and of the exposure being securitised; or (b) purchases Council of 12 December 2017 laying down a third party's exposures general framework for its own account securitisation and then securitises them; creating a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012 (OJ L 347, 28.12.2017, p. 35).; (14) sponsor means a sponsor as defined in point (5) of Article 2 of Regulation (EU) 2017/2402; (14a) original lender means an institution other than an originator institution that establishes and manages an asset-backed commercial paper programme or other securitisation scheme that purchases exposures from third-party entities; original lender as defined in point (20) of Article 2 of Regulation (EU) 2017/2402; (15) parent undertaking means: (a) a parent undertaking within the meaning of Articles 1 and 2 of Directive 83/349/EEC; (b) for the purposes of Section II of Chapters 3 and 4 of Title VII and Title VIII of Directive 2013/36/EU and Part … 2,152 unchanged words … a covered bond, or any other non-subordinated instrument, which has been issued by an institution, for which the institution has already received full payment and which shall be unconditionally reimbursed by the institution at its nominal value; (61) securitisation means a transaction or scheme, whereby the credit risk associated with an exposure or pool securitisation as defined in point (1) of exposures is tranched, having both Article 2 of the following characteristics: (a) payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures; (b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme; Regulation (EU) 2017/2402; (62) securitisation position means an exposure to a securitisation; (63) re-securitisation means securitisation where the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitisation position; position as defined in point (19) of Article 2 of Regulation (EU) 2017/2402; (63) resecuritisation means a resecuritisation as defined in point (4) of Article 2 of Regulation (EU) 2017/2402; (64) re-securitisation position means an exposure to a re-securitisation; (65) credit enhancement means a contractual arrangement whereby the credit quality of a position in a securitisation is improved in relation to what it would have been if the enhancement had not been provided, including the enhancement provided by more junior tranches in the securitisation and other types of credit protection; (66) securitisation special purpose entity or SSPE means a corporation trust securitisation special purpose entity or other entity, other than an institution, organised for carrying out a securitisation or securitisations, the activities SSPE as defined in point (2) of which are limited to those appropriate to accomplishing that objective, the structure Article 2 of which is intended to isolate the obligations of the SSPE from those of the originator institution, and in which the holders of the beneficial interests have the right to pledge or exchange those interests without restriction; Regulation (EU) 2017/2402; (67) tranche means a contractually established segment tranche as defined in point (6) of the credit risk associated with an exposure or a number Article 2 of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in each other such segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments; Regulation (EU) 2017/2402; (68) marking to market means the valuation of positions at readily available close out prices that are sourced independently, including exchange prices, screen prices or quotes from several independent reputable brokers; (69) marking to model means any valuation which has to … 2,249 unchanged words … placed to non-distributable reserves in accordance with applicable national law or the statutes of the institution, those losses and reserves being determined on the basis of the individual accounts of the institution and not on the basis of the consolidated accounts. accounts; (129) servicer means a servicer as defined in point (13) of Article 2 of Regulation (EU) 2017/2402. 2. Where reference in this Regulation is made to immovable property, to residential property or commercial immovable property or to a mortgage on such property, it shall include shares in Finnish residential housing companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation. Member States or their competent authorities may allow shares constituting an equivalent indirect holding of immovable property to be treated as a direct holding of immovable property provided that such an indirect holding is specifically regulated in the national law of the Member State concerned and that, when pledged as collateral, it provides equivalent protection to creditors. 3. Trade finance as referred to in point (80) of paragraph 1 is generally uncommitted and requires satisfactory supporting transactional documentation for each drawdown request enabling refusal of the finance in the event of any doubt about creditworthiness or the supporting transactional documentation. Repayment of trade finance exposures is usually independent of the borrower, the funds instead coming from cash received from importers or resulting from proceeds of the sales of the underlying goods.

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Article 36 Deductions from Common Equity Tier 1 items 1. Institutions shall deduct the following from Common Equity Tier 1 items: (a) losses for the current financial year; (b) intangible assets; (c) deferred tax assets that rely on future profitability; (d) for institutions calculating risk-weighted exposure amounts using the Internal Ratings Based Approach (the IRB Approach), negative amounts resulting from the calculation of expected loss amounts laid down in Articles 158 and 159; (e) defined benefit pension fund assets on the balance sheet of the institution; (f) direct, indirect and synthetic holdings by an institution of own Common Equity Tier 1 instruments, including own Common Equity Tier 1 instruments that an institution is under an actual or contingent obligation to purchase by virtue of an existing contractual obligation; (g) direct, indirect and synthetic holdings of the Common Equity Tier 1 instruments of financial sector entities where those entities have a reciprocal cross holding with the institution that the competent authority considers to have been designed to inflate artificially the own funds of the institution; (h) the applicable amount of direct, indirect and synthetic holdings by the institution of Common Equity Tier 1 instruments of financial sector entities where the institution does not have a significant investment in those entities; (i) the applicable amount of direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1 instruments of financial sector entities where the institution has a significant investment in those entities; (j) the amount of items required to be deducted from Additional Tier 1 items pursuant to Article 56 that exceeds the Additional Tier 1 items of the institution; (k) the exposure amount of the following items which qualify for a risk weight of 1250 %, where the institution deducts that exposure amount from the amount of Common Equity Tier 1 items as an alternative to applying a risk weight of 1250 %: (i) qualifying holdings outside the financial sector; (ii) securitisation positions, in accordance with point (b) of Article 243(1)(b), 244(1), point (b) of Article 244(1)(b) 245(1) and Article 258; 253; (iii) free deliveries, in accordance with Article 379(3); (iv) positions in a basket for which an institution cannot determine the risk weight under the IRB Approach, in accordance with Article 153(8); (v) equity exposures under an internal models approach, in accordance with Article 155(4). (l) any tax charge relating to Common Equity Tier 1 items foreseeable at the moment of its calculation, except where the institution suitably adjusts the amount of Common Equity Tier 1 items insofar as such tax charges reduce the amount up to which those items may be used to cover risks or losses. 2. EBA shall develop draft regulatory technical standards to specify the application of the deductions referred to in points (a), (c), (e), (f), (h), (i) and (l) of paragraph 1 of this Article and related deductions referred to in points (a), (c), (d) and (f) of Article 56 and points (a), (c) and (d) of Article 66. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. 3. EBA shall develop draft regulatory technical standards to specify the types of capital instruments of financial institutions and, in consultation with the European Supervisory Authority (European Insurance and Occupational Pensions Authority) (EIOPA) established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010OJ L 331, 15.12.2010, p. 48., of third country insurance and reinsurance undertakings, and of undertakings excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive that shall be deducted from the following elements of own funds: (a) Common Equity Tier 1 items; (b) Additional Tier 1 items; (c) Tier 2 items. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 109
Treatment of securitised exposures under the Standardised Approach and the IRB Approach
1. Where an institution uses the Standardised Approach under Chapter 2 for the calculation of risk-weighted exposure amounts for the exposure class to which the securitised exposures would be assigned under Article 112, it shall calculate the risk-weighted exposure amount for a securitisation position in accordance with Articles 245, 246 and 251 to 258. Institutions using the Standardised Approach may also use the Internal Assessment Approach where this has been permitted under Article 259(3).
2. Where an institution uses the IRB Approach under Chapter 3 for the calculation of risk-weighted exposures amounts for the exposure class to which the securitised exposure would be assigned under Article 147 it shall calculate the risk-weighted exposure amount in accordance with Articles 245, 246 and 259 to 266.
Except for the Internal Assessment Approach, where the IRB Approach is used only for a part of the securitised exposures underlying a securitisation, the institution shall use the approach corresponding to the predominant share of securitised exposures underlying this securitisation.

after (02013R0575-20190101)

Article 109
Treatment of securitisation positions
Institutions shall calculate the risk-weighted exposure amount for a position they hold in a securitisation in accordance with Chapter 5.

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Article 134 Other items 1. Tangible assets within the meaning of item 10 under the heading 'Assets' in Article 4 of Directive 86/635/EEC shall be assigned a risk weight of 100 %. 2. Prepayments and accrued income for which an institution is unable to determine the counterparty in accordance with Directive 86/635/EEC, shall be assigned a risk weight of 100 %. 3. Cash items in the process of collection shall be assigned a 20 % risk weight. Cash in hand and equivalent cash items shall be assigned a 0 % risk weight. 4. Gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities shall be assigned a 0 % risk weight. 5. In the case of asset sale and repurchase agreements and outright forward purchases, the risk weight shall be that assigned to the assets in question and not to the counterparties to the transactions. 6. Where an institution provides credit protection for a number of exposures under terms subject to the condition that the nth default among the exposures shall trigger payment and that this credit event shall terminate the contract, and where the product has an external credit assessment from an ECAI, the risk weights prescribed in Chapter 5 shall be assigned. If the product is not rated by an ECAI, the risk weights of the exposures included in the basket will be aggregated, excluding n-1 exposures, up to a maximum of 1250 % and multiplied by the nominal amount of the protection provided by the credit derivative to obtain the risk weighted asset risk-weighted exposure amount. The n-1 exposures to be excluded from the aggregation shall be determined on the basis that they shall include those exposures each of which produces a lower risk-weighted exposure amount than the risk-weighted exposure amount of any of the exposures included in the aggregation. 7. The exposure value for leases shall be the discounted minimum lease payments. Minimum lease payments are the payments over the lease term that the lessee is or can be required to make and any bargain option the exercise of which is reasonably certain. A party other than the lessee may be required to make a payment related to the residual value of a leased property and that payment obligation fulfils the set of conditions in Article 201 regarding the eligibility of protection providers as well as the requirements for recognising other types of guarantees provided in Articles 213 to 215, that payment obligation may be taken into account as unfunded credit protection under Chapter 4. These exposures shall be assigned to the relevant exposure class in accordance with Article 112. When the exposure is a residual value of leased assets, the risk-weighted exposure amounts shall be calculated as follows: 1/t * 100 % * residual value, where t is the greater of 1 and the nearest number of whole years of the lease remaining.

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Article 142 Definitions 1. For the purposes of this Chapter, the following definitions shall apply: (1) rating system means all of the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of exposures to rating grades or pools, and the quantification of default and loss estimates that have been developed for a certain type of exposures; (2) type of exposures means a group of homogeneously managed exposures which are formed by a certain type of facilities and which may be limited to a single entity or a single sub-set of entities within a group provided that the same type of exposures is managed differently in other entities of the group; (3) business unit means any separate organisational or legal entities, business lines, geographical locations; (4) large financial sector entity means any financial sector entity which meets the following conditions: (a) its total assets, calculated on an individual or consolidated basis, are greater than or equal to a EUR 70 billion threshold, using the most recent audited financial statement or consolidated financial statement in order to determine asset size; and (b) it is, or one of its subsidiaries is, subject to prudential regulation in the Union or to the laws of a third country which applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union; (5) unregulated financial sector entity means an entity that is not a regulated financial sector entity but that performs, as its main business, one or more of the activities listed in Annex I to Directive 2013/36/EU or in Annex I to Directive 2004/39/EC; (6) obligor grade means a risk category within the obligor rating scale of a rating system, to which obligors are assigned on the basis of a specified and distinct set of rating criteria, from which estimates of probability of default (PD) are derived; (7) facility grade means a risk category within a rating system's facility scale, to which exposures are assigned on the basis of a specified and distinct set of rating criteria, from which own estimates of LGD are derived; derived. (8) servicer means an entity that manages a pool of purchased receivables or the underlying credit exposures on a day-to-day basis. 2. For the purposes of point (4)(b) of paragraph 1 of this Article, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies supervisory and regulatory arrangements at least equivalent to those applied in the Union. In the absence of such a decision, until 1 January 2015, institutions may continue to apply the treatment set out in this paragraph to a third country where the relevant competent authorities had approved the third country as eligible for this treatment before 1 January 2014.

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Article 153 Risk-weighted exposure amounts for exposures to corporates, institutions and central governments and central banks 1. Subject to the application of the specific treatments laid down in paragraphs 2, 3 and 4, the risk-weighted exposure amounts for exposures to corporates, institutions … 680 unchanged words … to use the risk quantification standards for corporate exposures as set out in Section 6 for these receivables, the risk quantification standards for retail exposures as set out in Section 6 may be used. 7. For purchased corporate receivables, refundable purchase price discounts, collateral collaterals or partial guarantees that provide first-loss first loss protection for default losses, dilution losses, or both, may be treated as first-loss positions under a first loss protection by the IRB securitisation framework. purchaser of the receivables or by the beneficiary of the collateral or of the partial guarantee in accordance with Subsections 2 and 3 of Section 3 of Chapter 5. The seller providing the refundable purchase price discount and the provider of a collateral or a partial guarantee shall treat those as an exposure to a first loss position in accordance with Subsections 2 and 3 of Section 3 of Chapter 5. 8. Where an institution provides credit protection for a number of exposures under terms subject to the condition that the nth default among the exposures shall trigger payment and that this credit event shall terminate the contract, if the product has an external credit assessment from an ECAI the risk weights set out in Chapter 5 shall be applied. If the product is not rated by an ECAI, the risk weights of the exposures included in the basket will be aggregated, excluding n-1 exposures exposures, where the sum of the expected loss amount multiplied by 12,5 and the risk-weighted exposure amount shall not exceed the nominal amount of the protection provided by the credit derivative multiplied by 12,5. The n-1 exposures to be excluded from the aggregation shall be determined on the basis that they shall include those exposures each of which produces a lower risk-weighted exposure amount than the risk-weighted exposure amount of any of the exposures included in the aggregation. A 1250 % risk weight shall apply to positions in a basket for which an institution cannot determine the risk-weight under the IRB Approach. 9. EBA shall develop draft regulatory technical standards to specify how institutions shall take into account the factors referred to in the second subparagraph of paragraph 5 when assigning risk weights to specialised lending exposures. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 154 Risk-weighted exposure amounts for retail exposures 1. The risk-weighted exposure amounts for retail exposures shall be calculated in accordance with the following formulae: Risk – weighted exposure amount = RW · exposure value where the risk weight RW is defined as follows: (i) … 556 unchanged words … that buy and sell to each other are ineligible; (c) the purchasing institution has a claim on all proceeds from the purchased receivables or a pro-rata interest in the proceeds; and (d) the portfolio of purchased receivables is sufficiently diversified. 6. For purchased retail receivables, refundable purchase price discounts, collateral collaterals or partial guarantees that provide first-loss first loss protection for default losses, dilution losses, or both, may be treated as first-loss positions under a first loss protection by the IRB securitisation framework. purchaser of the receivables or by the beneficiary of the collateral or of the partial guarantee in accordance with Subsections 2 and 3 of Section 3 of Chapter 5. The seller providing the refundable purchase price discount and the provider of a collateral or a partial guarantee shall treat those as an exposure to a first loss position in accordance with Subsections 2 and 3 of Section 3 of Chapter 5. 7. For hybrid pools of purchased retail receivables where purchasing institutions cannot separate exposures secured by immovable property collateral and qualifying revolving retail exposures from other retail exposures, the retail risk weight function producing the highest capital requirements for those exposures shall apply.

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Article 197 Eligibility of collateral under all approaches and methods 1. Institutions may use the following items as eligible collateral under all approaches and methods: (a) cash on deposit with, or cash assimilated instruments held by, the lending institution; (b) debt securities issued by central governments or central banks, which securities have a credit assessment by an ECAI or export credit agency recognised as eligible for the purposes of Chapter 2 which has been determined by EBA to be associated with credit quality step 4 or above under the rules for the risk weighting of exposures to central governments and central banks under Chapter 2; (c) debt securities issued by institutions, which securities have a credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to institutions under Chapter 2; (d) debt securities issued by other entities which securities have a credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2; (e) debt securities with a short-term credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of short term exposures under Chapter 2; (f) equities or convertible bonds that are included in a main index; (g) gold; (h) securitisation positions that are not re-securitisation positions, resecuritisation positions and which have an external credit assessment by an ECAI which has been determined by EBA are subject to be associated a 100 % risk weight or lower in accordance with credit quality step 3 or above under the rules for the risk weighting of securitisation exposures under the approach specified in Chapter 5, Section 3, Sub-section 3. Article 261 to Article 264. 2. For the purposes of point (b) of paragraph 1, debt securities issued by central governments or central banks shall include all the following: (a) debt securities issued by regional governments or local authorities, exposures to which are treated as exposures … 745 unchanged words … submit those draft implementing technical standards to the Commission by 31 December 2014. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

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Article 242
Definitions
For the purposes of this Chapter, the following definitions shall apply:
(1) excess spread means finance charge collections and other fee income received in respect of the securitised exposures net of costs and expenses;
(2) clean-up call option means a contractual option for the originator to repurchase or extinguish the securitisation positions before all of the underlying exposures have been repaid, when the amount of outstanding exposures falls below a specified level;
(3) liquidity facility means the securitisation position arising from a contractual agreement to provide funding to ensure timeliness of cash flows to investors;
(4) KIRB means 8 % of the risk-weighted exposure amounts that would be calculated under Chapter 3 in respect of the securitised exposures, had they not been securitised, plus the amount of expected losses associated with those exposures calculated under that Chapter;
(5) ratings based method means the method of calculating risk-weighted exposure amounts for securitisation positions in accordance with Article 261;
(6) supervisory formula method means the method of calculating risk-weighted exposure amounts for securitisation positions in accordance with Article 262;
(7) unrated position means a securitisation position which does not have an eligible credit assessment by an ECAI as referred to in Section 4;
(8) rated position means a securitisation position which has an eligible credit assessment by an ECAI as referred to in Section 4;
(9) asset-backed commercial paper programme or ABCP programme means a programme of securitisations the securities issued by which predominantly take the form of commercial paper with an original maturity of one year or less;
(10) traditional securitisation means a securitisation involving the economic transfer of the exposures being securitised. This shall be accomplished by the transfer of ownership of the securitised exposures from the originator institution to an SSPE or through sub-participation by an SSPE. The securities issued do not represent payment obligations of the originator institution;
(11) synthetic securitisation means a securitisation where the transfer of risk is achieved by the use of credit derivatives or guarantees, and the exposures being securitised remain exposures of the originator institution;
(12) revolving exposure means an exposure whereby customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to an agreed limit;
(13) revolving securitisation means a securitisation where the securitisation structure itself revolves by exposures being added to or removed from the pool of exposures irrespective of whether the exposures revolve or not;
(14) early amortisation provision means a contractual clause in a securitisation of revolving exposures or a revolving securitisation which requires, on the occurrence of defined events, investors' positions to be redeemed before the originally stated maturity of the securities issued;
(15) first loss tranche means the most subordinated tranche in a securitisation that is the first tranche to bear losses incurred on the securitised exposures and thereby provides protection to the second loss and, where relevant, higher ranking tranches.

