§3.141. Operational criteria for recognizing the transfer of risk. — Inbound Citations

(2) Wholesale exposures on which there is a tranching of credit risk (reflecting at least two different levels of seniority) are securitization exposures subject to §§ 3.141 through 3.145.

(a) Except as provided elsewhere in this section and in § 3.141:

(1) A national bank or Federal savings association must deduct from common equity tier 1 capital any after-tax gain-on-sale resulting from a securitization and must apply a 1,250 percent risk weight to the portion of any CEIO that does not constitute after tax gain-on-sale;

(2) If a securitization exposure does not require deduction or a 1,250 percent risk weight under paragraph (a)(1) of this section, the national bank or Federal savings association must apply the supervisory formula approach in § 3.143 to the exposure if the national bank or Federal savings association and the exposure qualify for the supervisory formula approach according to § 3.143(a);

(3) If a securitization exposure does not require deduction or a 1,250 percent risk weight under paragraph (a)(1) of this section and does not qualify for the supervisory formula approach, the national bank or Federal savings association may apply the simplified supervisory formula approach under § 3.144;

(4) If a securitization exposure does not require deduction or a 1,250 percent risk weight under paragraph (a)(1) of this section, does not qualify for the supervisory formula approach in § 3.143, and the national bank or Federal savings association does not apply the simplified supervisory formula approach in § 3.144, the national bank or Federal savings association must apply a 1,250 percent risk weight to the exposure; and

(5) If a securitization exposure is a derivative contract (other than protection provided by a national bank or Federal savings association in the form of a credit derivative) that has a first priority claim on the cash flows from the underlying exposures (notwithstanding amounts due under interest rate or currency derivative contracts, fees due, or other similar payments), a national bank or Federal savings association may choose to set the risk-weighted asset amount of the exposure equal to the amount of the exposure as determined in paragraph (e) of this section rather than apply the hierarchy of approaches described in paragraphs (a)(1) through (4) of this section.

(a) An originating national bank or Federal savings association that has obtained a credit risk mitigant to hedge its securitization exposure to a synthetic or traditional securitization that satisfies the operational criteria in § 3.141 may recognize the credit risk mitigant, but only as provided in this section. An investing national bank or Federal savings association that has obtained a credit risk mitigant to hedge a securitization exposure may recognize the credit risk mitigant, but only as provided in this section.

(10) An equity exposure; or

(d) Except as provided in § 3.141(c), unless one or more underlying exposures does not meet the definition of a wholesale, retail, securitization, or equity exposure, the total risk-based capital requirement for all securitization exposures held by a single national bank or Federal savings association associated with a single securitization (excluding any risk-based capital requirements that relate to the national bank's or Federal savings association's gain-on-sale or CEIOs associated with the securitization) may not exceed the sum of:

(1) The national bank's or Federal savings association's total risk-based capital requirement for the underlying exposures calculated under this subpart as if the national bank or Federal savings association directly held the underlying exposures; and