This chapter describes how to calculate capital requirements for short-term securitisation exposures according to the internal assessment by the bank of the credit quality of the exposures (SEC-IAA).

Version effective as of 15 Dec 2019

First version in the format of the consolidated framework.

Internal assessment approach (SEC-IAA)

43.1 Subject to supervisory approval, a bank may use its internal assessments of the credit quality of its securitisation exposures extended to ABCP programmes (eg liquidity facilities and credit enhancements) provided that the bank has at least one approved IRB model (which does not need to be applicable to the securitised exposures) and if the bank's internal assessment process meets the operational requirements set out below. Internal assessments of exposures provided to ABCP programmes must be mapped to equivalent external ratings of an ECAI. Those rating equivalents are used to determine the appropriate risk weights under the SEC-ERBA for the exposures.

43.2 A bank's internal assessment process must meet the following operational requirements in order to use internal assessments in determining the IRB capital requirement arising from liquidity facilities, credit enhancements, or other exposures extended to an ABCP programme:

(1) For the unrated exposure to qualify for the internal assessment approach (SEC-IAA), the ABCP must be externally rated. The ABCP itself is subject to the SEC-ERBA.