BANK 4.6.20 Retained securitisation exposures

(1) A banking business firm that is an originator or sponsor of a securitisation might, despite having transferred the underlying assets or the credit risk to those assets, continue to be exposed (through retained securitisation exposures) in relation to the securitisation. The firm must hold regulatory capital against all of its retained securitisation exposures.
(2) The sources of retained securitisation exposures include:
(a) investments in the securitisation (including the investment required under subrule (3));
(b) investments in asset-backed securities (including mortgage-backed securities);
(c) retention of a subordinated tranche;
(d) credit enhancements provided by the firm; and
(e) liquidity facilities provided by the firm.
A repurchased securitisation exposure must be treated as a retained securitisation exposure.

Note 1 For paragraph (a), the exposure arising from investments by a banking business firm in a securitisation originated by the firm is an on-balance-sheet exposure.

Note 2 For paragraphs (d) and (e), the exposures arising from the provision of credit enhancements and liquidity facilities by a banking business firm in relation to a securitisation originated by the firm are off-balance-sheet exposures.
(3) A banking business firm that is an originator or sponsor of a securitisation must retain 5% of the total issuance.

Note Under rule 3.2.29, a banking business firm must derecognise, in its calculation of CET 1, any increase in equity capital or CET 1 capital from a gain-on-sale in a securitisation transaction.
Inserted by QFCRA RM/2017-2 (as from 1st April 2017).