after (02013R0575-20190101)

Article 242
Definitions
For the purposes of this Chapter, the following definitions apply:
(1) clean-up call option means a contractual option that entitles the originator to call the securitisation positions before all of the securitised exposures have been repaid, either by repurchasing the underlying exposures remaining in the pool in the case of traditional securitisations or by terminating the credit protection in the case of synthetic securitisations, in both cases when the amount of outstanding underlying exposures falls to or below certain pre-specified level;
(2) credit-enhancing interest-only strip means an on-balance sheet asset that represents a valuation of cash flows related to future margin income and is a subordinated tranche in the securitisation;
(3) liquidity facility means a liquidity facility as defined in point (14) of Article 2 of Regulation (EU) 2017/2402;
(4) unrated position means a securitisation position which does not have an eligible credit assessment in accordance with Section 4;
(5) rated position means a securitisation position which has an eligible credit assessment in accordance with Section 4;
(6) senior securitisation position means a position backed or secured by a first claim on the whole of the underlying exposures, disregarding for these purposes amounts due under interest rate or currency derivative contracts, fees or other similar payments, and irrespective of any difference in maturity with one or more other senior tranches with which that position shares losses on a pro-rata basis;
(7) IRB pool means a pool of underlying exposures of a type in relation to which the institution has permission to use the IRB Approach and is able to calculate risk- weighted exposure amounts in accordance with Chapter 3 for all of these exposures;
(8) mixed pool means a pool of underlying exposures of a type in relation to which the institution has permission to use the IRB Approach and is able to calculate risk- weighted exposure amounts in accordance with Chapter 3 for some, but not all, of the exposures;
(9) overcollateralisation means any form of credit enhancement by virtue of which underlying exposures are posted in value which is higher than the value of the securitisation positions;
(10) simple, transparent and standardised securitisation or STS securitisation means a securitisation that meets the requirements set out in Article 18 of Regulation (EU) 2017/2402;
(11) asset-backed commercial paper programme or ABCP programme means an asset backed commercial paper programme or ABCP programme as defined in point (7) of Article 2 of Regulation (EU) 2017/2402;
(12) asset-backed commercial paper transaction or ABCP transaction means an asset-backed commercial paper transaction or ABCP transaction as defined in point (8) of Article 2 of Regulation (EU) 2017/2402;
(13) traditional securitisation means a traditional securitisation as defined in point (9) of Article 2 of Regulation (EU) 2017/2402;
(14) synthetic securitisation means a synthetic securitisation as defined in point (10) of Article 2 of Regulation (EU) 2017/2402;
(15) revolving exposure means a revolving exposure as defined in point (15) of Article 2 of Regulation (EU) 2017/2402;
(16) early amortisation provision means an early amortisation provision as defined in point (17) of Article 2 of Regulation (EU) 2017/2402;
(17) first loss tranche means a first loss tranche as defined in point (18) of Article 2 of Regulation (EU) 2017/2402;
(18) mezzanine securitisation position means a position in the securitisation which is subordinated to the senior securitisation position and more senior than the first loss tranche, and which is subject to a risk weight lower than 1250 % and higher than 25 % in accordance with Subsections 2 and 3 of Section 3;
(19) promotional entity means any undertaking or entity established by a Member State’s central, regional or local government, which grants promotional loans or grants promotional guarantees, whose primary goal is not to make profit or maximise market share but to promote that government’s public policy objectives, provided that, subject to State aid rules, that government has an obligation to protect the economic basis of the undertaking or entity and maintain its viability throughout its lifetime, or that at least 90 % of its original capital or funding or the promotional loan it grants is directly or indirectly guaranteed by the Member State’s central, regional or local government.

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Article 243
Traditional securitisation
1. The originator institution of a traditional securitisation may exclude securitised exposures from the calculation of risk-weighted exposure amounts and expected loss amounts if either of the following conditions is fulfilled:
(a) significant credit risk associated with the securitised exposures is considered to have been transferred to third parties;
(b) the originator institution applies a 1250 % risk weight to all securitisation positions it holds in this securitisation or deducts these securitisation positions from Common Equity Tier 1 items in accordance with Article 36(1)(k).
2. Significant credit risk shall be considered to have been transferred in the following cases:
(a) the risk-weighted exposure amounts of the mezzanine securitisation positions held by the originator institution in this securitisation do not exceed 50 % of the risk-weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;
(b) where there are no mezzanine securitisation positions in a given securitisation and the originator can demonstrate that the exposure value of the securitisation positions that would be subject to deduction from Common Equity Tier 1 or a 1250 % risk weight exceeds a reasoned estimate of the expected loss on the securitised exposures by a substantial margin, the originator institution does not hold more than 20 % of the exposure values of the securitisation positions that would be subject to deduction from Common Equity Tier 1 or a 1250 % risk weight.
Where the possible reduction in risk-weighted exposure amounts, which the originator institution would achieve by this securitisation is not justified by a commensurate transfer of credit risk to third parties, competent authorities may decide on a case-by-case basis that significant credit risk shall not be considered to have been transferred to third parties.
3. For the purposes of paragraph 2, mezzanine securitisation positions mean securitisation positions to which a risk weight lower than 1250 % applies and that are more junior than the most senior position in this securitisation and more junior than any securitisation position in this securitisation to which either of the following is assigned in accordance with Section 4:
(a) in the case of a securitisation position subject to Section 3, Sub-section 3 a credit quality step 1;
(b) in the case of a securitisation position subject to points Section 3, Sub-section 4 a credit quality step 1 or 2.
4. As an alternative to paragraphs 2 and 3, competent authorities shall grant permission to originator institutions to consider significant credit risk as having been transferred where the originator institution is able to demonstrate, in every case of a securitisation, that the reduction of own funds requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties.
Permission shall be granted only where the institution meets all of the following conditions:
(a) the institution has appropriately risk-sensitive policies and methodologies in place to assess the transfer of risk;
(b) the institution has also recognised the transfer of credit risk to third parties in each case for purposes of the institution's internal risk management and its internal capital allocation.
5. In addition to the requirements set out in paragraphs 1 to 4, as applicable, all the following conditions shall be met:
(a) the securitisation documentation reflects the economic substance of the transaction;
(b) the securitised exposures are put beyond the reach of the originator institution and its creditors, including in bankruptcy and receivership. This shall be supported by the opinion of qualified legal counsel;
(c) the securities issued do not represent payment obligations of the originator institution;
(d) the originator institution does not maintain effective or indirect control over the transferred exposures. An originator shall be considered to have maintained effective control over the transferred exposures if it has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is obligated to re-assume transferred risk. The originator institution's retention of servicing rights or obligations in respect of the exposures shall not of itself constitute indirect control of the exposures;
(e) the securitisation documentation meets all the following conditions:
(i) it does not contain clauses that other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator institution including but not limited to altering the underlying credit exposures or increasing the yield payable to investors in response to a deterioration in the credit quality of the securitised exposures;
(ii) it does not contain clauses that increase the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool;
(iii) it makes it clear, where applicable, that any purchase or repurchase of securitisation positions by the originator or sponsor beyond its contractual obligations is exceptional and may only be made at arm's length;
(f) where there is a clean-up call option, that option shall also meet the following conditions:
(i) it is exercisable at the discretion of the originator institution;
(ii) it may only be exercised when 10 % or less of the original value of the exposures securitised remains unamortised;
(iii) it is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to provide credit enhancement.
6. The competent authorities shall keep EBA informed about the specific cases, referred to in paragraph 2, where the possible reduction in risk-weighted exposure amounts is not justified by a commensurate transfer of credit risk to third parties, and the use institutions make of paragraph 4. EBA shall monitor the range of practices in this area and shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines. EBA shall review Member States' implementation of those guidelines and provide advice to the Commission by 31 December 2017 on whether a binding technical standard is required.

after (02013R0575-20190101)

Article 243
Criteria for STS securitisations qualifying for differentiated capital treatment
1. Positions in an ABCP programme or ABCP transaction that qualify as positions in an STS securitisation shall be eligible for the treatment set out in Articles 260, 262 and 264 where the following requirements are met:
(a) the underlying exposures meet, at the time of their inclusion in the ABCP programme, to the best knowledge of the originator or the original lender, the conditions for being assigned, under the Standardised Approach and taking into account any eligible credit risk mitigation, a risk weight equal to or smaller than 75 % on an individual exposure basis where the exposure is a retail exposure or 100 % for any other exposures; and
(b) the aggregate exposure value of all exposures to a single obligor at ABCP programme level does not exceed 2 % of the aggregate exposure value of all exposures within the ABCP programme at the time the exposures were added to the ABCP programme. For the purposes of this calculation, loans or leases to a group of connected clients, to the best knowledge of the sponsor, shall be considered as exposures to a single obligor.
In the case of trade receivables, point (b) of the first subparagraph shall not apply where the credit risk of those trade receivables is fully covered by eligible credit protection in accordance with Chapter 4, provided that in that case the protection provider is an institution, an insurance undertaking or a reinsurance undertaking. For the purposes of this subparagraph, only the portion of the trade receivables remaining after taking into account the effect of any purchase price discount and overcollateralisation shall be used to determine whether they are fully covered and whether the concentration limit is met.
In the case of securitised residual leasing values, point (b) of the first subparagraph shall not apply where those values are not exposed to refinancing or resell risk due to a legally enforceable commitment to repurchase or refinance the exposure at a pre-determined amount by a third party eligible under Article 201(1).
By way of derogation from point (a) of the first subparagraph, where an institution applies Article 248(3) or has been granted permission to apply the Internal Assessment Approach in accordance with Article 265, the risk weight that institution would assign to a liquidity facility that completely covers the ABCP issued under the programme is equal to or smaller than 100 %.
2. Positions in a securitisation, other than an ABCP programme or ABCP transaction, that qualify as positions in an STS securitisation, shall be eligible for the treatment set out in Articles 260, 262 and 264 where the following requirements are met:
(a) at the time of inclusion in the securitisation, the aggregate exposure value of all exposures to a single obligor in the pool does not exceed 2 % of the exposure values of the aggregate outstanding exposure values of the pool of underlying exposures. For the purposes of this calculation, loans or leases to a group of connected clients shall be considered as exposures to a single obligor.
In the case of securitised residual leasing values, the first subparagraph of this point shall not apply where those values are not exposed to refinancing or resell risk due to a legally enforceable commitment to repurchase or refinance the exposure at a pre-determined amount by a third party eligible under Article 201(1);
(b) at the time of their inclusion in the securitisation, the underlying exposures meet the conditions for being assigned, under the Standardised Approach and taking into account any eligible credit risk mitigation, a risk weight equal to or smaller than:
(i) 40 % on an exposure value-weighted average basis for the portfolio where the exposures are loans secured by residential mortgages or fully guaranteed residential loans, as referred to in point (e) of Article 129(1);
(ii) 50 % on an individual exposure basis where the exposure is a loan secured by a commercial mortgage;
(iii) 75 % on an individual exposure basis where the exposure is a retail exposure;
(iv) for any other exposures, 100 % on an individual exposure basis;
(c) where points (b)(i) and (b)(ii) apply, the loans secured by lower ranking security rights on a given asset shall only be included in the securitisation where all loans secured by prior ranking security rights on that asset are also included in the securitisation;
(d) where point (b)(i) of this paragraph applies, no loan in the pool of underlying exposures shall have a loan-to-value ratio higher than 100 %, at the time of inclusion in the securitisation, measured in accordance with point (d)(i) of Article 129(1) and Article 229(1).

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before (02013R0575-20180101)

Article 244
Synthetic securitisation
1. An originator institution of a synthetic securitisation may calculate risk-weighted exposure amounts, and, as relevant, expected loss amounts, for the securitised exposures in accordance with Article 249, if either of the following is met:
(a) significant credit risk is considered to have been transferred to third parties either through funded or unfunded credit protection;
(b) the originator institution applies a 1250 % risk weight to all securitisation positions it holds in this securitisation or deducts these securitisation positions from Common Equity Tier 1 items in accordance with Article 36(1)(k).
2. Significant credit risk shall be considered to have been transferred if either of the following conditions is met:
(a) the risk-weighted exposure amounts of the mezzanine securitisation positions which are held by the originator institution in this securitisation do not exceed 50 % of the risk-weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;
(b) where there are no mezzanine securitisation positions in a given securitisation and the originator can demonstrate that the exposure value of the securitisation positions that would be subject to deduction from Common Equity Tier 1 or a 1250 % risk weight exceeds a reasoned estimate of the expected loss on the securitised exposures by a substantial margin, the originator institution does not hold more than 20 % of the exposure values of the securitisation positions that would be subject to deduction from Common Equity Tier 1 or a 1250 % risk weight.
Where the possible reduction in risk-weighted exposure amounts, which the originator institution would achieve by this securitisation, is not justified by a commensurate transfer of credit risk to third parties, competent authority may decide on a case- by-case basis that significant credit risk shall not be considered to have been transferred to third parties.
3. For the purposes of paragraph 2, mezzanine securitisation positions means securitisation positions to which a risk weight lower than 1250 % applies and that are more junior than the most senior position in this securitisation and more junior than any securitisation positions in this securitisation to which either of the following is assigned in accordance with Section 4:
(a) in the case of a securitisation position subject to Section 3, Sub-section 3 a credit quality step 1;
(b) in the case of a securitisation position subject to Section 3, Sub-section 4 a credit quality step 1 or 2.
4. As an alternative to paragraphs 2 and 3, competent authorities shall grant permission to originator institutions to consider significant credit risk as having been transferred where the originator institution is able to demonstrate, in every case of a securitisation, that the reduction of own funds requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties.
Permission shall be granted only where the institution meets all of the following conditions:
(a) the institution has appropriately risk-sensitive policies and methodologies in place to assess the transfer of risk;
(b) the institution has also recognised the transfer of credit risk to third parties in each case for the purposes of the institution's internal risk management and its internal capital allocation.
5. In addition to the requirements set out in paragraphs 1 to 4, as applicable, the transfer shall comply with the following conditions:
(a) the securitisation documentation reflects the economic substance of the transaction;
(b) the credit protection by which the credit risk is transferred complies with Article 247(2);
(c) the instruments used to transfer credit risk do not contain terms or conditions that:
(i) impose significant materiality thresholds below which credit protection is deemed not to be triggered if a credit event occurs;
(ii) allow for the termination of the protection due to deterioration of the credit quality of the underlying exposures;
(iii) other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator institution;
(iv) increase the institution's cost of credit protection or the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool;
(d) an opinion is obtained from qualified legal counsel confirming the enforceability of the credit protection in all relevant jurisdictions;
(e) the securitisation documentation shall make clear, where applicable, that any purchase or repurchase of securitisation positions by the originator or sponsor beyond its contractual obligations may only be made at arm's length;
(f) where there is a clean-up call option, that option meets all the following conditions:
(i) it is exercisable at the discretion of the originator institution;
(ii) it may only be exercised when 10 % or less of the original value of the exposures securitised remains unamortised;
(iii) it is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to provide credit enhancement.
6. The competent authorities shall keep EBA informed about the specific cases, referred to in paragraph 2, where the possible reduction in risk-weighted exposure amounts is not justified by a commensurate transfer of credit risk to third parties, and the use institutions make of paragraph 4. EBA shall monitor the range of practices in this area and shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines. EBA shall review Member States' implementation of those guidelines and provide advice to the Commission by 31 December 2017 on whether a binding technical standard is required.

after (02013R0575-20190101)

Article 244
Traditional securitisation
1. The originator institution of a traditional securitisation may exclude underlying exposures from its calculation of risk-weighted exposure amounts and, where relevant, expected loss amounts if either of the following conditions is fulfilled:
(a) significant credit risk associated with the underlying exposures has been transferred to third parties;
(b) the originator institution applies a 1250 % risk weight to all securitisation positions it holds in the securitisation or deducts these securitisation positions from Common Equity Tier 1 items in accordance with point (k) of Article 36(1).
2. Significant credit risk shall be considered as transferred in either of the following cases:
(a) the risk-weighted exposure amounts of the mezzanine securitisation positions held by the originator institution in the securitisation do not exceed 50 % of the risk-weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;
(b) the originator institution does not hold more than 20 % of the exposure value of the first loss tranche in the securitisation, provided that both of the following conditions are met:
(i) the originator can demonstrate that the exposure value of the first loss tranche exceeds a reasoned estimate of the expected loss on the underlying exposures by a substantial margin;
(ii) there are no mezzanine securitisation positions.
Where the possible reduction in risk-weighted exposure amounts, which the originator institution would achieve by the securitisation under points (a) or (b), is not justified by a commensurate transfer of credit risk to third parties, competent authorities may decide on a case-by-case basis that significant credit risk shall not be considered as transferred to third parties.
3. By way of derogation from paragraph 2, competent authorities may allow originator institutions to recognise significant credit risk transfer in relation to a securitisation where the originator institution demonstrates in each case that the reduction in own funds requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties. Permission may only be granted where the institution meets both of the following conditions:
(a) the institution has adequate internal risk management policies and methodologies to assess the transfer of credit risk;
(b) the institution has also recognised the transfer of credit risk to third parties in each case for the purposes of the institution’s internal risk management and its internal capital allocation.
4. In addition to the requirements set out in paragraphs 1, 2 and 3, all of the following conditions shall be met:
(a) the transaction documentation reflects the economic substance of the securitisation;
(b) the securitisation positions do not constitute payment obligations of the originator institution;
(c) the underlying exposures are placed beyond the reach of the originator institution and its creditors in a manner that meets the requirement set out in Article 20(1) of Regulation (EU) 2017/2402;
(d) the originator institution does not retain control over the underlying exposures. It shall be considered that control is retained over the underlying exposures where the originator has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is otherwise required to re-assume transferred risk. The originator institution’s retention of servicing rights or obligations in respect of the underlying exposures shall not of itself constitute control of the exposures;
(e) the securitisation documentation does not contain terms or conditions that:
(i) require the originator institution to alter the underlying exposures to improve the average quality of the pool; or
(ii) increase the yield payable to holders of positions or otherwise enhance the positions in the securitisation in response to a deterioration in the credit quality of the underlying exposures;
(f) where applicable, the transaction documentation makes it clear that the originator or the sponsor may only purchase or repurchase securitisation positions or repurchase, restructure or substitute the underlying exposures beyond their contractual obligations where such arrangements are executed in accordance with prevailing market conditions and the parties to them act in their own interest as free and independent parties (arm’s length);
(g) where there is a clean-up call option, that option shall also meet all of the following conditions:
(i) it can be exercised at the discretion of the originator institution;
(ii) it may only be exercised when 10 % or less of the original value of the underlying exposures remains unamortised;
(iii) it is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors in the securitisation and is not otherwise structured to provide credit enhancement;
(h) the originator institution has received an opinion from a qualified legal counsel confirming that the securitisation complies with the conditions set out in point (c) of this paragraph.
5. The competent authorities shall inform the EBA of those cases where they have decided that the possible reduction in risk-weighted exposure amounts was not justified by a commensurate transfer of credit risk to third parties in accordance with paragraph 2, and the cases where institutions have chosen to apply paragraph 3.
6. The EBA shall monitor the range of supervisory practices in relation to the recognition of significant risk transfer in traditional securitisations in accordance with this Article. In particular, the EBA shall review:
(a) the conditions for the transfer of significant credit risk to third parties in accordance with paragraphs 2, 3 and 4;
(b) the interpretation of commensurate transfer of credit risk to third parties for the purposes of the competent authorities’ assessment provided for in the second subparagraph of paragraph 2 and in paragraph 3;
(c) the requirements for the competent authorities’ assessment of securitisation transactions in relation to which the originator seeks recognition of significant credit risk transfer to third parties in accordance with paragraph 2 or 3.
The EBA shall report its findings to the Commission by 2 January 2021. The Commission may, having taken into account the report from the EBA, adopt a delegated act in accordance with Article 462, to supplement this Regulation by further specifying the items listed in points (a), (b) and (c) of this paragraph.

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before (02013R0575-20180101)

Article 245
Calculation of risk-weighted exposure amounts
1. Where an originator institution has transferred significant credit risk associated with securitised exposures in accordance with Section 2, that institution may:
(a) in the case of a traditional securitisation, exclude from its calculation of risk-weighted exposure amounts, and, as relevant, expected loss amounts, the exposures which it has securitised;
(b) in the case of a synthetic securitisation, calculate risk-weighted exposure amounts, and, as relevant, expected loss amounts, in respect of the securitised exposures in accordance with Articles 249 and 250.
2. Where the originator institution has decided to apply paragraph 1, it shall calculate the risk-weighted exposure amounts prescribed in this Chapter for the positions that it may hold in the securitisation.
Where the originator institution has not transferred significant credit risk or has decided not to apply paragraph 1, it need not calculate risk-weighted exposure amounts for any positions it may have in the securitisation in question but shall continue including the securitised exposures in its calculation of risk-weighted exposure amounts as if they had not been securitised.
3. Where there is an exposure to different tranches in a securitisation, the exposure to each tranche shall be considered a separate securitisation position. The providers of credit protection to securitisation positions shall be considered to hold positions in the securitisation. Securitisation positions shall include exposures to a securitisation arising from interest rate or currency derivative contracts.
4. Unless a securitisation position is deducted from Common Equity Tier 1 items pursuant to Article 36(1)(k), the risk-weighted exposure amount shall be included in the institution's total of risk-weighted exposure amounts for the purposes of Article 92(3).
5. The risk-weighted exposure amount of a securitisation position shall be calculated by applying to the exposure value of the position, calculated as set out in Article 246, the relevant total risk weight.
6. The total risk weight shall be determined as the sum of the risk weight set out in this Chapter and any additional risk weight in accordance with Article 407.

after (02013R0575-20190101)

Article 245
Synthetic securitisation
1. The originator institution of a synthetic securitisation may calculate risk-weighted exposure amounts, and, where relevant, expected loss amounts with respect to the underlying exposures in accordance with Articles 251 and 252, where either of the following conditions is met:
(a) significant credit risk has been transferred to third parties either through funded or unfunded credit protection;
(b) the originator institution applies a 1250 % risk weight to all securitisation positions that it retains in the securitisation or deducts these securitisation positions from Common Equity Tier 1 items in accordance with point (k) of Article 36(1).
2. Significant credit risk shall be considered as transferred in either of the following cases:
(a) the risk-weighted exposure amounts of the mezzanine securitisation positions held by the originator institution in the securitisation do not exceed 50 % of the risk-weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;
(b) the originator institution does not hold more than 20 % of the exposure value of the first loss tranche in the securitisation, provided that both of the following conditions are met:
(i) the originator can demonstrate that the exposure value of the first loss tranche exceeds a reasoned estimate of the expected loss on the underlying exposures by a substantial margin;
(ii) there are no mezzanine securitisation positions.
Where the possible reduction in risk-weighted exposure amounts, which the originator institution would achieve by the securitisation, is not justified by a commensurate transfer of credit risk to third parties, competent authorities may decide on a case-by-case basis that significant credit risk shall not be considered as transferred to third parties.
3. By way of derogation from paragraph 2, competent authorities may allow originator institutions to recognise significant credit risk transfer in relation to a securitisation where the originator institution demonstrates in each case that the reduction in own funds requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties. Permission may only be granted where the institution meets both of the following conditions:
(a) the institution has adequate internal risk-management policies and methodologies to assess the transfer of risk;
(b) the institution has also recognised the transfer of credit risk to third parties in each case for the purposes of the institution’s internal risk management and its internal capital allocation.
4. In addition to the requirements set out in paragraphs 1, 2 and 3, all of the following conditions shall be met:
(a) the transaction documentation reflects the economic substance of the securitisation;
(b) the credit protection by virtue of which credit risk is transferred complies with Article 249;
(c) the securitisation documentation does not contain terms or conditions that:
(i) impose significant materiality thresholds below which credit protection is deemed not to be triggered if a credit event occurs;
(ii) allow for the termination of the protection due to deterioration of the credit quality of the underlying exposures;
(iii) require the originator institution to alter the composition of the underlying exposures to improve the average quality of the pool; or
(iv) increase the institution’s cost of credit protection or the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool;
(d) the credit protection is enforceable in all relevant jurisdictions;
(e) where applicable, the transaction documentation makes it clear that the originator or the sponsor may only purchase or repurchase securitisation positions or repurchase, restructure or substitute the underlying exposures beyond their contractual obligations where such arrangements are executed in accordance with prevailing market conditions and the parties to them act in their own interest as free and independent parties (arm’s length);
(f) where there is a clean-up call option, that option meets all the following conditions:
(i) it may be exercised at the discretion of the originator institution;
(ii) it may only be exercised when 10 % or less of the original value of the underlying exposures remains unamortised;
(iii) it is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors in the securitisation and is not otherwise structured to provide credit enhancement;
(g) the originator institution has received an opinion from a qualified legal counsel confirming that the securitisation complies with the conditions set out in point (d) of this paragraph;
5. The competent authorities shall inform the EBA of the cases where they have decided that the possible reduction in risk-weighted exposure amounts was not justified by a commensurate transfer of credit risk to third parties in accordance with paragraph 2, and the cases where institutions have chosen to apply paragraph 3.
6. The EBA shall monitor the range of supervisory practices in relation to the recognition of significant risk transfer in synthetic securitisations in accordance with this Article. In particular, the EBA shall review:
(a) the conditions for the transfer of significant credit risk to third parties in accordance with paragraphs 2, 3 and 4;
(b) the interpretation of commensurate transfer of credit risk to third parties for the purposes of the competent authorities’ assessment provided for in the second subparagraph of paragraph 2 and in paragraph 3; and
(c) the requirements for the competent authorities’ assessment of securitisation transactions in relation to which the originator seeks recognition of significant credit risk transfer to third parties in accordance with paragraph 2 or 3.
The EBA shall report its findings to the Commission by 2 January 2021. The Commission may, having taken into account the report from the EBA, adopt a delegated act in accordance with Article 462, to supplement this Regulation by further specifying the items listed in points (a), (b) and (c) of this paragraph.

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before (02013R0575-20180101)

Article 246
Exposure value
1. The exposure value shall be calculated as follows:
(a) where an institution calculates risk-weighted exposure amounts under Sub-section 3, the exposure value of an on-balance sheet securitisation position shall be its accounting value remaining after specific credit risk adjustments treated in accordance with Article 110 have been applied;
(b) where an institution calculates risk-weighted exposure amounts under Sub-section 4, the exposure value of an on-balance sheet securitisation position shall be the accounting value measured without taking into account any credit risk adjustments treated in accordance with Article 110 made;
(c) where an institution calculates risk-weighted exposure amounts under Sub-section 3, the exposure value of an off-balance sheet securitisation position shall be its nominal value, less any specific credit risk adjustment of that securitisation position, multiplied by a conversion factor as prescribed in this Chapter. The conversion factor shall be 100 % unless otherwise specified;
(d) where an institution calculates risk-weighted exposure amounts under Sub-section 4, the exposure value of an off-balance sheet securitisation position shall be its nominal value multiplied by a conversion factor as prescribed in this Chapter. The conversion factor shall be 100 % unless otherwise specified;
(e) The exposure value for the counterparty credit risk of a derivative instrument listed in Annex II, shall be determined in accordance with Chapter 6.
2. Where an institution has two or more overlapping positions in a securitisation, it shall, to the extent that they overlap include in its calculation of risk-weighted exposure amounts only the position or portion of a position producing the higher risk-weighted exposure amounts. The institution may also recognise such overlap between specific risk own funds requirements for positions in the trading book and own funds requirements for securitisation positions in the non-trading book, provided that the institution is able to calculate and compare the own funds requirements for the relevant positions. For the purpose of this paragraph, overlapping occurs when the positions, wholly or partially, represent an exposure to the same risk such that, to the extent of the overlap, there is a single exposure.
3. Where Article 268(c) applies to positions in the ABCP, the institution may, use the risk-weight assigned to a liquidity facility in order to calculate the risk-weighted exposure amount for the ABCP provided that 100 % of the ABCP issued by the programme is covered by this or other liquidity facilities and all of those liquidity facilities rank pari passu with the ABCP so that they form overlapping positions.
The institution shall notify to the competent authorities the use it makes of that treatment.

after (02013R0575-20190101)

Article 246
Operational requirements for early amortisation provisions
Where the securitisation includes revolving exposures and early amortisation provisions or similar provisions, significant credit risk shall only be considered transferred by the originator institution where the requirements laid down in Articles 244 and 245 are met and the early amortisation provision, once triggered, does not:
(a) subordinate the institution’s senior or pari passu claim on the underlying exposures to the other investors’ claims;
(b) subordinate further the institution’s claim on the underlying exposures relative to other parties’ claims; or
(c) otherwise increase the institution’s exposure to losses associated with the underlying revolving exposures.

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before (02013R0575-20180101)

Article 247
Recognition of credit risk mitigation for securitisation positions
1. An institution may recognise funded or unfunded credit protection obtained in respect of a securitisation position in accordance with Chapter 4 and subject to the requirements laid down in this Chapter and in Chapter 4.
Eligible funded credit protection is limited to financial collateral which is eligible for the calculation of risk-weighted exposure amounts under Chapter 2 as laid down under Chapter 4 and recognition is subject to compliance with the relevant requirements as laid down under Chapter 4.
2. Eligible unfunded credit protection and unfunded credit protection providers are limited to those which are eligible under Chapter 4 and recognition is subject to compliance with the relevant requirements laid down under Chapter 4.
3. By way of derogation from paragraph 2, the eligible providers of unfunded credit protection listed in points (a) to (h) of Article 201(1) except for qualifying central counterparties shall have a credit assessment by a recognised ECAI which has been determined to be associated with credit quality step 3 or above under Article 136 and shall have been associated with credit quality step 2 or above at the time the credit protection was first recognised. Institutions that have a permission to apply the IRB Approach to a direct exposure to the protection provider may assess eligibility in accordance with the first sentence based on the equivalence of the PD for the protection provider to the PD associated with the credit quality steps referred to in Article 136.
4. By way of derogation from paragraph 2, SSPEs are eligible protection providers where they own assets that qualify as eligible financial collateral and to which there are no rights or contingent rights preceding or ranking pari passu to the contingent rights of the institution receiving unfunded credit protection and all requirements for the recognition of financial collateral in Chapter 4 are fulfilled. In those cases, GA (the amount of the protection adjusted for any currency mismatch and maturity mismatch in accordance with the provisions of Chapter 4) shall be limited to the volatility adjusted market value of those assets and g (the risk weight of exposures to the protection provider as specified under the Standardised Approach) shall be determined as the weighted-average risk weight that would apply to those assets as financial collateral under the Standardised Approach.

after (02013R0575-20190101)

Article 247
Calculation of risk-weighted exposure amounts
1. Where an originator institution has transferred significant credit risk associated with the underlying exposures of the securitisation in accordance with Section 2, that institution may:
(a) in the case of a traditional securitisation, exclude the underlying exposures from its calculation of risk-weighted exposure amounts, and, as relevant, expected loss amounts;
(b) in the case of a synthetic securitisation, calculate risk-weighted exposure amounts, and, where relevant, expected loss amounts, with respect to the underlying exposures in accordance with Articles 251 and 252.
2. Where the originator institution has decided to apply paragraph 1, it shall calculate the risk-weighted exposure amounts as set out in this Chapter for the positions that it may hold in the securitisation.
Where the originator institution has not transferred significant credit risk or has decided not to apply paragraph 1, it shall not be required to calculate risk-weighted exposure amounts for any position it may have in the securitisation but shall continue including the underlying exposures in its calculation of risk-weighted exposure amounts and, where relevant, expected loss amounts as if they had not been securitised.
3. Where there is an exposure to positions in different tranches in a securitisation, the exposure to each tranche shall be considered a separate securitisation position. The providers of credit protection to securitisation positions shall be considered as holding positions in the securitisation. Securitisation positions shall include exposures to a securitisation arising from interest rate or currency derivative contracts that the institution has entered into with the transaction.
4. Unless a securitisation position is deducted from Common Equity Tier 1 items pursuant to point (k) of Article 36(1), the risk-weighted exposure amount shall be included in the institution’s total of risk-weighted exposure amounts for the purposes of Article 92(3).
5. The risk-weighted exposure amount of a securitisation position shall be calculated by multiplying the exposure value of the position, calculated as set out in Article 248, by the relevant total risk weight.
6. The total risk weight shall be determined as the sum of the risk weight set out in this Chapter and any additional risk weight in accordance with Article 270a.

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before (02013R0575-20180101)

Article 248
Implicit support
1. A sponsor institution, or an originator institution which in respect of a securitisation has made use of Article 245(1) and (2) in the calculation of risk-weighted exposure amounts or has sold instruments from its trading book to the effect that it is no longer required to hold own funds for the risks of those instruments shall not, with a view to reducing potential or actual losses to investors, provide support to the securitisation beyond its contractual obligations. A transaction shall not be considered to provide support if it is executed at arm's length and taken into account in the assessment of significant risk transfer. Any such transaction shall be, regardless of whether it provides support, notified to the competent authorities and subject to the institution's credit review and approval process. The institution shall, when assessing whether the transaction is not structured to provide support, adequately consider at least all the following:
(a) the price of the repurchase;
(b) the institution's capital and liquidity position before and after repurchase;
(c) the performance of the securitised exposures;
(d) the performance of the securitisation positions;
(e) the impact of support on the losses expected to be incurred by the originator relative to investors.
2. EBA shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines on what constitutes at arm's length and when a transaction is not structured to provide support.
3. If an originator institution or a sponsor institution fails to comply with paragraph 1 in respect of a securitisation this institution shall at a minimum hold own funds against all of the securitised exposures as if they had not been securitised.

after (02013R0575-20190101)

Article 248
Exposure value
1. The exposure value of a securitisation position shall be calculated as follows:
(a) the exposure value of an on-balance sheet securitisation position shall be its accounting value remaining after any relevant specific credit risk adjustments on the securitisation position have been applied in accordance with Article 110;
(b) the exposure value of an off-balance sheet securitisation position shall be its nominal value less any relevant specific credit risk adjustments on the securitisation position in accordance with Article 110, multiplied by the relevant conversion factor as set out in this point. The conversion factor shall be 100 %, except in the case of cash advance facilities. To determine the exposure value of the undrawn portion of the cash advance facilities, a conversion factor of 0 % may be applied to the nominal amount of a liquidity facility that is unconditionally cancellable provided that repayment of draws on the facility are senior to any other claims on the cash flows arising from the underlying exposures and the institution has demonstrated to the satisfaction of the competent authority that it is applying an appropriately conservative method for measuring the amount of the undrawn portion;
(c) the exposure value for the counterparty credit risk of a securitisation position that results from a derivative instrument listed in Annex II, shall be determined in accordance with Chapter 6;
(d) an originator institution may deduct from the exposure value of a securitisation position which is assigned 1250 % risk weight in accordance with Subsection 3 or deducted from Common Equity Tier 1 in accordance with point (k) of Article 36(1), the amount of the specific credit risk adjustments on the underlying exposures in accordance with Article 110, and any non-refundable purchase price discounts connected with such underlying exposures to the extent that such discounts have caused the reduction of own funds.
The EBA shall develop draft regulatory technical standards to specify what constitutes an appropriately conservative method for measuring the amount of the undrawn portion referred to in point (b) of the first subparagraph.
The EBA shall submit those draft regulatory technical standards to the Commission by 18 January 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the third subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
2. Where an institution has two or more overlapping positions in a securitisation, it shall include only one of the positions in its calculation of risk-weighted exposure amounts.
Where the positions partially overlap, the institution may split the position into two parts and recognise the overlap in relation to one part only in accordance with the first subparagraph. Alternatively, the institution may treat the positions as if they were fully overlapping by expanding for capital calculation purposes the position that produces the higher risk-weighted exposure amounts.
The institution may also recognise an overlap between the specific risk own funds requirements for positions in the trading book and the own funds requirements for securitisation positions in the non-trading book, provided that the institution is able to calculate and compare the own funds requirements for the relevant positions.
For the purposes of this paragraph, two positions shall be deemed to be overlapping where they are mutually offsetting in such a manner that the institution is able to preclude the losses arising from one position by performing the obligations required under the other position.
3. Where point (d) of Article 270c applies to positions in an ABCP, the institution may use the risk weight assigned to a liquidity facility in order to calculate the risk-weighted exposure amount for the ABCP, provided that the liquidity facility covers 100 % of the ABCP issued by the ABCP programme and the liquidity facility ranks pari passu with the ABCP in a manner that they form an overlapping position. The institution shall notify the competent authorities where it has applied the provisions laid down in this paragraph. For the purposes of determining the 100 % coverage set out in this paragraph, the institution may take into account other liquidity facilities in the ABCP programme, provided that they form an overlapping position with the ABCP.

