AI Summary of Article 244 Traditional securitisation
This document outlines the criteria under which the originator institution in a traditional securitisation may exclude underlying exposures from risk-weighted exposure calculations. Key conditions include the transfer of significant credit risk to third parties and adherence to capital requirements. Specifically, credit risk transfer is validated by limits on mezzanine securitisation positions and exposure to first loss tranches.
Additionally, competent authorities may grant recognition of credit risk transfer when internal risk management practices substantiate it. Comprehensive transaction documentation must reflect economic substance, and control over underlying exposures must be relinquished. Legal opinions confirming compliance are also mandatory.
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 1 250 % 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: