AI Summary of Article 256 Determination of attachment point (A) and detachment point (D)
This document outlines the criteria for determining the attachment point (A) and detachment point (D) for securitisation positions. Institutions are required to express both points as decimals between zero and one, calculated based on the outstanding balances of the pool of underlying exposures and relevant senior tranches. It clarifies the treatment of overcollateralisation and funded reserve accounts while disregarding unfunded accounts and assets providing only liquidity support.
Furthermore, it addresses scenarios involving multiple positions with differing maturities, ensuring a unified calculation for attachment and detachment points. Notably, for synthetic securitisations, only the originator institution is permitted to adjust these points based on synthetic excess spread values.
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.