Effective from Jan 01 2023 - Dec 31 2022 To view other versions open the versions tab on the right
23.1
A non-performing loan securitization (NPL securitization) means a securitization where the underlying pool's variable W, as defined in 19.6, is equal to or higher than 90% at the origination cut-off date and at any subsequent date on which assets are added to or removed from the underlying pool due to replenishment, restructuring or any other relevant reason. The underlying pool of exposures of an NPL securitization may only comprise loans, loan-equivalent financial instruments or tradable instruments used for the sole purpose of loan sub-participation as referred to in 18.24 (2). Loan-equivalent financial instruments include, for example, bonds not listed on a trading venue. For the avoidance of doubt, an NPL securitization may not be backed by exposures to other securitizations.
23.2
SAMA may provide for a stricter definition of NPL securitizations than that laid out in 23.1 above. For these purposes, SAMA may:
(1)
Raise the minimum level of W to a level higher than 90%; or
(2)
Require that the non-delinquent exposures in the underlying pool comply with a set of minimum criteria, or preclude certain types of non-delinquent exposures from forming part of the underlying pools of NPL securitizations.
23.3
A bank is precluded from applying the SEC-IRBA to an exposure to an NPL securitization where the bank uses the foundation approach as referred to in 10.35 to calculate the KIRB of the underlying pool of exposures.
23.4
The risk weight applicable to exposures to NPL securitizations according to Internal ratings-based approach (SEC-IRBA) set out in chapter 22, Standardized approach (SEC-SA) outlined in chapter 19, or the look-through approach in 24718.50 is floored at 100%.
23.5
Where, according to the hierarchy of approaches in 18.41 to 18.47, the bank must use the SEC-IRBA or the SEC-SA, a bank may apply a risk weight of 100% to the senior tranche of an NPL securitization provided that the NPL securitization is a traditional securitization and the sum of the non- refundable purchase price discounts (NRPPD), calculated as described in 23.6 below, is equal to or higher than 50% of the outstanding balance of the pool of exposures.
23.6
For the purposes of 23.5, NRPPD is the difference between the outstanding balance of the exposures in the underlying pool and the price at which these exposures are sold by the originator to the securitization entity, when neither originator nor the original lender are reimbursed for this difference. In cases where the originator underwrites tranches of the NPL securitization for subsequent sale, the NRPPD may include the differences between the nominal amount of the tranches and the price at which these tranches are first sold to unrelated third parties. For any given piece of a securitization tranche, only its initial sale from the originator to investors is taken into account in the determination of NRPPD. The purchase prices of subsequent re-sales are not considered.
23.7
An originator or sponsor bank may apply the capital requirement cap specified in 18.54 to the aggregated capital requirement for its exposures to the same NPL securitization. The same applies to an investor bank, provided that it is using the SEC-IRBA for an exposure to the NPL securitization.
