(a) General requirements. To use the SSFA to determine the specific
risk-weighting factor for a securitization position, a Board-regulated
institution must have data that enables it to assign accurately the
parameters described in paragraph (b) of this section. Data used to
assign the parameters described in paragraph (b) of this section must
be the most currently available data; if the contracts governing the
underlying exposures of the securitization require payments on a monthly
or quarterly basis, the data used to assign the parameters described
in paragraph (b) of this section must be no more than 91 calendar
days old. A Board-regulated institution that does not have the appropriate
data to assign the parameters described in paragraph (b) of this section
must assign a specific risk-weighting factor of 100 percent to the
position.
(b) SSFA parameters. To calculate the specific risk-weighting factor for a securitization
position using the SSFA, a Board-regulated institution must have accurate
information on the five inputs to the SSFA calculation described in
paragraphs (b)(1) through (b)(5) of this section.
(1) KG is the weighted-average
(with unpaid principal used as the weight for each exposure) total
capital requirement of the underlying exposures calculated using subpart
D. KG is expressed as a decimal value between zero and
one (that is, an average risk weight of 100 percent represents a value
of KG equal to 0.08).
(2) Parameter W is expressed as a decimal
value between zero and one. Parameter W is the ratio of the sum of
the dollar amounts of any underlying exposures of the securitization
that meet any of the criteria as set forth in paragraphs (b)(2)(i)
through (vi) of this section to the balance, measured in dollars,
of underlying exposures:
(i) Ninety days or more past due;
(ii) Subject to a
bankruptcy or insolvency proceeding;
(iii) In the process of foreclosure;
(iv) Held as real
estate owned;
(v)
Has contractually deferred payments for 90 days or more, other than
principal or interest payments deferred on:
(A) Federally-guaranteed
student loans, in accordance with the terms of those guarantee programs;
or
(B) Consumer loans,
including non-federally-guaranteed student loans, provided that such
payments are deferred pursuant to provisions included in the contract
at the time funds are disbursed that provide for period(s) of deferral
that are not initiated based on changes in the creditworthiness of
the borrower; or
(vi) Is in default.
(3) Parameter A is the
attachment point for the position, which represents the threshold
at which credit losses will first be allocated to the position. Except
as provided in section 217.210(b)(2)(vii)(D) for nth-to-default
credit derivatives, parameter A equals the ratio of the current dollar
amount of underlying exposures that are subordinated to the position
of the Board-regulated institution to the current dollar amount of
underlying exposures. Any reserve account funded by the accumulated
cash flows from the underlying exposures that is subordinated to the
position that contains the Board-regulated institution’s securitization
exposure may be included in the calculation of parameter A to the
extent that cash is present in the account. Parameter A is expressed
as a decimal value between zero and one.
(4) Parameter D is the detachment point
for the position, which represents the threshold at which credit losses
of principal allocated to the position would result in a total loss
of principal. Except as provided in section 217.210(b)(2)(vii)(D)
for nth-to-default credit derivatives, parameter D equals
parameter A plus the ratio of the current dollar amount of the securitization
positions that are pari passu with the position (that is, have
equal seniority with respect to credit risk) to the current dollar
amount of the underlying exposures. Parameter D is expressed as a
decimal value between zero and one.
(5) A supervisory calibration parameter,
p, is equal to 0.5 for securitization positions that are not resecuritization
positions and equal to 1.5 for resecuritization positions.
(c) Mechanics of the SSFA. KG and W are used to calculate KA, the augmented
value of KG, which reflects the observed credit quality
of the underlying exposures. KA is defined in paragraph
(d) of this section. The values of parameters A and D, relative to
KA determine the specific risk-weighting factor assigned
to a position as described in this paragraph (c) and paragraph (d)
of this section. The specific risk-weighting factor assigned to a
securitization position, or portion of a position, as appropriate,
is the larger of the specific risk-weighting factor determined in
accordance with this paragraph (c), paragraph (d) of this section,
and a specific risk-weighting factor of 1.6 percent.
(1) When the detachment point, parameter
D, for a securitization position is less than or equal to KA, the position must be assigned a specific risk-weighting factor
of 100 percent.
(2)
When the attachment point, parameter A, for a securitization position
is greater than or equal to KA, the Board-regulated institution
must calculate the specific risk-weighting factor in accordance with
paragraph (d) of this section.
(3) When A is less than KA and
D is greater than KA, the specific risk-weighting factor
is a weighted-average of 1.00 and KSSFA calculated under
paragraphs (c)(3)(i) and (c)(3)(ii) of this section. For the purpose
of this calculation:
(i) The weight assigned to 1.00 equals
Figure 1. DISPLAY EQUATION
$$\mathrm{\frac{K_A - A}{D - A}}$$
(ii) The
weight assigned to K
SSFA equals
Figure 2. DISPLAY EQUATION
$$
\begin{array}{c c}
\underline{D - K_A} \\
{D - A} & \textrm{. The specific risk-weighting factor}
\end{array}
$$
is equal to:
Figure 3. DISPLAY EQUATION
$$SRWF = 100 \cdot \begin{bmatrix}
\left(\frac{K_A - A}{D - A}\right) \cdot 1.00
\end{bmatrix}
+
\begin{bmatrix}
\left(\frac{D - K_A}{D - A}\right) \cdot K_{SSFA}
\end{bmatrix}
$$
(d) SSFA equation.
(1) The Board-regulated institution must
define the following parameters:
K A = (1−
W) •
K G + (0.5 •
W)
Figure 4. DISPLAY EQUATION
$$\alpha = - \frac{1}{\rho \cdot K_A}$$
u = D − K A
l = max(A − K A ,0)
e = 2.71828, the base of the natural logarithms.
(2) Then the Board-regulated
institution must calculate K
SSFA according to the following
formula:
Figure 5. DISPLAY EQUATION
$$K_{SSFA} = \frac{e^{a \cdot u} - e^{a \cdot l}}{a(u-l)}$$
(3) The specific
risk-weighting factor for the position (expressed as a percent) is
equal to K SSFA × 100.
