627-A INVESTMENTS IN SECURITIES OVERLYING SECURITIZATION STRUCTURES
a. structures where the cash flow from an underlying pool of exposures is used to service at least two (2) different stratified risk positions or tranches reflecting different degrees of credit risk (also known as traditional securitization); or
b. structures with at least two (2) different stratified risk positions or tranches that reflect different degrees of credit risk, where credit risk of an underlying pool of exposures is transferred, in whole or in part, through the use of credit derivatives or guarantees that serve to hedge the credit risk of the portfolio (also known as synthetic securitization).
a. Credit risk
(1) Risk weights. Capital charge for investments in securitization structures held in the banking book shall be based on the latest rating given by any of the following BSP-recognized credit rating agencies:
(a) International rating agencies:
(ii) Standard & Poor’s;
(iii)Fitch IBCA; and
(iv) Other international rating agencies as may be approved by the Monetary Board
(b) Domestic rating agencies:
(i) PhilRatings; and
(ii) Other domestic rating agencies as may be approved by the Monetary Board The assignment of risk weights corresponding to agency ratings shall be as follows:
|Moody’s||Standard & Poor’s||Fitch IBCA||PhilRatings|
|20%||Aaa to Aa3||AAA to AA-||AAA to AA-||Aaa to Aa|
|50%||A1 to A3||A+ to A-||A+ to A-||A|
|100%||Baa1+ to Baa3||BBB+ to BBB-||BBB+ to BBB-||Baa|
|Deduction from total of Tier 1 and Tier 2 Capital||Below Baa3||Below BBB-||Below BBB-||Below Baa|
(2) Use of ratings. Ratings of BSP recognized credit rating agencies shall be used as follows:
(a) Securities overlying securitization structures created within the Philippines may be rated by any BSP-recognized international or domestic credit rating agency, while securities overlying securitization structures created outside of the Philippines may only be rated by any of the international credit rating agencies that are recognized by the BSP; and
(b) In cases when overlying securities have split ratings which map into different risk weights, the higher risk weight should be used.
b. Market risk. Capital charge for securities overlying securitization structures held in the trading book shall be determined in accordance with Appendix 42 and the use of agency ratings for such purpose shall be consistent with the above principles.