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before (02013R0575-20180101)

Article 249
General treatment
In calculating risk-weighted exposure amounts for the securitised exposures, where the conditions in Article 244 are met, the originator institution of a synthetic securitisation shall, subject to Article 250, use the relevant calculation methodologies set out in this Section and not those set out in Chapter 2. For institutions calculating risk-weighted exposure amounts and expected loss amounts under Chapter 3, the expected loss amount in respect of such exposures shall be zero.
The requirements set out in the first subparagraph apply to the entire pool of exposures included in the securitisation. Subject to Article 250, the originator institution shall calculate risk-weighted exposure amounts in respect of all tranches in the securitisation in accordance with the provisions of this Section including those for which the institution recognises credit risk mitigation in accordance with Article 247, in which case the risk-weight to be applied to that position may be amended in accordance with Chapter 4, subject to the requirements laid down in this Chapter.

after (02013R0575-20190101)

Article 249
Recognition of credit risk mitigation for securitisation positions
1. An institution may recognise funded or unfunded credit protection with respect to a securitisation position where the requirements for credit risk mitigation laid down in this Chapter and in Chapter 4 are met.
2. Eligible funded credit protection shall be limited to financial collateral which is eligible for the calculation of risk-weighted exposure amounts under Chapter 2 as laid down under Chapter 4 and recognition of credit risk mitigation shall be subject to compliance with the relevant requirements as laid down under Chapter 4.
Eligible unfunded credit protection and unfunded credit protection providers shall be limited to those which are eligible in accordance with Chapter 4 and recognition of credit risk mitigation shall be subject to compliance with the relevant requirements as laid down under Chapter 4.
3. By way of derogation from paragraph 2, the eligible providers of unfunded credit protection listed in points (a) to (h) of Article 201(1) shall have been assigned a credit assessment by a recognised ECAI which is credit quality step 2 or above at the time the credit protection was first recognised and credit quality step 3 or above thereafter. The requirement set out in this subparagraph shall not apply to qualifying central counterparties.
Institutions which are allowed to apply the IRB Approach to a direct exposure to the protection provider may assess eligibility in accordance with the first subparagraph based on the equivalence of the PD for the protection provider to the PD associated with the credit quality steps referred to in Article 136.
4. By way of derogation from paragraph 2, SSPEs shall be eligible protection providers where all of the following conditions are met:
(a) the SSPE owns assets that qualify as eligible financial collateral in accordance with Chapter 4;
(b) the assets referred to in point (a) are not subject to claims or contingent claims ranking ahead or pari passu with the claim or contingent claim of the institution receiving unfunded credit protection; and
(c) all the requirements for the recognition of financial collateral set out in Chapter 4 are met.
5. For the purposes of paragraph 4, the amount of the protection adjusted for any currency and maturity mismatches (Ga) in accordance with Chapter 4 shall be limited to the volatility adjusted market value of those assets and the risk weight of exposures to the protection provider as specified under the Standardised Approach (g) shall be determined as the weighted-average risk weight that would apply to those assets as financial collateral under the Standardised Approach.
6. Where a securitisation position benefits from full credit protection or a partial credit protection on a pro-rata basis, the following requirements shall apply:
(a) the institution providing credit protection shall calculate risk-weighted exposure amounts for the portion of the securitisation position benefiting from credit protection in accordance with Subsection 3 as if it held that portion of the position directly;
(b) the institution buying credit protection shall calculate risk-weighted exposure amounts in accordance with Chapter 4 for the protected portion.
7. In all cases not covered by paragraph 6, the following requirements shall apply:
(a) the institution providing credit protection shall treat the portion of the position benefiting from credit protection as a securitisation position and shall calculate risk-weighted exposure amounts as if it held that position directly in accordance with Subsection 3, subject to paragraphs 8, 9 and 10;
(b) the institution buying credit protection shall calculate risk-weighted exposure amounts for the protected portion of the position referred to in point (a) in accordance with Chapter 4. The institution shall treat the portion of the securitisation position not benefiting from credit protection as a separate securitisation position and shall calculate risk-weighted exposure amounts in accordance with Subsection 3, subject to paragraphs 8, 9 and 10.
8. Institutions using the Securitisation Internal Ratings Based Approach (SEC-IRBA) or the Securitisation Standardised Approach (SEC-SA) under Subsection 3 shall determine the attachment point (A) and detachment point (D) separately for each of the positions derived in accordance with paragraph 7 as if these had been issued as separate securitisation positions at the time of origination of the transaction. The value of KIRB or KSA, respectively, shall be calculated taking into account the original pool of exposures underlying the securitisation.
9. Institutions using the Securitisation External Ratings Based Approach (SEC-ERBA) under Subsection 3 for the original securitisation position shall calculate risk-weighted exposure amounts for the positions derived in accordance with paragraph 7 as follows:
(a) where the derived position has the higher seniority, it shall be assigned the risk weight of the original securitisation position;
(b) where the derived position has the lower seniority, it may be assigned an inferred rating in accordance with Article 263(7). In that case, thickness input T shall only be computed on the basis of the derived position. Where a rating may not be inferred, the institution shall apply the higher of the risk weight resulting from either:
(i) applying the SEC-SA in accordance with paragraph 8 and Subsection 3; or
(ii) the risk weight of the original securitisation position under the SEC-ERBA.
10. The derived position with the lower seniority shall be treated as a non-senior securitisation position even if the original securitisation position prior to protection qualifies as senior.

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before (02013R0575-20180101)

Article 250
Treatment of maturity mismatches in synthetic securitisations
For the purposes of calculating risk-weighted exposure amounts in accordance with Article 249, any maturity mismatch between the credit protection which constitutes a tranche and by which the transfer of risk is achieved and the securitised exposures shall be taken into consideration as follows:
(a) the maturity of the securitised exposures shall be taken to be the longest maturity of any of those exposures subject to a maximum of five years. The maturity of the credit protection shall be determined in accordance with Chapter 4;
(b) an originator institution shall ignore any maturity mismatch in calculating risk-weighted exposure amounts for tranches appearing pursuant to this Section with a risk weighting of 1250 %. For all other tranches, the maturity mismatch treatment set out in Chapter 4 shall be applied in accordance with the following formula:
RW*RWSP  t  t*T  t*RWAss  T  tT  t*
where:
RW*
risk-weighted exposure amounts for the purposes of Article 92(3)(a);
RWAss
risk-weighted exposure amounts for exposures if they had not been securitised, calculated on a pro-rata basis;
RWSP
risk-weighted exposure amounts calculated under Article 249 if there was no maturity mismatch;
T
maturity of the underlying exposures expressed in years;
t
maturity of credit protection. expressed in years;
t*
0,25.

after (02013R0575-20190101)

Article 250
Implicit support
1. A sponsor institution, or an originator institution which in respect of a securitisation has made use of Article 247(1) and (2) in the calculation of risk-weighted exposure amounts or has sold instruments from its trading book to the effect that it is no longer required to hold own funds for the risks of those instruments shall not provide support, directly or indirectly, to the securitisation beyond its contractual obligations with a view to reducing potential or actual losses to investors.
2. A transaction shall not be considered as support for the purposes of paragraph 1 where the transaction has been duly taken into account in the assessment of significant credit risk transfer and both parties have executed the transaction acting in their own interest as free and independent parties (arm’s length). For these purposes, the institution shall undertake a full credit review of the transaction and, at a minimum, take into account all of the following items:
(a) the repurchase price;
(b) the institution’s capital and liquidity position before and after repurchase;
(c) the performance of the underlying exposures;
(d) the performance of the securitisation positions;
(e) the impact of support on the losses expected to be incurred by the originator relative to investors.
3. The originator institution and the sponsor institution shall notify the competent authority of any transaction entered into in relation to the securitisation in accordance with paragraph 2.
4. The EBA shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines on what constitutes arm’s length for the purposes of this Article and the circumstances under which a transaction is not structured to provide support.
5. If an originator institution or a sponsor institution fails to comply with paragraph 1 in respect of a securitisation, the institution shall include all of the underlying exposures of that securitisation in its calculation of risk-weighted exposure amounts as if they had not been securitised and disclose:
(a) that it has provided support to the securitisation in breach of paragraph 1; and
(b) the impact of the support provided in terms of own funds requirements.

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before (02013R0575-20180101)

Article 251
Risk-weights
Subject to Article 252, the institution shall calculate the risk-weighted exposure amount of a rated securitisation or re-securitisation position by applying the relevant risk weight to the exposure value.
The relevant risk weight shall be the risk weight as laid down in Table 1, with which the credit assessment of the position is associated in accordance with Section 4.
Table 1
Credit Quality Step 1 2 3 4 (only for credit assessments other than short-term credit assessments) all other credit quality steps
Securitisation positions 20 % 50 % 100 % 350 % 1250 %
Re-securitisation positions 40 % 100 % 225 % 650 % 1250 %
Subject to Articles 252 to 255, the risk-weighted exposure amount of an unrated securitisation position shall be calculated by applying a risk weight of 1250 %.

after (02013R0575-20190101)

Article 251
Originator institutions’ calculation of risk-weighted exposure amounts securitised in a synthetic securitisation
1. For the purpose of calculating risk-weighted exposure amounts for the underlying exposures, the originator institution of a synthetic securitisation shall use the calculation methodologies set out in this Section where applicable instead of those set out in Chapter 2. For institutions calculating risk-weighted exposure amounts and, where relevant, expected loss amounts with respect to the underlying exposures under Chapter 3, the expected loss amount in respect of such exposures shall be zero.
2. The requirements set out in paragraph 1 of this Article shall apply to the entire pool of exposures backing the securitisation. Subject to Article 252, the originator institution shall calculate risk-weighted exposure amounts with respect to all tranches in the securitisation in accordance with this Section, including the positions in relation to which the institution is able to recognise credit risk mitigation in accordance with Article 249. The risk weight to be applied to positions which benefit from credit risk mitigation may be amended in accordance with Chapter 4.

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before (02013R0575-20180101)

Article 252
Originator and sponsor institutions
For an originator institution or sponsor institution, the risk-weighted exposure amounts calculated in respect of its securitisation positions in any one securitisation may be limited to the risk-weighted exposure amounts which would currently be calculated for the securitised exposures had they not been securitised subject to the presumed application of a 150 % risk weight to the following:
(a) all items currently in default;
(b) all items associated with particularly high risk in accordance with Article 128 amongst the securitised exposures.

after (02013R0575-20190101)

Article 252
Treatment of maturity mismatches in synthetic securitisations
For the purposes of calculating risk-weighted exposure amounts in accordance with Article 251, any maturity mismatch between the credit protection by which the transfer of risk is achieved and the underlying exposures shall be calculated as follows:
(a) the maturity of the underlying exposures shall be taken to be the longest maturity of any of those exposures subject to a maximum of 5 years. The maturity of the credit protection shall be determined in accordance with Chapter 4;
(b) an originator institution shall ignore any maturity mismatch in calculating risk-weighted exposure amounts for securitisation positions subject to a risk weight of 1250 % in accordance with this Section. For all other positions, the maturity mismatch treatment set out in Chapter 4 shall be applied in accordance with the following formula:
RW*RWSP · t t*T t* RWAss · T tT t*
where:
RW*
risk-weighted exposure amounts for the purposes of point (a) of Article 92(3);
RWAss
risk-weighted exposure amounts for the underlying exposures as if they had not been securitised, calculated on a pro-rata basis;
RWSP
risk-weighted exposure amounts calculated under Article 251 as if there was no maturity mismatch;
T
maturity of the underlying exposures, expressed in years;
t
maturity of credit protection, expressed in years;
t*
0,25

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before (02013R0575-20180101)

Article 253
Treatment of unrated positions
1. For the purpose of calculating the risk-weighted exposure amount of an unrated securitisation position an institution may apply the weighted-average risk weight that would be applied to the securitised exposures under Chapter 2 by an institution holding the exposures, multiplied by the concentration ratio referred to in paragraph 2. For this purpose, the institution shall know the composition of the pool of securitised exposures securitised at all times.
2. The concentration ratio shall be equal to the sum of the nominal amounts of all the tranches divided by the sum of the nominal amounts of the tranches junior to or pari passu with the tranche in which the position is held including that tranche itself. The resulting risk weight shall not be higher than 1250 % or lower than any risk weight applicable to a rated more senior tranche. Where the institution is unable to determine the risk weights that would be applied to the securitised exposures under Chapter 2, it shall apply a risk weight of 1250 % to the position.

after (02013R0575-20190101)

Article 253
Reduction in risk-weighted exposure amounts
1. Where a securitisation position is assigned a 1250 % risk weight under this Section, institutions may deduct the exposure value of such position from Common Equity Tier 1 capital in accordance with point (k) of Article 36(1) as an alternative to including the position in their calculation of risk-weighted exposure amounts. For that purpose, the calculation of the exposure value may reflect eligible funded credit protection in accordance with Article 249.
2. Where an institution makes use of the alternative set out in paragraph 1, it may subtract the amount deducted in accordance with point (k) of Article 36(1) from the amount specified in Article 268 as maximum capital requirement that would be calculated in respect of the underlying exposures as if they had not been securitised.

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before (02013R0575-20180101)

Article 254
Treatment of securitisation positions in a second loss tranche or better in an ABCP programme
Subject to the availability of a more favourable treatment for unrated liquidity facilities under Article 255 an institution may apply to securitisation positions meeting the following conditions a risk weight that is the greater of 100 % or the highest of the risk weights that would be applied to any of the securitised exposures under Chapter 2 by an institution holding the exposures:
(a) the securitisation position shall be in a tranche which is economically in a second loss position or better in the securitisation and the first loss tranche shall provide meaningful credit enhancement to the second loss tranche;
(b) the quality of the securitisation position shall be equivalent to credit quality step 3 under the Standardised Approach or better;
(c) the securitisation position shall be held by an institution which does not hold a position in the first loss tranche.

after (02013R0575-20190101)

Article 254
Hierarchy of methods
1. Institutions shall use one of the methods set out in Subsection 3 to calculate risk-weighted exposure amounts in accordance with the following hierarchy:
(a) where the conditions set out in Article 258 are met, an institution shall use the SEC-IRBA in accordance with Articles 259 and 260;
(b) where the SEC-IRBA may not be used, an institution shall use the SEC-SA in accordance with Articles 261 and 262;
(c) where the SEC-SA may not be used, an institution shall use the SEC-ERBA in accordance with Articles 263 and 264 for rated positions or positions in respect of which an inferred rating may be used.
2. For rated positions or positions in respect of which an inferred rating may be used, an institution shall use the SEC-ERBA instead of the SEC-SA in each of the following cases:
(a) where the application of the SEC-SA would result in a risk weight higher than 25 % for positions qualifying as positions in an STS securitisation;
(b) where the application of the SEC-SA would result in a risk weight higher than 25 % or the application of the SEC-ERBA would result in a risk weight higher than 75 % for positions not qualifying as positions in an STS securitisation;
(c) for securitisation transactions backed by pools of auto loans, auto leases and equipment leases.
3. In cases not covered by paragraph 2, and by way of derogation from point (b) of paragraph 1, an institution may decide to apply the SEC-ERBA instead of the SEC-SA to all of its rated securitisation positions or positions in respect of which an inferred rating may be used.
For the purposes of the first subparagraph, an institution shall notify its decision to the competent authority no later than 17 November 2018.
Any subsequent decision to further change the approach applied to all of its rated securitisation positions shall be notified by the institution to its competent authority before the 15th November immediately following that decision.
In the absence of any objection by the competent authority by 15 December immediately following the deadline referred to in the second or third subparagraph, as appropriate, the decision notified by the institution shall take effect from 1 January of the following year and shall be valid until a subsequently notified decision comes into effect. An institution shall not use different approaches in the course of the same year.
4. By way of derogation from paragraph 1, competent authorities may prohibit institutions, on a case by case basis, from applying the SEC-SA when the risk-weighted exposure amount resulting from the application of the SEC-SA is not commensurate to the risks posed to the institution or to financial stability, including but not limited to the credit risk embedded in the exposures underlying the securitisation. In the case of exposures not qualifying as positions in an STS securitisation, particular regard shall be had to securitisations with highly complex and risky features.
5. Without prejudice to paragraph 1 of this Article, an institution may apply the Internal Assessment Approach to calculate risk-weighted exposure amounts in relation to an unrated position in an ABCP programme or ABCP transaction in accordance with Article 266, provided that the conditions set out in Article 265 are met. Where an institution has received permission to apply the Internal Assessment Approach in accordance with Article 265(2), and a specific position in an ABCP programme or ABCP transaction falls within the scope of application covered by such permission, the institution shall apply that approach to calculate the risk-weighted exposure amount of that position.
6. For a position in a re-securitisation, institutions shall apply the SEC-SA in accordance with Article 261, with the modifications set out in Article 269.
7. In all other cases, a risk weight of 1250 % shall be assigned to securitisation positions.
8. The competent authorities shall inform the EBA of any notification made pursuant to paragraph 3 of this Article. The EBA shall monitor the impact of this Article on capital requirements and the range of supervisory practices in connection with paragraph 4 of this Article, and shall report annually to the Commission on its findings and issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010.

