| 20.1 | For securitization exposures that are externally rated, or for which an inferred rating is available, risk-weighted assets under the securitization external ratings- based approach (SEC-ERBA) will be determined by multiplying securitization exposure amounts (as defined in 18.19) by the appropriate risk weights as determined by 19.2 to 19.7, provided that the operational criteria in 20.8 to 20.10 are met.108
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| 20.2 | For exposures with short-term ratings, or when an inferred rating based on a short-term rating is available, the following risk weights in table 28 below will apply:
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| ERBA risk weights for short-term ratings | Table 28 | | External credit assessment | A-1/P-1 | A-2/P-2 | A-3/P-3 | All other ratings | | Risk weight | 15% | 50% | 100% | 1250% |
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| 20.3 | For exposures with long-term ratings, or when an inferred rating based on a long-term rating is available, the risk weights depend on
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| | (1) | The external rating grade or an available inferred rating;
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| | (2) | The seniority of the position;
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| | (3) | The tranche maturity; and
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| | (4) | In the case of non-senior tranches, the tranche thickness.
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| 20.4 | Specifically, for exposures with long-term ratings, risk weights will be determined according to Table 29 and will be adjusted for tranche maturity (calculated according to 18.22 and 18.23), and tranche thickness for non-senior tranches according to 20.5.
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| ERBA risk weights for long-term ratings | Table 29 | | Rating | Senior tranche | Non-senior (thin) tranche | | Tranche maturity (MT) | Tranche maturity (MT) | | 1 year | 5 years | 1 year | 5 years | | AAA | 15% | 20% | 15% | 70% | | AA+ | 15% | 30% | 15% | 90% | | AA | 25% | 40% | 30% | 120% | | AA- | 30% | 45% | 40% | 140% | | A+ | 40% | 50% | 60% | 160% | | A | 50% | 65% | 80% | 180% | | A- | 60% | 70% | 120% | 210% | | BBB+ | 75% | 90% | 170% | 260% | | BBB | 90% | 105% | 220% | 310% | | BBB- | 120% | 140% | 330% | 420% | | BB+ | 140% | 160% | 470% | 580% | | BB | 160% | 180% | 620% | 760% | | BB- | 200% | 225% | 750% | 860% | | B+ | 250% | 280% | 900% | 950% | | B | 310% | 340% | 1050% | 1050% | | B- | 380% | 420% | 1130% | 1130% | | CCC+/CCC/CCC- | 460% | 505% | 1250% | 1250% | | Below CCC- | 1250% | 1250% | 1250% | 1250% |
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| 20.5 | The risk weight assigned to a securitization exposure when applying the SEC-ERBA is calculated as follows:
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| | (1) | To account for tranche maturity, banks shall use linear interpolation between the risk weights for one and five years.
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| | (2) | To account for tranche thickness, banks shall calculate the risk weight for non- senior tranches as follows, where T equals tranche thickness, and is measured a minus A, as defined, respectively, in 22.15 and 22.14:
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| | | Risk weight = (risk weight from table after adjusting for maturity) x (1 - min(T,50%))
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| 20.6 | In the case of market risk hedges such as currency or interest rate swaps, the risk weight will be inferred from a securitization exposure that is pari passu to the swaps or, if such an exposure does not exist, from the next subordinated tranche.
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| 20.7 | The resulting risk weight is subject to a floor risk weight of 15%. In addition, the resulting risk weight should never be lower than the risk weight corresponding to a senior tranche of the same securitization with the same rating and maturity.
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