(a) In general.
(1) For purposes of this section, the
following definitions apply:
(i) SPV means a securitization
vehicle, investment fund, or other special purpose vehicle that is
not a subsidiary of the covered company.
(ii) SPV exposure means an investment in the
debt or equity of an SPV, or a credit derivative or equity derivative
between the covered company and a third party where the covered company
is the protection provider and the reference asset is an obligation
or equity security of, or equity investment in, an SPV.
(2) (i) A covered
company must determine whether the amount of its gross credit exposure
to an issuer of assets in an SPV, due to an SPV exposure, is equal
to or greater than 0.25 percent of the covered company’s tier 1 capital
using one of the following two methods:
(A) The sum of all of the issuer’s assets
(with each asset valued in accordance with section 238.153(a)) in
the SPV; or
(B) The application of
the look-through approach described in paragraph (b) of this section.
(ii) With respect
to the determination required under paragraph (a)(2)(i) of this section,
a covered company must use the same method to calculate gross credit
exposure to each issuer of assets in a particular SPV.
(iii) In making a determination under
paragraph (a)(2)(i) of this section, the covered company must consider
only the credit exposure to the issuer arising from the covered company’s
SPV exposure.
(iv) For purposes
of this paragraph (a)(2), a covered company that is unable to identify
each issuer of assets in an SPV must attribute to a single unknown
counterparty the amount of its gross credit exposure to all unidentified
issuers and calculate such gross credit exposure using one method
in either paragraph (a)(2)(i)(A) or (a)(2)(i)(B) of this section.
(3) (i)
If a covered company determines pursuant to paragraph (a)(2) of this
section that the amount of its gross credit exposure to an issuer
of assets in an SPV is less than 0.25 percent of the covered company’s
tier 1 capital, the amount of the covered company’s gross credit exposure
to that issuer may be attributed to either that issuer of assets or
the SPV:
(A) If attributed
to the issuer of assets, the issuer of assets must be identified as
a counterparty, and the gross credit exposure calculated under paragraph
(a)(2)(i)(A) of this section to that issuer of assets must be aggregated
with any other gross credit exposures (valued in accordance with section
238.153) to that same counterparty; and
(B) If attributed to the SPV, the covered company’s gross credit
exposure is equal to the covered company’s SPV exposure, valued in
accordance with section 238.153(a).
(ii) If a covered company determines
pursuant to paragraph (a)(2) of this section that the amount of its
gross credit exposure to an issuer of assets in an SPV is equal to
or greater than 0.25 percent of the covered company’s tier 1 capital
or the covered company is unable to determine that the amount of the
gross credit exposure is less than 0.25 percent of the covered company’s
tier 1 capital:
(A) The
covered company must calculate the amount of its gross credit exposure
to the issuer of assets in the SPV using the look-through approach
in paragraph (b) of this section;
(B)
The issuer of assets in the SPV must be identified as a counterparty,
and the gross credit exposure calculated in accordance with paragraph
(b) of this section must be aggregated with any other gross credit
exposures (valued in accordance with section 238.153) to that same
counterparty; and
(C) When applying
the look-through approach in paragraph (b) of this section, a covered
company that is unable to identify each issuer of assets in an SPV
must attribute to a single unknown counterparty the amount of its
gross credit exposure, calculated in accordance with paragraph (b)
of this section, to all unidentified issuers.
(iii) For purposes of this section,
a covered company must aggregate all gross credit exposures to unknown counterparties
for all SPVs as if the exposures related to a single unknown counterparty;
this single unknown counterparty is subject to the limits of section
238.152 as if it were a single counterparty.
(b) Look-through approach. A covered
company that is required to calculate the amount of its gross credit
exposure with respect to an issuer of assets in accordance with this
paragraph (b) must calculate the amount as follows:
(1) Where all investors in the SPV rank pari passu, the amount of the gross credit exposure to the issuer
of assets is equal to the covered company’s pro rata share of the
SPV multiplied by the value of the underlying asset in the SPV, valued
in accordance with section 238.153(a); and
(2) Where all investors in the SPV do not
rank pari passu, the amount of the gross credit exposure to
the issuer of assets is equal to:
(i) The pro rata share of the covered
company’s investment in the tranche of the SPV; multiplied by
(ii) The lesser of:
(A) The market value of the tranche in
which the covered company has invested, except in the case of a debt
security that is held to maturity, in which case the tranche must
be valued at the amortized purchase price of the securities; and
(B) The value of each underlying asset
attributed to the issuer in the SPV, each as calculated pursuant to
section 238.153(a).
(c) Exposures to third parties.
(1) Notwithstanding any other requirement
in this section, a covered company must recognize, for purposes of
this subpart, a gross credit exposure to each third party that has
a contractual obligation to provide credit or liquidity support to
an SPV whose failure or material financial distress would cause a
loss in the value of the covered company’s SPV exposure.
(2) The amount of any gross credit exposure
that is required to be recognized to a third party under paragraph
(c)(1) of this section is equal to the covered company’s SPV exposure,
up to the maximum contractual obligation of that third party to the
SPV, valued in accordance with section 238.153(a). (This gross credit
exposure is in addition to the covered company’s gross credit exposure
to the SPV or the issuers of assets of the SPV, calculated in accordance
with paragraphs (a) and (b) of this section.)
(3) A covered company must aggregate the
gross credit exposure to a third party recognized in accordance with
paragraphs (c)(1) and (2) of this section with its other gross credit
exposures to that third party (that are unrelated to the SPV) for
purposes of compliance with the limits of section 238.152.