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before (02013R0575-20180101)

Article 255
Treatment of unrated liquidity facilities
1. Institutions may apply a conversion factor of 50 % to the nominal amount of an unrated liquidity facility in order to determine its exposure value when the following conditions are met:
(a) the liquidity facility documentation shall clearly identify and limit the circumstances under which the facility may be drawn;
(b) it shall not be possible for the facility to be drawn so as to provide credit support by covering losses already incurred at the time of draw and in particular not so as to provide liquidity in respect of exposures in default at the time of draw or so as to acquire assets at more than fair value;
(c) the facility shall not be used to provide permanent or regular funding for the securitisation;
(d) repayment of draws on the facility shall not be subordinated to the claims of investors other than to claims arising in respect of interest rate or currency derivative contracts, fees or other such payments, nor be subject to waiver or deferral;
(e) it shall not be possible for the facility to be drawn after all applicable credit enhancements from which the liquidity facility would benefit are exhausted;
(f) the facility shall include a provision that results in an automatic reduction in the amount that can be drawn by the amount of exposures that are in default, where default has the meaning given to it under Chapter 3, or where the pool of securitised exposures consists of rated instruments, that terminates the facility if the average quality of the pool falls below investment grade.
The risk weight to be applied shall be the highest risk weight that would be applied to any of the securitised exposures under Chapter 2 by an institution holding the exposures.
2. To determine the exposure value of cash advance facilities, a conversion factor of 0 % may be applied to the nominal amount of a liquidity facility that is unconditionally cancellable provided that the conditions set out in paragraph 1 are satisfied and that repayment of draws on the facility are senior to any other claims on the cash flows arising from the securitised exposures.

after (02013R0575-20190101)

Article 255
Determination of KIRB and KSA
1. Where an institution applies the SEC-IRBA under Subsection 3, the institution shall calculate KIRB in accordance with paragraphs 2 to 5.
2. Institutions shall determine KIRB by multiplying the risk-weighted exposure amounts that would be calculated under Chapter 3 in respect of the underlying exposures as if they had not been securitised by 8 % divided by the exposure value of the underlying exposures. KIRB shall be expressed in decimal form between zero and one.
3. For KIRB calculation purposes, the risk-weighted exposure amounts that would be calculated under Chapter 3 in respect of the underlying exposures shall include:
(a) the amount of expected losses associated with all the underlying exposures of the securitisation including defaulted underlying exposures that are still part of the pool in accordance with Chapter 3; and
(b) the amount of unexpected losses associated with all the underlying exposures including defaulted underlying exposures in the pool in accordance with Chapter 3.
4. Institutions may calculate KIRB in relation to the underlying exposures of the securitisation in accordance with the provisions set out in Chapter 3 for the calculation of capital requirements for purchased receivables. For these purposes, retail exposures shall be treated as purchased retail receivables and non-retail exposures as purchased corporate receivables.
5. Institutions shall calculate KIRB separately for dilution risk in relation to the underlying exposures of a securitisation where dilution risk is material to such exposures.
Where losses from dilution and credit risks are treated in an aggregate manner in the securitisation, institutions shall combine the respective KIRB for dilution and credit risk into a single KIRB for the purposes of Subsection 3. The presence of a single reserve fund or overcollateralisation available to cover losses from either credit or dilution risk may be regarded as an indication that these risks are treated in an aggregate manner.
Where dilution and credit risk are not treated in an aggregate manner in the securitisation, institutions shall modify the treatment set out in the second subparagraph to combine the respective KIRB for dilution and credit risk in a prudent manner.
6. Where an institution applies the SEC-SA under Subsection 3, it shall calculate KSA by multiplying the risk-weighted exposure amounts that would be calculated under Chapter 2 in respect of the underlying exposures as if they had not been securitised by 8 % divided by the value of the underlying exposures. KSA shall be expressed in decimal form between zero and one.
For the purposes of this paragraph, institutions shall calculate the exposure value of the underlying exposures without netting any specific credit risk adjustments and additional value adjustments in accordance with Articles 34 and 110 and other own funds reductions.
7. For the purposes of paragraphs 1 to 6, where a securitisation structure involves the use of an SSPE, all the SSPE’s exposures related to the securitisation shall be treated as underlying exposures. Without prejudice to the preceding, the institution may exclude the SSPE’s exposures from the pool of underlying exposures for KIRB or KSA calculation purposes if the risk from the SSPE’s exposures is immaterial or if it does not affect the institution’s securitisation position.
In the case of funded synthetic securitisations, any material proceeds from the issuance of credit-linked notes or other funded obligations of the SSPE that serve as collateral for the repayment of the securitisation positions shall be included in the calculation of KIRB or KSA if the credit risk of the collateral is subject to the tranched loss allocation.
8. For the purposes of the third subparagraph of paragraph 5 of this Article, the EBA shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 on the appropriate methods to combine KIRB for dilution and credit risk where these risks are not treated in an aggregate manner in a securitisation.
9. The EBA shall develop draft regulatory technical standards to further specify the conditions to allow institutions to calculate KIRB for the pools of underlying exposures in accordance with paragraph 4, in particular with regard to:
(a) internal credit policy and models for calculating KIRB for securitisations;
(b) use of different risk factors relating to the pool of underlying exposures and, where sufficient accurate or reliable data on that pool are not available, of proxy data to estimate PD and LGD; and
(c) due diligence requirements to monitor the actions and policies of sellers of receivables or other originators.
The EBA shall submit those draft regulatory technical standards to the Commission by 18 January 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the second subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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before (02013R0575-20180101)

Article 256
Additional own funds requirements for securitisations of revolving exposures with early amortisation provisions
1. Where there is a securitisation of revolving exposures subject to an early amortisation provision, the originator institution shall calculate an additional risk-weighted exposure amount in respect of the risk that the levels of credit risk to which it is exposed may increase following the operation of the early amortisation provision, in accordance with this Article.
2. The institution shall calculate a risk-weighted exposure amount in respect of the sum of the exposure values of the originator's interest and the investors' interest.
For securitisation structures where the securitised exposures comprise revolving and non-revolving exposures, an originator institution shall apply the treatment set out in paragraphs 3 to 6 to that portion of the underlying pool containing revolving exposures.
The exposure value of the originator's interest shall be the exposure value of that notional part of a pool of drawn amounts sold into a securitisation, the proportion of which in relation to the amount of the total pool sold into the structure determines the proportion of the cash flows generated by principal and interest collections and other associated amounts which are not available to make payments to those having securitisation positions in the securitisation. The originator's interest shall not be subordinate to the investors' interest. The exposure value of the investors' interest shall be the exposure value of the remaining notional part of the pool of drawn amounts.
The risk-weighted exposure amount in respect of the exposure value of the originator's interest shall be calculated as that for a pro rata exposure to the securitised exposures as if they had not been securitised.
3. Originators of the following types of securitisation are exempt from the calculation of an additional risk-weighted exposure amount in paragraph 1:
(a) securitisations of revolving exposures whereby investors remain fully exposed to all future draws by borrowers so that the risk on the underlying facilities does not return to the originator institution even after an early amortisation event has occurred;
(b) securitisations where any early amortisation provision is solely triggered by events not related to the performance of the securitised assets or the originator institution, such as material changes in tax laws or regulations.
4. For an originator institution subject to the calculation of an additional risk-weighted exposure amount in accordance with paragraph 1 the total of the risk-weighted exposure amounts in respect of its positions in the investors' interest and the risk-weighted exposure amounts calculated under paragraph 1 shall be no greater than the greater of:
(a) the risk-weighted exposure amounts calculated in respect of its positions in the investors' interest;
(b) the risk-weighted exposure amounts that would be calculated in respect of the securitised exposures by an institution holding the exposures as if they had not been securitised in an amount equal to the investors' interest.
Deduction of net gains, if any, arising from the capitalisation of future income required under Article 32(1), shall be treated outside the maximum amount indicated in the preceding subparagraph.
5. The risk-weighted exposure amount to be calculated in accordance with paragraph 1 shall be determined by multiplying the exposure value of the investors' interest by the product of the appropriate conversion factor as indicated in paragraphs 6 to 9 and the weighted average risk weight that would apply to the securitised exposures if the exposures had not been securitised.
An early amortisation provision shall be considered to be controlled where all of the following conditions are met:
(a) the originator institution has an appropriate own funds/liquidity plan in place to ensure that it has sufficient own funds and liquidity available in the event of an early amortisation;
(b) throughout the duration of the transaction there is pro-rata sharing between the originator's interest and the investor's interest of payments of interest and principal, expenses, losses and recoveries based on the balance of receivables outstanding at one or more reference points during each month;
(c) the amortisation period is considered sufficient for 90 % of the total debt (originator's and investors' interest) outstanding at the beginning of the early amortisation period to have been repaid or recognised as in default;
(d) the speed of repayment is no more rapid than would be achieved by straight-line amortisation over the period set out in point (c).
6. In the case of securitisations subject to an early amortisation provision of retail exposures which are uncommitted and unconditionally cancellable without prior notice, where the early amortisation is triggered by the excess spread level falling to a specified level, institutions shall compare the three-month average excess spread level with the excess spread levels at which excess spread is required to be trapped.
Where the securitisation does not require excess spread to be trapped, the trapping point is deemed to be 4,5 percentage points greater than the excess spread level at which an early amortisation is triggered.
The conversion factor to be applied shall be determined by the level of the actual three month average excess spread in accordance with Table 2.
Table 2
Securitisations subject to a controlled early amortisation provision Securitisations subject to a non-controlled early amortisation provision
Three months average excess spread Conversion factor Conversion factor
Above level A 0 % 0 %
Level A 1 % 5 %
Level B 2 % 15 %
Level C 10 % 50 %
Level D 20 % 100 %
Level E 40 % 100 %
Where:
(a) Level A refers to levels of excess spread less than 133,33 % of the trapping level of excess spread but not less than 100 % of that trapping level;
(b) Level B refers to levels of excess spread less than 100 % of the trapping level of excess spread but not less than 75 % of that trapping level;
(c) Level C refers to levels of excess spread less than 75 % of the trapping level of excess spread but not less than 50 % of that trapping level;
(d) Level D refers to levels of excess spread less than 50 % of the trapping level of excess spread but not less than 25 % of that trapping level;
(e) Level E refers to levels of excess spread less than 25 % of the trapping level of excess spread.
7. In the case of securitisations subject to an early amortization provision of retail exposures which are uncommitted and unconditionally cancellable without prior notice and where the early amortization is triggered by a quantitative value in respect of something other than the three months average excess spread, subject to permission by the competent authorities, institutions may apply a treatment which approximates closely to that prescribed in paragraph 6 for determining the conversion factor indicated. The competent authority shall grant permission, if the following conditions are met:
(a) that treatment is more appropriate because the institution can establish a quantitative measure equivalent, in relation to the quantitative value triggering early amortisation, to the trapping level of excess spread;
(b) that treatment leads to a measure of the risk that the credit risk to which the institution is exposed may increase following the operation of the early amortisation provision that is as prudent as that calculated in accordance with paragraph 6.
8. All other securitisations subject to a controlled early amortisation provision of revolving exposures shall be subject to a conversion factor of 90 %.
9. All other securitisations subject to a non-controlled early amortisation provision of revolving exposures shall be subject to a conversion factor of 100 %.

after (02013R0575-20190101)

Article 256
Determination of attachment point (A) and detachment point (D)
1. For the purposes of Subsection 3, institutions shall set the attachment point (A) at the threshold at which losses within the pool of underlying exposures would start to be allocated to the relevant securitisation position.
The attachment point (A) shall be expressed as a decimal value between zero and one and shall be equal to the greater of zero and the ratio of the outstanding balance of the pool of underlying exposures in the securitisation minus the outstanding balance of all tranches that rank senior or pari passu to the tranche containing the relevant securitisation position including the exposure itself to the outstanding balance of all the underlying exposures in the securitisation.
2. For the purposes of Subsection 3, institutions shall set the detachment point (D) at the threshold at which losses within the pool of underlying exposures would result in a complete loss of principal for the tranche containing the relevant securitisation position.
The detachment point (D) shall be expressed as a decimal value between zero and one and shall be equal to the greater of zero and the ratio of the outstanding balance of the pool of underlying exposures in the securitisation minus the outstanding balance of all tranches that rank senior to the tranche containing the relevant securitisation position to the outstanding balance of all the underlying exposures in the securitisation.
3. For the purposes of paragraphs 1 and 2, institutions shall treat overcollateralisation and funded reserve accounts as tranches and the assets comprising such reserve accounts as underlying exposures.
4. For the purposes of paragraphs 1 and 2, institutions shall disregard unfunded reserve accounts and assets that do not provide credit enhancement, such as those that only provide liquidity support, currency or interest rate swaps and cash collateral accounts related to those positions in the securitisation. For funded reserve accounts and assets providing credit enhancement, the institution shall only treat as securitisation positions the parts of those accounts or assets that are loss-absorbing.
5. Where two or more positions of the same transaction have different maturities but share pro rata loss allocation, the calculation of the attachment points (A) and the detachment points (D) shall be based on the aggregated outstanding balance of those positions and the resulting attachment points (A) and detachment points (D) shall be the same.

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before (02013R0575-20180101)

Article 257
Credit risk mitigation for securitisation positions subject to the Standardised Approach
Where credit protection is obtained on a securitisation position, the calculation of risk-weighted exposure amounts may be amended in accordance with Chapter 4.

after (02013R0575-20190101)

Article 257
Determination of tranche maturity (MT)
1. For the purposes of Subsection 3 and subject to paragraph 2, institutions may measure the maturity of a tranche (MT) as either:
(a) the weighted average maturity of the contractual payments due under the tranche in accordance with the following formula:
t t · CFtt CFt,
where CFt denotes all contractual payments (principal, interests and fees) payable by the borrower during period t; or
(b) the final legal maturity of the tranche in accordance with the following formula:
MT 1 ML 1 * 80 %,
where ML is the final legal maturity of the tranche.
2. For the purposes of paragraph 1, the determination of a tranche maturity (MT) shall be subject in all cases to a floor of 1 year and a cap of 5 years.
3. Where an institution may become exposed to potential losses from the underlying exposures by virtue of contract, the institution shall determine the maturity of the securitisation position by taking into account the maturity of the contract plus the longest maturity of such underlying exposures. For revolving exposures, the longest contractually possible remaining maturity of the exposure that might be added during the revolving period shall apply.
4. The EBA shall monitor the range of practices in this area, with particular regard to the application of point (a) of paragraph 1 of this Article, and shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines by 31 December 2019.

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before (02013R0575-20180101)

Article 258
Reduction in risk-weighted exposure amounts
Where a securitisation position is assigned a 1250 % risk weight, institutions may in accordance with Article 36(1)(k), as an alternative to including the position in their calculation of risk-weighted exposure amounts, deduct from Common Equity Tier 1 capital the exposure value of the position. For these purposes, the calculation of the exposure value may reflect eligible funded credit protection in a manner consistent with Article 257.
Where an originator institution makes use of this alternative, it may subtract 12,5 times the amount deducted in accordance with Article 36(1)(k) from the amount specified in Article 252 as the risk-weighted exposure amount which would currently be calculated for the securitised exposures had they not been securitised.

after (02013R0575-20190101)

Article 258
Conditions for the use of the Internal Ratings Based Approach (SEC-IRBA)
1. Institutions shall use the SEC-IRBA to calculate risk-weighted exposure amounts in relation to a securitisation position where the following conditions are met:
(a) the position is backed by an IRB pool or a mixed pool, provided that, in the latter case, the institution is able to calculate KIRB in accordance with Section 3 on a minimum of 95 % of the underlying exposure amount;
(b) there is sufficient information available in relation to the underlying exposures of the securitisation for the institution to be able to calculate KIRB; and
(c) the institution has not been precluded from using the SEC-IRBA in relation to a specified securitisation position in accordance with paragraph 2.
2. Competent authorities may on a case-by-case basis preclude the use of the SEC-IRBA where securitisations have highly complex or risky features. For these purposes, the following may be regarded as highly complex or risky features:
(a) credit enhancement that can be eroded for reasons other than portfolio losses;
(b) pools of underlying exposures with a high degree of internal correlation as a result of concentrated exposures to single sectors or geographical areas;
(c) transactions where the repayment of the securitisation positions is highly dependent on risk drivers not reflected in KIRB; or
(d) highly complex loss allocations between tranches.

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before (02013R0575-20180101)

Article 259
Hierarchy of methods
1. Institutions shall use the methods in accordance with the following hierarchy:
(a) for a rated position or a position in respect of which an inferred rating may be used, the Ratings Based Method set out in Article 261 shall be used to calculate the risk-weighted exposure amount;
(b) for an unrated position the institution may use the Supervisory Formula Method set out in Article 262 where it can produce estimates of PD, and where applicable exposure value and LGD as inputs into the Supervisory Formula Method in accordance with the requirements for the estimation of those parameters under the Internal Ratings Based approach in accordance with Section 3. An institution other than the originator institution may only use the Supervisory Formula Method subject to the prior permission of the competent authorities, which shall only be granted where the institution fulfils the condition provided in the first sentence of this point;
(c) as an alternative to point (b) and only for unrated positions in ABCP programmes, the institution may use the Internal Assessment Approach as set out in paragraph 4 if the competent authorities have permitted it to do so;
(d) in all other cases, a risk weight of 1250 % shall be assigned to securitisation positions which are unrated;
(e) notwithstanding point (d), and subject to the prior permission by the competent authorities, an institution may calculate the risk weight for an unrated position in an ABCP programme in accordance with Article 253 or 254, if the unrated position is not in commercial paper and falls within the scope of application of an Internal Assessment Approach for which permission is being sought. The aggregated exposure values treated by this exception shall not be material and in any case less than 10 % of the aggregate exposure values treated by the institution under the Internal Assessment Approach. The institution shall stop making use of this when the permission for the relevant Internal Assessment Approach has been refused.
2. For the purposes of using inferred ratings, an institution shall attribute to an unrated position an inferred credit assessment equivalent to the credit assessment of a rated reference position which is the most senior position which is in all respects subordinate to the unrated securitisation position in question and meets all of the following conditions:
(a) the reference positions shall be subordinate in all respects to the unrated securitisation position;
(b) the maturity of the reference positions shall be equal to or longer than that of the unrated position in question;
(c) on an ongoing basis, any inferred rating shall be updated to reflect any changes in the credit assessment of the reference positions.
3. The competent authorities shall grant institutions permission to use the Internal Assessment Approach as set out in paragraph 4 where all of the following conditions are met:
(a) positions in the commercial paper issued from the ABCP programme shall be rated positions;
(b) the internal assessment of the credit quality of the position shall reflect the publicly available assessment methodology of one or more ECAIs, for the rating of securities backed by the exposures of the type securitised;
(c) the ECAIs, the methodology of which shall be reflected as required by point (b), shall include those ECAIs which have provided an external rating for the commercial paper issued from the ABCP programme. Quantitative elements, such as stress factors, used in assessing the position to a particular credit quality shall be at least as conservative as those used in the relevant assessment methodology of the ECAIs in question;
(d) in developing its internal assessment methodology the institution shall take into consideration relevant published ratings methodologies of the ECAIs that rate the commercial paper of the ABCP programme. This consideration shall be documented by the institution and updated regularly, as outlined in point (g);
(e) the institution's internal assessment methodology shall include rating grades. There shall be a correspondence between such rating grades and the credit assessments of ECAIs. This correspondence shall be explicitly documented;
(f) the internal assessment methodology shall be used in the institution's internal risk management processes, including its decision making, management information and internal capital allocation processes;
(g) internal or external auditors, an ECAI, or the institution's internal credit review or risk management function shall perform regular reviews of the internal assessment process and the quality of the internal assessments of the credit quality of the institution's exposures to an ABCP programme. If the institution's internal audit, credit review, or risk management functions perform the review, then these functions shall be independent of the ABCP programme business line, as well as the customer relationship;
(h) the institution shall track the performance of its internal ratings over time to evaluate the performance of its internal assessment methodology and shall make adjustments, as necessary, to that methodology when the performance of the exposures routinely diverges from that indicated by the internal ratings;
(i) the ABCP programme shall incorporate underwriting standards in the form of credit and investment guidelines. In deciding on an asset purchase, the ABCP programme administrator shall consider the type of asset being purchased, the type and monetary value of the exposures arising from the provision of liquidity facilities and credit enhancements, the loss distribution, and the legal and economic isolation of the transferred assets from the entity selling the assets. A credit analysis of the asset seller's risk profile shall be performed and shall include analysis of past and expected future financial performance, current market position, expected future competitiveness, leverage, cash flow, interest coverage and debt rating. In addition, a review of the seller's underwriting standards, servicing capabilities, and collection processes shall be performed;
(j) the ABCP programme's underwriting standards shall establish minimum asset eligibility criteria that, in particular:
(i) exclude the purchase of assets that are significantly past due or defaulted;
(ii) limit excess concentration to individual obligor or geographic area;
(iii) limits the tenor of the assets to be purchased;
(k) the ABCP programme shall have collections policies and processes that take into account the operational capability and credit quality of the servicer. The ABCP programme shall mitigate risk relating to the performance of the seller and the servicer through various methods, such as triggers based on current credit quality that would preclude commingling of funds;
(l) the aggregated estimate of loss on an asset pool that the ABCP programme is considering purchasing shall take into account all sources of potential risk, such as credit and dilution risk. If the seller-provided credit enhancement is sized based only on credit-related losses, then a separate reserve shall be established for dilution risk, if dilution risk is material for the particular exposure pool. In addition, in sizing the required enhancement level, the program shall review several years of historical information, including losses, delinquencies, dilutions, and the turnover rate of the receivables;
(m) the ABCP programme shall incorporate structural features, such as wind-down triggers, into the purchase of exposures in order to mitigate potential credit deterioration of the underlying portfolio.
4. Under the Internal Assessment Approach, the unrated position shall be assigned by the institution to one of the rating grades laid down in point (e) of paragraph 3. The position shall be attributed a derived rating the same as the credit assessments corresponding to that rating grade as laid down in point (e) of paragraph 3. Where this derived rating is, at the inception of the securitisation, at the level of investment grade or better, it shall be considered the same as an eligible credit assessment by an ECAI for the purposes of calculating risk-weighted exposure amounts.
5. Institutions which have obtained permission to use the Internal Assessment Approach shall not revert to the use of other methods unless all of the following conditions are met:
(a) the institution has demonstrated to the satisfaction of the competent authority that the institution has good cause to do so;
(b) the institution has received the prior permission of the competent authority.

after (02013R0575-20190101)

Article 259
Calculation of risk-weighted exposure amounts under the SEC-IRBA
1. Under the SEC-IRBA, the risk-weighted exposure amount for a securitisation position shall be calculated by multiplying the exposure value of the position calculated in accordance with Article 248 by the applicable risk weight determined as follows, in all cases subject to a floor of 15 %:
RW = 1250 % when D ≤ KIRB
RW 12,5 · KSSFAKIRB when A ≥ KIRB
RWKIRB AD A · 12.5 D KIRBD A · 12.5 · KSSFAKIRB when A < KIRB < D
where:
KIRB
is the capital charge of the pool of underlying exposures as defined in Article 255
D
is the detachment point as determined in accordance with Article 256
A
is the attachment point as determined in accordance with Article 256KSSFAKIRBea · u ea · lau l
where:
a
– (1/(p * KIRB))
u
D – KIRB
l
max (A – KIRB; 0)
where:pmax 0,3; A B*1N C* KIRB D*LGD E*MT
where:
N
is the effective number of exposures in the pool of underlying exposures, calculated in accordance with paragraph 4;
LGD
is the exposure-weighted average loss-given-default of the pool of underlying exposures, calculated in accordance with paragraph 5;
MT
is the maturity of the tranche as determined in accordance with Article 257.
The parameters A, B, C, D, and E shall be determined according to the following look-up table:
A B C D E
Non-retail Senior, granular (N ≥ 25) 0 3,56 –1,85 0,55 0,07
Senior, non-granular (N < 25) 0,11 2,61 –2,91 0,68 0,07
Non-senior, granular (N ≥ 25) 0,16 2,87 –1,03 0,21 0,07
Non-senior, non-granular (N < 25) 0,22 2,35 –2,46 0,48 0,07
Retail Senior 0 0 –7,48 0,71 0,24
Non-senior 0 0 –5,78 0,55 0,27
2. If the underlying IRB pool comprises both retail and non-retail exposures, the pool shall be divided into one retail and one non-retail subpool and, for each subpool, a separate p-parameter (and the corresponding input parameters N, KIRB and LGD) shall be estimated. Subsequently, a weighted average p-parameter for the transaction shall be calculated on the basis of the p-parameters of each subpool and the nominal size of the exposures in each subpool.
3. Where an institution applies the SEC-IRBA to a mixed pool, the calculation of the p-parameter shall be based on the underlying exposures subject to the IRB Approach only. The underlying exposures subject to the Standardised Approach shall be ignored for these purposes.
4. The effective number of exposures (N) shall be calculated as follows: Ni EADi2i EAD2i
where EADi represents the exposure value associated with the ith exposure in the pool.
Multiple exposures to the same obligor shall be consolidated and treated as a single exposure.
5. The exposure-weighted average LGD shall be calculated as follows: LGDi LGDi · EADii EADi
where LGDi represents the average LGD associated with all exposures to the ith obligor.
Where credit and dilution risks for purchased receivables are managed in an aggregate manner in a securitisation, the LGD input shall be construed as a weighted average of the LGD for credit risk and 100 % LGD for dilution risk. The weights shall be the stand-alone IRB Approach capital requirements for credit risk and dilution risk, respectively. For these purposes, the presence of a single reserve fund or overcollateralisation available to cover losses from either credit or dilution risk may be regarded as an indication that these risks are managed in an aggregate manner.
6. Where the share of the largest underlying exposure in the pool (C1) is no more than 3 %, institutions may use the following simplified method to calculate N and the exposure-weighted average LGDs:NC1 · Cm Cm C1m 1 · max1 m · C1,0–1
LGD = 0,50
where
Cm
denotes the share of the pool corresponding to the sum of the largest m exposures; and
m
is set by the institution.
If only C1 is available and this amount is no more than 0,03, then the institution may set LGD as 0,50 and N as 1/C1.
7. Where the position is backed by a mixed pool and the institution is able to calculate KIRB on at least 95 % of the underlying exposure amounts in accordance with point (a) of Article 258(1), the institution shall calculate the capital charge for the pool of underlying exposures as:d · KIRB 1 d · KSA,
where
d is the share of the exposure amount of underlying exposures for which the institution can calculate KIRB over the exposure amount of all underlying exposures.
8. Where an institution has a securitisation position in the form of a derivative to hedge market risks, including interest rate or currency risks, the institution may attribute to that derivative an inferred risk weight equivalent to the risk weight of the reference position calculated in accordance with this Article.
For the purposes of the first subparagraph, the reference position shall be the position that is pari passu in all respects to the derivative or, in the absence of such pari passu position, the position that is immediately subordinate to the derivative.

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before (02013R0575-20180101)

Article 260
Maximum risk-weighted exposure amounts
An originator institution, a sponsor institution, or other institutions which can calculate KIRB may limit the risk-weighted exposure amounts calculated in respect of its positions in a securitisation to that which would produce a own funds requirement under Article 92(3) equal to the sum of 8 % of the risk-weighted exposure amounts which would be produced if the securitised assets had not been securitised and were on the balance sheet of the institution plus the expected loss amounts of those exposures.

after (02013R0575-20190101)

Article 260
Treatment of STS securitisations under the SEC-IRBA
Under the SEC-IRBA, the risk weight for a position in an STS securitisation shall be calculated in accordance with Article 259, subject to the following modifications:
risk-weight floor for senior securitisation positions = 10 %pmax 0,3; 0,5 · A B · 1N C · KIRB D · LGD E · MT

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before (02013R0575-20180101)

Article 261
Ratings Based Method
1. Under the Ratings Based Method, the institution shall calculate the risk-weighted exposure amount of a rated securitisation or re-securitisation position by applying the relevant risk weight to the exposure value and multiplying the result by 1,06.
The relevant risk weight shall be the risk weight as laid down in Table 4, with which the credit assessment of the position is associated in accordance with Section 4.
Table 4
Credit Quality Step Securitisation Positions Re-securitisation Positions
Credit assessments other than short term Short term credit assessments A B C D E
1 1 7 % 12 % 20 % 20 % 30 %
2 8 % 15 % 25 % 25 % 40 %
3 10 % 18 % 35 % 35 % 50 %
4 2 12 % 20 % 40 % 65 %
5 20 % 35 % 60 % 100 %
6 35 % 50 % 100 % 150 %
7 3 60 % 75 % 150 % 225 %
8 100 % 200 % 350 %
9 250 % 300 % 500 %
10 425 % 500 % 650 %
11 650 % 750 % 850 %
all other and unrated 1250 %
The weightings in column C of Table 4 shall be applied where the securitisation position is not a re-securitisation position and where the effective number of exposures securitised is less than six.
For the remainder of the securitisation positions that are not re-securitisation positions, the weightings in column B shall be applied unless the position is in the most senior tranche of a securitisation, in which case the weightings in column A shall be applied.
For re-securitisation positions the weightings in column E shall be applied unless the re-securitisation position is in the most senior tranche of the re-securitisation and none of the underlying exposures are themselves re-securitisation exposures, in which case column D shall be applied.
When determining whether a tranche is the most senior, it is not required to take into consideration amounts due under interest rate or currency derivative contracts, fees due, or other similar payments.
In calculating the effective number of exposures securitised multiple exposures to one obligor shall be treated as one exposure. The effective number of exposures is calculated as:NiEADi2iEADi2
where EADi represents the sum of the exposure values of all exposures to the ith obligor. If the portfolio share associated with the largest exposure, C1, is available, the institution may compute N as 1/C1.
2. Credit risk mitigation on securitisation positions may be recognised in accordance with Article 264(1) and (4), subject to the conditions in Article 247.

after (02013R0575-20190101)

Article 261
Calculation of risk-weighted exposure amounts under the Standardised Approach (SEC-SA)
1. Under the SEC-SA, the risk-weighted exposure amount for a position in a securitisation shall be calculated by multiplying the exposure value of the position as calculated in accordance with Article 248 by the applicable risk weight determined as follows, in all cases subject to a floor of 15 %:
RW = 1250 % when D ≤ KA
RW 12.5 · KSSFAKA when A ≥ KA
RWKA AD A · 12.5 D KAD A · 12.5 · KSSFAKA when A < KA < D
where:
D
is the detachment point as determined in accordance with Article 256;
A
is the attachment point as determined in accordance with Article 256;
KA
is a parameter calculated in accordance with paragraph 2;KSSFAKAea · u ea · lau l
where:
a
– (1/(p · KA))
u
D – KA
l
max (A – KA; 0)
p
1 for a securitisation exposure that is not a re-securitisation exposure
2. For the purposes of paragraph 1, KA shall be calculated as follows:KA1 W · KSA W · 0.5
where:
KSA is the capital charge of the underlying pool as defined in Article 255;
W = ratio of:
(a) the sum of the nominal amount of underlying exposures in default, to
(b) the sum of the nominal amount of all underlying exposures.
For these purposes, an exposure in default shall mean an underlying exposure which is either: (i) 90 days or more past due; (ii) subject to bankruptcy or insolvency proceedings; (iii) subject to foreclosure or similar proceeding; or (iv) in default in accordance with the securitisation documentation.
Where an institution does not know the delinquency status for 5 % or less of underlying exposures in the pool, the institution may use the SEC-SA subject to the following adjustment in the calculation KA:KAEADSubpool 1 where W knownEAD Total KSubpool 1 where W knownA EADSubpool 2 where W unknownEAD Total
Where the institution does not know the delinquency status for more than 5 % of underlying exposures in the pool, the position in the securitisation must be risk-weighted at 1250 %.
3. Where an institution has a securitisation position in the form of a derivative to hedge market risks, including interest rate or currency risks, the institution may attribute to that derivative an inferred risk weight equivalent to the risk weight of the reference position calculated in accordance with this Article.
For the purposes of this paragraph, the reference position shall be the position that is pari passu in all respects to the derivative or, in the absence of such pari passu position, the position that is immediately subordinate to the derivative.

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before (02013R0575-20180101)

Article 262
Supervisory Formula Method
1. Under the Supervisory Formula Method, the risk weight for a securitisation position shall be calculated as follows subject to a floor of 20 % for re-securitisation positions and 7 % for all other securitisation positions:12.5  SL  T  SLT
where:
S[x] = x, when x ≤ KIRBR
KIRBR Kx  KKIRBR1  expω KIRBR  xKIRBR  d  KIRBRω, when x > KIRBR
where:h1  KIRBRELGDNcKIRBR1  hvELGD  KIRBR  KIRBR0,25  1  ELGD  KIRBRNfv  KIRBR21  h  c21  KIRBR  KIRBR  ν1  h τg1  c  cf  1ag  cbg  1  cd1  1  h  1  BetaKIRBR; a , bKx1  h  1  Betax;a,b  xBetax;a1,b  c
τ
1000;
ω
20;
Beta [x; a, b]
the cumulative beta distribution with parameters a and b evaluated at x;
T
the thickness of the tranche in which the position is held, measured as the ratio of (a) the nominal amount of the tranche to (b) the sum of the nominal amounts of the exposures that have been securitised. For derivative instruments listed in Annex II, the sum of the current replacement cost and the potential future credit exposure calculated in accordance with Chapter 6 shall be used in place of the nominal amount;
KIRBR
the ratio of (a) KIRB to (b) the sum of the exposure values of the exposures that have been securitised, and is expressed in decimal form;
L
the credit enhancement level, measured as the ratio of the nominal amount of all tranches subordinate to the tranche in which the position is held to the sum of the nominal amounts of the exposures that have been securitised. Capitalised future income shall not be included in the measured L. Amounts due by counterparties to derivative instruments listed in Annex II that represent tranches more junior than the tranche in question may be measured at their current replacement cost, without the potential future credit exposures, in calculating the enhancement level;
N
the effective number of exposures calculated in accordance with Article 261. In the case of re-securitisations, the institution shall look at the number of securitisation exposures in the pool and not the number of underlying exposures in the original pools from which the underlying securitisation exposures stem;
ELGD
the exposure-weighted average loss-given-default, calculated as follows:ELGDiLGDi  EADiiEADi
where:
LGDi
the average LGD associated with all exposures to the ith obligor, where LGD is determined in accordance with Chapter 3. In the case of re-securitisation, an LGD of 100 % shall be applied to the securitised positions. When default and dilution risk for purchased receivables are treated in an aggregate manner within a securitisation, the LGDi input shall be constructed as a weighted average of the LGD for credit risk and the 75 % LGD for dilution risk. The weights shall be the stand-alone own funds charges for credit risk and dilution risk respectively.
2. Where the nominal amount of the largest securitised exposure, C1, is no more than 3 % of the sum of the nominal amount of the securitised exposures, then, for the purposes of the Supervisory Formula Method, the institution may set LGD= 50 % in the case of securitisations, which are not re-securitisations, and N equal to either of the following:NC1  CmCm  C 1m  1  max1  m  C1,01N1C1
where:
Cm
the ratio of the sum of the nominal amounts of the largest m exposures to the sum of the nominal amounts of the exposures securitised. The level of m may be set by the institution.
For securitisations in which materially all securitised exposures are retail exposures, institutions may, subject to permission by the competent authority, use the Supervisory Formula Method using the simplifications h=0 and v=0, provided that the effective number of exposures is not low and that the exposures are not highly concentrated.
3. The competent authorities shall keep EBA informed about the use institutions make of paragraph 2. EBA shall monitor the range of practices in this area and shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines.
4. Credit risk mitigation on securitisation positions may be recognised in accordance with Article 264(2) to (4), subject to the conditions in Article 247.

after (02013R0575-20190101)

Article 262
Treatment of STS securitisations under the SEC-SA
Under the SEC-SA the risk weight for a position in an STS securitisation shall be calculated in accordance with Article 261, subject to the following modifications:
risk-weight floor for senior securitisation positions = 10 %
p = 0,5

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before (02013R0575-20180101)

Article 263
Liquidity Facilities
1. For the purposes of determining the exposure value of an unrated securitisation position in the form of cash advance facilities, a conversion factor of 0 % may be applied to the nominal amount of a liquidity facility that meets the conditions set out in Article 255(2).
2. When it is not possible for the institution to calculate the risk-weighted exposure amounts for the securitised exposures as if they had not been securitised, an institution may, on an exceptional basis and subject to the permission of the competent authorities, temporarily apply the method set out in paragraph 3 for the calculation of risk-weighted exposure amounts for an unrated securitisation position in the form of liquidity facility that meets the conditions in Article 255(1). Institutions shall notify the use they make of the first sentence to the competent authorities, together with its reasons and the intended time period of use.
The calculation of risk-weighted exposure amounts shall, in general, be deemed not to be possible if an inferred rating, the Internal Assessment Approach and the Supervisory Formula Approach are not at the institution's disposal.
3. The highest risk weight that would be applied under Chapter 2 to any of the securitised exposures, had they not been securitised, may be applied to the securitisation position represented by a liquidity facility that meets the conditions in Article 255(1). To determine the exposure value of the position a conversion factor of 100 % shall be applied.

after (02013R0575-20190101)

Article 263
Calculation of risk-weighted exposure amounts under the External Ratings Based Approach (SEC-ERBA)
1. Under the SEC-ERBA, the risk-weighted exposure amount for a securitisation position shall be calculated by multiplying the exposure value of the position as calculated in accordance with Article 248 by the applicable risk weight in accordance with this Article.
2. For exposures with short-term credit assessments or when a rating based on a short-term credit assessment may be inferred in accordance with paragraph 7, the following risk weights shall apply:
Table 1
Credit Quality Step 1 2 3 All other ratings
Risk weight 15 % 50 % 100 % 1250 %
3. For exposures with long-term credit assessments or when a rating based on a long-term credit assessment may be inferred in accordance with paragraph 7 of this Article, the risk weights set out in Table 2 shall apply, adjusted as applicable for tranche maturity (MT) in accordance with Article 257 and paragraph 4 of this Article and for tranche thickness for non-senior tranches in accordance with paragraph 5 of this Article:
Table 2
Credit Quality Step Senior tranche Non-senior (thin) tranche
Tranche maturity (MT) Tranche maturity (MT)
1 year 5 years 1 year 5 years
1 15 % 20 % 15 % 70 %
2 15 % 30 % 15 % 90 %
3 25 % 40 % 30 % 120 %
4 30 % 45 % 40 % 140 %
5 40 % 50 % 60 % 160 %
6 50 % 65 % 80 % 180 %
7 60 % 70 % 120 % 210 %
8 75 % 90 % 170 % 260 %
9 90 % 105 % 220 % 310 %
10 120 % 140 % 330 % 420 %
11 140 % 160 % 470 % 580 %
12 160 % 180 % 620 % 760 %
13 200 % 225 % 750 % 860 %
14 250 % 280 % 900 % 950 %
15 310 % 340 % 1050 % 1050 %
16 380 % 420 % 1130 % 1130 %
17 460 % 505 % 1250 % 1250 %
All other 1250 % 1250 % 1250 % 1250 %
4. In order to determine the risk weight for tranches with a maturity between 1 and 5 years, institutions shall use linear interpolation between the risk weights applicable for 1 and 5 years maturity respectively in accordance with Table 2.
5. In order to account for tranche thickness, institutions shall calculate the risk weight for non-senior tranches as follows:RWRW after adjusting for maturity according to paragraph 4 · 1 minT; 50 %
where
T = tranche thickness measured as D – A
where
D
is the detachment point as determined in accordance with Article 256
A
is the attachment point as determined in accordance with Article 256
6. The risk weights for non-senior tranches resulting from paragraphs 3, 4 and 5 shall be subject to a floor of 15 %. In addition, the resulting risk weights shall be no lower than the risk weight corresponding to a hypothetical senior tranche of the same securitisation with the same credit assessment and maturity.
7. For the purposes of using inferred ratings, institutions shall attribute to an unrated position an inferred rating equivalent to the credit assessment of a rated reference position which meets all of the following conditions:
(a) the reference position ranks pari passu in all respects to the unrated securitisation position or, in the absence of a pari passu ranking position, the reference position is immediately subordinate to the unrated position;
(b) the reference position does not benefit from any third-party guarantees or other credit enhancements that are not available to the unrated position;
(c) the maturity of the reference position shall be equal to or longer than that of the unrated position in question;
(d) on an ongoing basis, any inferred rating shall be updated to reflect any changes in the credit assessment of the reference position.
8. Where an institution has a securitisation position in the form of a derivative to hedge market risks, including interest rate or currency risks, the institution may attribute to that derivative an inferred risk weight equivalent to the risk weight of the reference position calculated in accordance with this Article.
For the purposes of the first subparagraph, the reference position shall be the position that is pari passu in all respects to the derivative or, in the absence of such pari passu position, the position that is immediately subordinate to the derivative.

