(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 252.73(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
252.73) 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 252.73(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) must be aggregated
with any other gross credit exposures (valued in accordance with section
252.73) 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 252.72 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 252.73(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 252.73(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 252.73(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
252.72.
