Banks Act, 1990 (Act No. 94 of 1990)

Regulations

Regulations relating to Banks

Chapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof

23. Credit risk: monthly return

Directives and interpretations for completion of monthly return concerning credit risk (Form BA 200)

Subregulation (11) Method 1 : Calculation of credit risk exposure in terms of the foundation IRB approach

Subregulation (11)(l) Securitisation exposure: Definition of attachment point A and detachment point D
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[Regulation 23 (11)(l) heading substituted by section 2(hh) of Notice No. 2561, GG46996, dated 30 September 2022 - effective 1 October 2022]

 

(l)Securitisation exposure: Definition of attachment point A and detachment point D

 

(i) The attachment point A represents the threshold at which losses within the underlying pool would first be allocated to the securitisation exposure. The input A, (which is a decimal value between zero and one), equals the greater of –
(A) zero; and
(B) the ratio of
(i) the outstanding balance of all underlying assets in the securitisation minus the outstanding balance of all tranches that rank senior to the tranche that contains the securitisation exposure of the bank (including the exposure itself) C

divided by

(ii) the outstanding balance of all underlying assets in the securitisation.
(iii)For the calculation of input (A) and input (D).

 

(A) overcollateralization and funded reserve accounts must be recognised as tranches; and
(B) the assets forming these reserve accounts must be recognised as underlying assets. Only the loss-absorbing part of the funded reserve accounts that provide credit enhancement can be recognised as tranches and underlying assets. Unfunded reserve accounts, such as those to be funded from future receipts from the underlying exposures (e.g. unrealised excess spread) and assets that do not provide credit enhancement like pure liquidity support, currency or interest-rate swaps, or cash collateral accounts related to these instruments must not be included in the calculation of (A) and (D).
(C) Banks must take into consideration the economic substance of the transaction and apply these definitions conservatively in the light of the structure.

 

[Regulation 23(11)(l) substituted by section 2(hh) of Notice No. 2561, GG46996, dated 30 September 2022 - effective 1 October 2022]