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before (02013R0575-20180101)

Article 264
Credit risk mitigation for securitisation positions subject to the IRB Approach
1. Where risk-weighted exposure amounts are calculated using the Ratings Based Method, the exposure value or the risk-weight for a securitisation position in respect of which credit protection has been obtained may be amended in accordance with the provisions of Chapter 4 as they apply for the calculation of risk-weighted exposure amounts under Chapter 2.
2. In the case of full credit protection, where risk-weighted exposure amounts are calculated using the Supervisory Formula Method, the following requirements shall apply:
(a) the institution shall determine the effective risk weight of the position. It shall do this by dividing the risk-weighted exposure amount of the position by the exposure value of the position and multiplying the result by 100;
(b) in the case of funded credit protection, the risk-weighted exposure amount of the securitisation position shall be calculated by multiplying the funded protection-adjusted exposure amount of the position (E*), as calculated under Chapter 4 for the calculation of risk-weighted exposure amounts under Chapter 2 taking the amount of the securitisation position to be E, by the effective risk weight;
(c) in the case of unfunded credit protection, the risk-weighted exposure amount of the securitisation position shall be calculated by multiplying the amount of the protection adjusted for any currency mismatch and maturity mismatch (GA) in accordance with the provisions of Chapter 4 by the risk weight of the protection provider; and adding this to the amount arrived at by multiplying the amount of the securitisation position minus GA by the effective risk weight.
3. In the case of partial protection, where risk-weighted exposure amounts are calculated using the Supervisory Formula Method, the following requirements shall apply:
(a) if the credit risk mitigation covers the first loss or losses on a proportional basis on the securitisation position, the institution may apply paragraph 2;
(b) in other cases, the institution shall treat the securitisation position as two or more positions with the uncovered portion being considered the position with the lower credit quality. For the purposes of calculating the risk-weighted exposure amount for this position, the provisions in Article 262 shall apply subject to the adjustment of T to e* in the case of funded credit protection and to T-g in the case of unfunded credit protection, where e* denotes the ratio of E* to the total notional amount of the underlying pool, where E* is the adjusted exposure amount of the securitisation position calculated in accordance with the provisions of Chapter 4 as they apply for the calculation of risk-weighted exposure amounts under Chapter 2 taking the amount of the securitisation position to be E; and g is the ratio of the nominal amount of credit protection, adjusted for any currency or maturity mismatch in accordance with the provisions of Chapter 4, to the sum of the exposure amounts of the securitised exposures. In the case of unfunded credit protection the risk weight of the protection provider shall be applied to that portion of the position not falling within the adjusted value of T.
4. Where, in the case of unfunded credit protection, competent authorities have granted the institution permission to calculate risk-weighted exposure amounts for comparable direct exposures to the protection provider in accordance with Chapter 3, the risk weight g of exposures to the protection provider in accordance with Article 235 shall be determined as specified in Chapter 3.

after (02013R0575-20190101)

Article 264
Treatment of STS securitisations under the SEC-ERBA
1. Under the SEC-ERBA, the risk weight for a position in an STS securitisation shall be calculated in accordance with Article 263, subject to the modifications laid down in this Article.
2. For exposures with short-term credit assessments or when a rating based on a short-term credit assessment may be inferred in accordance with Article 263(7), the following risk weights shall apply:
Table 3
Credit Quality Step 1 2 3 All other ratings
Risk weight 10 % 30 % 60 % 1250 %
3. For exposures with long-term credit assessments or when a rating based on a long-term credit assessment may be inferred in accordance with Article 263(7), risk weights shall be determined in accordance with Table 4, adjusted for tranche maturity (MT) in accordance with Article 257 and Article 263(4) and for tranche thickness for non-senior tranches in accordance with Article 263(5):
Table 4
Credit Quality Step Senior tranche Non-senior (thin) tranche
Tranche maturity (MT) Tranche maturity (MT)
1 year 5 years 1 year 5 years
1 10 % 10 % 15 % 40 %
2 10 % 15 % 15 % 55 %
3 15 % 20 % 15 % 70 %
4 15 % 25 % 25 % 80 %
5 20 % 30 % 35 % 95 %
6 30 % 40 % 60 % 135 %
7 35 % 40 % 95 % 170 %
8 45 % 55 % 150 % 225 %
9 55 % 65 % 180 % 255 %
10 70 % 85 % 270 % 345 %
11 120 % 135 % 405 % 500 %
12 135 % 155 % 535 % 655 %
13 170 % 195 % 645 % 740 %
14 225 % 250 % 810 % 855 %
15 280 % 305 % 945 % 945 %
16 340 % 380 % 1015 % 1015 %
17 415 % 455 % 1250 % 1250 %
All other 1250 % 1250 % 1250 % 1250 %

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before (02013R0575-20180101)

Article 265
Additional own funds requirements for securitisations of revolving exposures with early amortisation provisions
1. In addition to the risk-weighted exposure amounts calculated in respect of its securitisation positions, an originator institution shall calculate a risk-weighted exposure amount in accordance with the methodology set out in Article 256 when it sells revolving exposures into a securitisation that contains an early amortisation provision.
2. By way of derogation from Article 256, the exposure value of the originators interest shall be the sum of the following items:
(a) the exposure value of that notional part of a pool of drawn amounts sold into a securitisation, the proportion of which in relation to the amount of the total pool sold into the structure determines the proportion of the cash flows generated by principal and interest collections and other associated amounts which are not available to make payments to those having securitisation positions in the securitisation;
(b) the exposure value of that part of the pool of undrawn amounts of the credit lines, the drawn amounts of which have been sold into the securitisation, the proportion of which to the total amount of such undrawn amounts is the same as the proportion of the exposure value described in point (a) to the exposure value of the pool of drawn amounts sold into the securitisation.
The originator's interest shall not be subordinate to the investors' interest.
The exposure value of the Investors' interest shall be the exposure value of the notional part of the pool of drawn amounts not falling within point (a) plus the exposure value of that part of the pool of undrawn amounts of credit lines, the drawn amounts of which have been sold into the securitisation, not falling within point (b).
3. The risk-weighted exposure amount in respect of the exposure value of the originator's interest in accordance with point (a) of paragraph 2 shall be calculated as that for a pro-rata exposure to the securitised drawn amounts exposures as if they had not been securitised and a pro rata exposure to the undrawn amounts of the credit lines, the drawn amounts of which have been sold into the securitisation.

after (02013R0575-20190101)

Article 265
Scope and operational requirements for the Internal Assessment Approach
1. Institutions may calculate the risk-weighted exposure amounts for unrated positions in ABCP programmes or ABCP transactions under the Internal Assessment Approach in accordance with Article 266 where the conditions set out in paragraph 2 of this Article are met.
Where an institution has received permission to apply the Internal Assessment Approach in accordance with paragraph 2 of this Article, and a specific position in an ABCP programme or ABCP transaction falls within the scope of application covered by such permission, the institution shall apply that approach to calculate the risk-weighted exposure amount of that position.
2. The competent authorities shall grant institutions permission to apply the Internal Assessment Approach within a clearly defined scope of application where all of the following conditions are met:
(a) all positions in the commercial paper issued from the ABCP programme are rated positions;
(b) the internal assessment of the credit quality of the position reflects the publicly available assessment methodology of one or more ECAIs for the rating of securitisation positions backed by underlying exposures of the type securitised;
(c) the commercial paper issued from the ABCP programme is predominantly issued to third-party investors;
(d) the institution’s internal assessment process is at least as conservative as the publicly available assessments of those ECAIs which have provided an external rating for the commercial paper issued from the ABCP programme, in particular with regard to stress factors and other relevant quantitative elements;
(e) the institution’s internal assessment methodology takes into account all relevant publicly available rating methodologies of the ECAIs that rate the commercial paper of the ABCP programme and includes rating grades corresponding to the credit assessments of ECAIs. The institution shall document in its internal records an explanatory statement describing how the requirements set out in this point have been met and shall update such statement on a regular basis;
(f) the institution uses the internal assessment methodology for internal risk management purposes, including in its decision-making, management information and internal capital allocation processes;
(g) internal or external auditors, an ECAI, or the institution’s internal credit review or risk management function perform regular reviews of the internal assessment process and the quality of the internal assessments of the credit quality of the institution’s exposures to an ABCP programme or ABCP transaction;
(h) the institution tracks the performance of its internal ratings over time to evaluate the performance of its internal assessment methodology and makes adjustments, as necessary, to that methodology when the performance of the exposures routinely diverges from that indicated by the internal ratings;
(i) the ABCP programme includes underwriting and liability management standards in the form of guidelines to the programme administrator on, at least:
(i) the asset eligibility criteria, subject to point (j);
(ii) the types and monetary value of the exposures arising from the provision of liquidity facilities and credit enhancements;
(iii) the loss distribution between the securitisation positions in the ABCP programme or ABCP transaction;
(iv) the legal and economic isolation of the transferred assets from the entity selling the assets;
(j) the asset eligibility criteria in the ABCP programme provide for, at least:
(i) exclusion of the purchase of assets that are significantly past due or defaulted;
(ii) limitation of excessive concentration to individual obligor or geographic area; and
(iii) limitation of the tenor of the assets to be purchased;
(k) an analysis of the asset seller’s credit risk and business profile is performed including, at least, an assessment of the seller’s:
(i) past and expected future financial performance;
(ii) current market position and expected future competitiveness;
(iii) leverage, cash flow, interest coverage and debt rating; and
(iv) underwriting standards, servicing capabilities, and collection processes;
(l) the ABCP programme has collection policies and processes that take into account the operational capability and credit quality of the servicer and comprises features that mitigate performance-related risks of the seller and the servicer. For the purposes of this point, performance-related risks may be mitigated through triggers based on the seller or servicer’s current credit quality to prevent commingling of funds in the event of the seller’s or servicer’s default;
(m) the aggregated estimate of loss on an asset pool that may be purchased under the ABCP programme takes into account all sources of potential risk, such as credit and dilution risk;
(n) where the seller-provided credit enhancement is sized based only on credit-related losses and dilution risk is material for the particular asset pool, the ABCP programme comprises a separate reserve for dilution risk;
(o) the size of the required enhancement level in the ABCP programme is calculated taking into account several years of historical information, including losses, delinquencies, dilutions, and the turnover rate of the receivables;
(p) the ABCP programme comprises structural features in the purchase of exposures in order to mitigate potential credit deterioration of the underlying portfolio. Such features may include wind-down triggers specific to a pool of exposures;
(q) the institution evaluates the characteristics of the underlying asset pool, such as its weighted-average credit score, and identifies any concentrations to an individual obligor or geographic area and the granularity of the asset pool.
3. Where the institution’s internal audit, credit review, or risk management functions perform the review provided for in point (g) of paragraph 2, those functions shall be independent from the institution’s internal functions dealing with ABCP programme business and customer relations.
4. Institutions which have received permission to apply the Internal Assessment Approach shall not revert to the use of other methods for positions that fall within scope of application of the Internal Assessment Approach unless both of the following conditions are met:
(a) the institution has demonstrated to the satisfaction of the competent authority that the institution has good cause to do so;
(b) the institution has received the prior permission of the competent authority.

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before (02013R0575-20180101)

Article 266
Reduction in risk-weighted exposure amounts
1. The risk-weighted exposure amount of a securitisation position to which a 1250 % risk weight is assigned may be reduced by 12,5 times the amount of any specific credit risk adjustments treated in accordance with Article 110 made by the institution in respect of the securitised exposures. To the extent that specific credit adjustments are taken account of for this purpose they shall not be taken account of for the purposes of the calculation laid down in Article 159.
2. The risk-weighted exposure amount of a securitisation position may be reduced by 12,5 times the amount of any specific credit risk adjustments treated in accordance with Article 110 made by the institution in respect of the position.
3. As provided in Article 36(1)(k) in respect of a securitisation position in respect of which a 1250 % risk weight applies, institutions may, as an alternative to including the position in their calculation of risk-weighted exposure amounts, deduct from own funds the exposure value of the position subject to the following:
(a) the exposure value of the position may be derived from the risk-weighted exposure amounts taking into account any reductions made in accordance with paragraphs 1 and 2;
(b) the calculation of the exposure value may reflect eligible funded protection in a manner consistent with the methodology prescribed in Articles 247 and 264;
(c) where the Supervisory Formula Method is used to calculate risk-weighted exposure amounts and L < KIRBR and [L+T] > KIRBR the position may be treated as two positions with L equal to KIRBR for the more senior of the positions.
4. Where an institution makes use of the option in paragraph 3 it may subtract 12,5 times the amount deducted in accordance with that paragraph from the amount specified in Article 260 as the amount to which the risk-weighted exposure amount in respect of its positions in a securitisation may be limited.

after (02013R0575-20190101)

Article 266
Calculation of risk-weighted exposure amounts under the Internal Assessment Approach
1. Under the Internal Assessment Approach, the institution shall assign the unrated position in the ABCP programme or ABCP transaction to one of the rating grades laid down in point (e) of Article 265(2) on the basis of its internal assessment. The position shall be attributed a derived rating which shall be the same as the credit assessments corresponding to that rating grade as laid down in point (e) of Article 265(2).
2. The rating derived in accordance with paragraph 1 shall be at least at the level of investment grade or better at the time it was first assigned and shall be regarded as an eligible credit assessment by an ECAI for the purposes of calculating risk-weighted exposure amounts in accordance with Article 263 or Article 264, as applicable.

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before (02013R0575-20180101)

Article 267
Use of Credit Assessments by ECAIs
Institutions may use credit assessments to determine the risk weight of a securitisation position only where the credit assessment has been issued or has been endorsed by an ECAI in accordance with Regulation (EC) No 1060/2009.

after (02013R0575-20190101)

Article 267
Maximum risk weight for senior securitisation positions: look-through approach
1. An institution which has knowledge at all times of the composition of the underlying exposures may assign the senior securitisation position a maximum risk weight equal to the exposure-weighted-average risk weight that would be applicable to the underlying exposures as if the underlying exposures had not been securitised.
2. In the case of pools of underlying exposures where the institution uses exclusively the Standardised Approach or the IRB Approach, the maximum risk weight of the senior securitisation position shall be equal to the exposure-weighted-average risk weight that would apply to the underlying exposures under Chapter 2 or 3, respectively, as if they had not been securitised.
In the case of mixed pools the maximum risk weight shall be calculated as follows:
(a) where the institution applies the SEC-IRBA, the Standardised Approach portion and the IRB Approach portion of the underlying pool shall each be assigned the corresponding Standardised Approach risk weight and IRB Approach risk weight respectively;
(b) where the institution applies the SEC-SA or the SEC-ERBA, the maximum risk weight for senior securitisation positions shall be equal to the Standardised Approach weighted-average risk weight of the underlying exposures.
3. For the purposes of this Article, the risk weight that would be applicable under the IRB Approach in accordance with Chapter 3 shall include the ratio of:
(a) expected losses multiplied by 12,5 to
(b) the exposure value of the underlying exposures.
4. Where the maximum risk weight calculated in accordance with paragraph 1 results in a lower risk weight than the risk-weight floors set out in Articles 259 to 264, as applicable, the former shall be used instead.

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before (02013R0575-20180101)

Article 268
Requirements to be met by the credit assessments of ECAIs
For the purposes of calculating risk-weighted exposure amounts in accordance with Section 3, institutions shall only use a credit assessment of an ECAI if the following conditions are met:
(a) there shall be no mismatch between the types of payments reflected in the credit assessment and the types of payment to which the institution is entitled under the contract giving rise to the securitisation position in question;
(b) loss and cash-flow analysis as well as sensitivity of ratings to changes in the underlying ratings assumptions, including the performance of pool assets, shall be published by the ECAI as well as the credit assessments, procedures, methodologies, assumptions, and the key elements underpinning the assessments in accordance with Regulation (EC) No 1060/2009. Information that is made available only to a limited number of entities shall not be considered to have been published. The credit assessments shall be included in the ECAI's transition matrix;
(c) the credit assessment shall not be based or partly based on unfunded support provided by the institution itself. In such case, the institution shall consider the relevant position for the purposes of calculating risk-weighted exposure amounts for this position in accordance with Section 3 as if it were not rated.
The ECAI shall be committed to publish explanations how the performance of pool assets affects this credit assessment.

after (02013R0575-20190101)

Article 268
Maximum capital requirements
1. An originator institution, a sponsor institution or other institution using the SEC-IRBA or an originator institution or sponsor institution using the SEC-SA or the SEC-ERBA may apply a maximum capital requirement for the securitisation position it holds equal to the capital requirements that would be calculated under Chapter 2 or 3 in respect of the underlying exposures had they not been securitised. For the purposes of this Article, the IRB Approach capital requirement shall include the amount of the expected losses associated with those exposures calculated under Chapter 3 and that of unexpected losses.
2. In the case of mixed pools, the maximum capital requirement shall be determined by calculating the exposure-weighted average of the capital requirements of the IRB Approach and Standardised Approach portions of the underlying exposures in accordance with paragraph 1.
3. The maximum capital requirement shall be the result of multiplying the amount calculated in accordance with paragraphs 1 or 2 by the largest proportion of interest that the institution holds in the relevant tranches (V), expressed as a percentage and calculated as follows:
(a) for an institution that has one or more securitisation positions in a single tranche, V shall be equal to the ratio of the nominal amount of the securitisation positions that the institution holds in that given tranche to the nominal amount of the tranche;
(b) for an institution that has securitisation positions in different tranches, V shall be equal to the maximum proportion of interest across tranches. For these purposes, the proportion of interest for each of the different tranches shall be calculated as set out in point (a).
4. When calculating the maximum capital requirement for a securitisation position in accordance with this Article, the entire amount of any gain on sale and credit-enhancing interest-only strips arising from the securitisation transaction shall be deducted from Common Equity Tier 1 items in accordance with point (k) of Article 36(1).

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before (02013R0575-20180101)

Article 269
Use of credit assessments
1. An institution may nominate one or more ECAIs the credit assessments of which shall be used in the calculation of its risk-weighted exposure amounts under this Chapter (a nominated ECAI).
2. An institution shall use credit assessments consistently and not selectively in respect of its securitisation positions, in accordance with the following principles:
(a) an institution may not use an ECAI's credit assessments for its positions in some tranches and another ECAI's credit assessments for its positions in other tranches within the same securitisation that may or may not be rated by the first ECAI;
(b) where a position has two credit assessments by nominated ECAIs, the institution shall use the less favourable credit assessment;
(c) where a position has more than two credit assessments by nominated ECAIs, the two most favourable credit assessments shall be used. If the two most favourable assessments are different, the less favourable of the two shall be used;
(d) an institution shall not actively solicit the withdrawal of less favourable ratings.
3. Where credit protection eligible under Chapter 4 is provided directly to the SSPE, and that protection is reflected in the credit assessment of a position by a nominated ECAI, the risk weight associated with that credit assessment may be used. Where the protection is not eligible under Chapter 4, the credit assessment shall not be recognised. Where the credit protection is not provided to the SSPE but directly to a securitisation position, the credit assessment shall not be recognised.

after (02013R0575-20190101)

Article 269
Re-securitisations
1. For a position in a re-securitisation, institutions shall apply the SEC-SA in accordance with Article 261, with the following changes:
(a) W = 0 for any exposure to a securitisation tranche within the pool of underlying exposures;
(b) p = 1,5;
(c) the resulting risk weight shall be subject to a risk-weight floor of 100 %.
2. KSA for the underlying securitisation exposures shall be calculated in accordance with Subsection 2.
3. The maximum capital requirements set out in Subsection 4 shall not be applied to re-securitisation positions.
4. Where the pool of underlying exposures consists of a mix of securitisation tranches and other types of assets, the KA parameter shall be determined as the nominal exposure weighted-average of the KA calculated individually for each subset of exposures.

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before (02013R0575-20180101)

Article 270
Mapping
EBA shall develop draft implementing technical standards to determine, for all ECAIs, which of the credit quality steps set out in this Chapter are associated with the relevant credit assessments of an ECAI. Those determinations shall be objective and consistent, and carried out in accordance with the following principles:
(a) EBA shall differentiate between the relative degrees of risk expressed by each assessment;
(b) EBA shall consider quantitative factors, such as default and/or loss rates and the historical performance of credit assessments of each ECAI across different asset classes;
(c) EBA shall consider qualitative factors such as the range of transactions assessed by the ECAI, its methodology and the meaning of its credit assessments, in particular whether based on expected loss or first euro loss, and to timely payment of interest or to ultimate payment of interest;
(d) EBA shall seek to ensure that securitisation positions to which the same risk weight is applied on the basis of the credit assessments of ECAIs are subject to equivalent degrees of credit risk. EBA shall consider amending its determination as to the credit quality step with which a particular credit assessment shall be associated, as appropriate.
EBA shall submit those draft implementing technical standards to the Commission by 1 July 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

after (02013R0575-20190101)

Article 270
Senior positions in SME securitisations
An originator institution may calculate the risk-weighted exposure amounts in respect of a securitisation position in accordance with Articles 260, 262 or 264, as applicable, where the following conditions are met:
(a) the securitisation meets the requirements for STS securitisation set out in Chapter 4 of Regulation (EU) 2017/2402 as applicable, other than Article 20(1) to (6) of that Regulation;
(b) the position qualifies as the senior securitisation position;
(c) the securitisation is backed by a pool of exposures to undertakings, provided that at least 70 % of those in terms of portfolio balance qualify as SMEs within the meaning of Article 501 at the time of issuance of the securitisation or in the case of revolving securitisations at the time an exposure is added to the securitisation;
(d) the credit risk associated with the positions not retained by the originator institution is transferred through a guarantee or a counter-guarantee meeting the requirements for unfunded credit protection set out in Chapter 4 for the Standardised Approach to credit risk;
(e) the third party to which the credit risk is transferred is one or more of the following:
(i) the central government or the central bank of a Member State, a multilateral development bank, an international organisation or a promotional entity, provided that the exposures to the guarantor or counter-guarantor qualify for a 0 % risk weight under Chapter 2;
(ii) an institutional investor as defined in point (12) of Article 2 of Regulation (EU) 2017/2402 provided that the guarantee or counter-guarantee is fully collateralised by cash on deposit with the originator institution.

inserted text (02013R0575-20190101)

Article 270a
Additional risk weight
1. Where an institution does not meet the requirements in Chapter 2 of Regulation (EU) 2017/2402 in any material respect by reason of negligence or omission by the institution, the competent authorities shall impose a proportionate additional risk weight of no less than 250 % of the risk weight, capped at 1250 %, which shall apply to the relevant securitisation positions in the manner specified in Article 247(6) or Article 337(3) of this Regulation respectively. The additional risk weight shall progressively increase with each subsequent infringement of the due diligence and risk management provisions. The competent authorities shall take into account the exemptions for certain securitisations provided for in Article 6(5)) of Regulation (EU) 2017/2402 by reducing the risk weight they would otherwise impose under this Article in respect of a securitisation to which Article 6(5) of Regulation (EU) 2017/2402 applies.
2. The EBA shall develop draft implementing technical standards to facilitate the convergence of supervisory practices with regard to the implementation of paragraph 1, including the measures to be taken in the case of breach of the due diligence and risk management obligations. The EBA shall submit those draft implementing technical standards to the Commission by 1 January 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

inserted text (02013R0575-20190101)

Article 270b
Use of credit assessments by ECAIs
Institutions may use only credit assessments to determine the risk weight of a securitisation position in accordance with this Chapter where the credit assessment has been issued or has been endorsed by an ECAI in accordance with Regulation (EC) No 1060/2009.

inserted text (02013R0575-20190101)

Article 270c
Requirements to be met by the credit assessments of ECAIs
For the purposes of calculating risk-weighted exposure amounts in accordance with Section 3, institutions shall only use a credit assessment of an ECAI where all of the following conditions are met:
(a) there is no mismatch between the types of payments reflected in the credit assessment and the types of payments to which the institution is entitled under the contract giving rise to the securitisation position in question;
(b) the ECAI publishes the credit assessments and information on loss and cash-flow analysis, sensitivity of ratings to changes in the underlying ratings assumptions, including the performance of underlying exposures, and on the procedures, methodologies, assumptions, and key elements underpinning the credit assessments in accordance with Regulation (EC) No 1060/2009. For the purposes of this point, information shall be considered as publicly available where it is published in accessible format. Information that is made available only to a limited number of entities shall not be considered as publicly available;
(c) the credit assessments are included in the ECAI’s transition matrix;
(d) the credit assessments are not based or partly based on unfunded support provided by the institution itself. Where a position is based or partly based on unfunded support, the institution shall consider that position as if it were unrated for the purposes of calculating risk-weighted exposure amounts for this position in accordance with Section 3;
(e) the ECAI has committed to publishing explanations on how the performance of underlying exposures affects the credit assessment.

inserted text (02013R0575-20190101)

Article 270d
Use of credit assessments
1. An institution may decide to nominate one or more ECAIs the credit assessments of which shall be used in the calculation of its risk-weighted exposure amounts under this Chapter (a nominated ECAI).
2. An institution shall use the credit assessments of its securitisation positions in a consistent and non-selective manner and, for these purposes, shall comply with the following requirements:
(a) an institution shall not use an ECAI’s credit assessments for its positions in some tranches and another ECAI’s credit assessments for its positions in other tranches within the same securitisation that may or may not be rated by the first ECAI;
(b) where a position has two credit assessments by nominated ECAIs, the institution shall use the less favourable credit assessment;
(c) where a position has three or more credit assessments by nominated ECAIs, the two most favourable credit assessments shall be used. Where the two most favourable assessments are different, the less favourable of the two shall be used;
(d) an institution shall not actively solicit the withdrawal of less favourable ratings.
3. Where the exposures underlying a securitisation benefit from full or partial eligible credit protection in accordance with Chapter 4, and the effect of such protection has been reflected in the credit assessment of a securitisation position by a nominated ECAI, the institution shall use the risk weight associated with that credit assessment. Where the credit protection referred to in this paragraph is not eligible under Chapter 4, the credit assessment shall not be recognised and the securitisation position shall be treated as unrated.
4. Where a securitisation position benefits from eligible credit protection in accordance with Chapter 4 and the effect of such protection has been reflected in its credit assessment by a nominated ECAI, the institution shall treat the securitisation position as if it were unrated and calculate the risk-weighted exposure amounts in accordance with Chapter 4.

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Article 270e
Securitisation mapping
The EBA shall develop draft implementing technical standards to map in an objective and consistent manner the credit quality steps set out in this Chapter relative to the relevant credit assessments of all ECAIs. For the purposes of this Article, the EBA shall in particular:
(a) differentiate between the relative degrees of risk expressed by each assessment;
(b) consider quantitative factors, such as default or loss rates and the historical performance of credit assessments of each ECAI across different asset classes;
(c) consider qualitative factors such as the range of transactions assessed by the ECAI, its methodology and the meaning of its credit assessments in particular whether such assessments take into account expected loss or first Euro loss, and timely payment of interests or ultimate payment of interests;
(d) seek to ensure that securitisation positions to which the same risk weight is applied on the basis of the credit assessments of ECAIs are subject to equivalent degrees of credit risk.
The EBA shall submit those draft implementing technical standards to the Commission by 1 July 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

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Article 276 Standardised Method 1. Institutions may use the Standardised Method (hereinafter referred to as SM) only for calculating the exposure value for OTC derivatives and long settlement transactions. 2. When applying the SM, institutions shall calculate the exposure value separately for each netting set, net of collateral, as follows:Exposure valueβ max CMV CMC ,jiRPTij CMC, jiRPTij lRPClj CCRMj where: CMV current market value of the portfolio of transactions within the netting set with a counterparty gross of collateral, where:CMViCMVi where: CMVi the current market value of transaction i; CMC the current market value of the collateral assigned to the netting set, where:CMClCMCl where: CMCl the current market value of collateral l; i index designating transaction; l index designating collateral; j index designating hedging set category; The hedging sets for this purpose correspond to risk factors for which risk positions of opposite sign can be offset to yield a net risk position on which the exposure measure is then based. RPTij risk position from transaction i with respect to hedging set j; RPClj risk position from collateral l with respect to hedging set j; CCRMj CCR Multiplier set out in Table 5 with respect to hedging set j; β 1,4. 3. For the purposes of the calculation under paragraph 2: (a) eligible collateral received from a counterparty shall have a positive sign and collateral posted to a counterparty shall have a negative sign; (b) only collateral that is eligible under Article 197, Article 198 and Article 299(2)(d) shall be used for the SM; (c) an institution may disregard the interest rate risk from payment legs with a remaining maturity of less than one year; (d) an institution may treat transactions that consist of two payment legs that are denominated in the same currency as a single aggregate transaction. The treatment for payment legs applies to the aggregate transaction.

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Article 337 Own funds requirement for securitisation instruments 1. For instruments in the trading book that are securitisation positions, the institution shall weight with the following its net positions as calculated in accordance with Article 327(1): (a) for securitisation positions that would be subject to the Standardised Approach for credit risk in the same institution's non-trading book, 327(1) with 8 % of the risk weight under the Standardised Approach as set out in Title II, Chapter 5, Section 3; (b) for securitisation positions that institution would be subject apply to the Internal Ratings Based Approach in the same institution's non-trading book, 8 % of the risk weight under the Internal Ratings Based Approach as set out in Title II, Chapter 5, Section 3. 2. The Supervisory Formula Method set out in Article 262 may be used where the institution can produce estimates of PD, and where applicable exposure value and LGD as inputs into the Supervisory Formula Method in accordance with the requirements for the estimation of those parameters under the Internal Ratings Based Approach in accordance with Title II, Chapter 3. An institution other than an originator institution that could apply it for the same securitisation position in its non-trading book may only use that method subject according to permission by Section 3 of Chapter 5 of Title II. 2. When determining risk weights for the competent authorities, which shall be granted where the institution fulfils the condition in the first subparagraph. Estimates purposes of paragraph 1, estimates of PD and LGD as inputs to the Supervisory Formula Method may alternatively also be determined based on estimates that are derived from an IRC approach internal incremental default and migration risk model (IRC model) of an institution that has been granted permission to use an internal model for specific risk of debt instruments. The latter alternative may be used only subject to permission by the competent authorities, which shall be granted if those estimates meet the quantitative requirements for the Internal Ratings Based IRB Approach set out in Chapter 3 of Title II, Chapter 3. II. In accordance with Article 16 of Regulation (EU) No 1093/2010, the EBA shall issue guidelines on the use of estimates of PD and LGD as inputs when those estimates are based on an IRC approach. model. 3. For securitisation positions that are subject to an additional risk weight in accordance with Article 407, 247(6), 8 % of the total risk weight shall be applied. Except for securitisation positions treated in accordance with Article 338(4), the 4. The institution shall sum its weighted positions resulting from the application of this Article (regardless paragraphs 1, 2 and 3 regardless of whether they are long or short) short, in order to calculate its own funds requirement against specific risk. 4. By way of derogation from the second subparagraph of paragraph 3, risk, except for a transitional period ending 31 December 2014, the institution shall sum separately its weighted net long securitisation positions and its weighted net short positions. The larger of those sums shall constitute the specific risk own funds requirement. The institution shall, however, quarterly report subject to the competent authority of the home Member State the total sum of its weighted net long and net short positions, broken down by types of underlying assets. Article 338(4). 5. Where an originator institution of a traditional securitisation does not meet the conditions for significant risk transfer set out in Article 243, it 244, the originator institution shall include the exposures underlying the securitisation in the its calculation of the own funds requirement under this Article the securitised as if those exposures instead of its securitisation positions from this securitisation. had not been securitised. Where an originator institution of a synthetic securitisation does not meet the conditions for significant risk transfer set out in Article 244, it 245, the originator institution shall include the exposures underlying the securitisation in the its calculation of the own funds requirement under this Article requirements as if those exposures had not been securitised and shall ignore the securitised exposures from this securitisation, but not any effect of the synthetic securitisation for credit protection obtained for the securitised portfolio. purposes.

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Article 457 Technical adjustments and corrections The Commission shall be empowered to adopt delegated acts in accordance with Article 462, to make technical adjustment and corrections of non-essential elements in the following provisions in order to take account of developments in new financial products or activities, to make adjustments taking into account developments after the adoption of this Regulation in other legislative acts of the Union on financial services and accounting including accounting standards based on Regulation (EC) No 1606/2002: (a) the own funds requirements for credit risk laid down in Articles 111 to 134, and in Articles 143 to 191; (b) the effects of credit risk mitigation in accordance with Articles 193 to 241; (c) the own funds requirements for securitisation laid down in Articles 243 242 to 266; 270a; (d) the own funds requirements for counterparty credit risks in accordance with Articles 272 to 311; (e) the own funds requirements for operational risk laid down in Articles 315 to 324; (f) the own funds requirements for market risk laid down in Articles 325 to 377; (g) the own funds requirements for settlement risk laid down in Articles 378 and 379; (h) the own funds requirements for credit valuation adjustment risk laid down in Articles 383, 384 and 386; (i) Part Two and Article 99 only as a result of developments in accounting standards or requirements which take account of Union legislation.

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Article 462 Exercise of the delegation 1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The power to adopt delegated acts referred to in Articles 244(6) and 245(6) and in Articles 456 to 460 shall be conferred on the Commission for an indeterminate period of time from 28 June 2013. 3. The delegation of power referred to in Articles 244(6) and 245(6) and in Articles 456 to 460 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of the delegated acts already in force. 4. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. 5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 5. 6. A delegated act adopted pursuant to Articles 244(6) and 245(6) and Articles 456 to 460 shall enter into force only if no objection has been expressed by the European Parliament or the Council within a period of three 3 months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three 3 months at the initiative of the European Parliament or of the Council.

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Article 519a
Reporting and review
By 1 January 2022, the Commission shall report to the European Parliament and the Council on the application of the provisions in Chapter 5 of Title II of Part Three in the light of developments in securitisation markets, including from a macroprudential and economic perspective. That report shall, if appropriate, be accompanied by a legislative proposal and shall, in particular, assess the following points:
(a) the impact of the hierarchy of methods set out in Article 254 and of the calculation of the risk-weighted exposure amounts of securitisation positions set out in Articles 258 to 266 on issuance and investment activity by institutions in securitisation markets in the Union;
(b) the effects on the financial stability of the Union and Member States, with a particular focus on potential immovable property market speculation and increased interconnection between financial institutions;
(c) what measures would be warranted to reduce and counter any negative effects of securitisation on financial stability while preserving its positive effect on financing, including the possible introduction of a maximum limit on exposure to securitisations; and
(d) the effects on the ability of financial institutions to provide a sustainable and stable funding channel to the real economy, with particular attention to SMEs.
The report shall also take into account regulatory developments in international fora, in particular those relating to international standards on securitisation.

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