---
kind: "section"
citation: "12 C.F.R. § 324.145"
title: "12"
number: "324.145"
heading: "Recognition of credit risk mitigants for securitization exposures."
url: "https://uscodex.org/cfr/12/324.145"
---

# §324.145. Recognition of credit risk mitigants for securitization exposures.

- (a) **General.** An originating FDIC-supervised institution that has obtained a credit risk mitigant to hedge its securitization exposure to a synthetic or traditional securitization that satisfies the operational criteria in [§ 324.141](/cfr/12/324.141.md) may recognize the credit risk mitigant, but only as provided in this section. An investing FDIC-supervised institution 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.
- (b) **Collateral—**
  - (1) **Rules of recognition.** An FDIC-supervised institution may recognize financial collateral in determining the FDIC-supervised institution's risk-weighted asset amount for a securitization exposure (other than a repo-style transaction, an eligible margin loan, or an OTC derivative contract for which the FDIC-supervised institution has reflected collateral in its determination of exposure amount under [§ 324.132](/cfr/12/324.132.md)) as follows. The FDIC-supervised institution's risk-weighted asset amount for the collateralized securitization exposure is equal to the risk-weighted asset amount for the securitization exposure as calculated under the SSFA in [§ 324.144](/cfr/12/324.144.md) or under the SFA in [§ 324.143](/cfr/12/324.143.md) multiplied by the ratio of adjusted exposure amount (SE*) to original exposure amount (SE), where:
    - (i) SE* equals max {0, [SE − C × (1− Hs − Hfx)]};
    - (ii) SE equals the amount of the securitization exposure calculated under [§ 324.142(e)](/cfr/12/324.142.md?p=e);
    - (iii) C equals the current fair value of the collateral;
    - (iv) Hs equals the haircut appropriate to the collateral type; and
    - (v) Hfx equals the haircut appropriate for any currency mismatch between the collateral and the exposure.
  - (3) **Standard supervisory haircuts.** Unless an FDIC-supervised institution qualifies for use of and uses own-estimates haircuts in [paragraph (b)(4)](#b-4) of this section:
    - (i) An FDIC-supervised institution must use the collateral type haircuts (Hs) in Table 1 to [§ 324.132](/cfr/12/324.132.md) of this subpart;
    - (ii) An FDIC-supervised institution must use a currency mismatch haircut (Hfx) of 8 percent if the exposure and the collateral are denominated in different currencies;
    - (iii) An FDIC-supervised institution must multiply the supervisory haircuts obtained in paragraphs [(b)(3)(i)](#b-3-i) and [(ii)](#b-3-ii) of this section by the square root of 6.5 (which equals 2.549510); and
    - (iv) An FDIC-supervised institution must adjust the supervisory haircuts upward on the basis of a holding period longer than 65 business days where and as appropriate to take into account the illiquidity of the collateral.
  - (4) **Own estimates for haircuts.** With the prior written approval of the FDIC, an FDIC-supervised institution may calculate haircuts using its own internal estimates of market price volatility and foreign exchange volatility, subject to [§ 324.132(b)(2)(iii)](/cfr/12/324.132.md?p=b-2-iii). The minimum holding period (TM) for securitization exposures is 65 business days.
- (c) **Guarantees and credit derivatives—**
  - (1) **Limitations on recognition.** An FDIC-supervised institution may only recognize an eligible guarantee or eligible credit derivative provided by an eligible guarantor in determining the FDIC-supervised institution's risk-weighted asset amount for a securitization exposure.
  - (2) **ECL for securitization exposures.** When an FDIC-supervised institution recognizes an eligible guarantee or eligible credit derivative provided by an eligible guarantor in determining the FDIC-supervised institution's risk-weighted asset amount for a securitization exposure, the FDIC-supervised institution must also:
    - (i) Calculate ECL for the protected portion of the exposure using the same risk parameters that it uses for calculating the risk-weighted asset amount of the exposure as described in [paragraph (c)(3)](#c-3) of this section; and
    - (ii) **Add the exposure's ECL to the FDIC-supervised institution's total ECL.**
  - (3) **Rules of recognition.** An FDIC-supervised institution may recognize an eligible guarantee or eligible credit derivative provided by an eligible guarantor in determining the FDIC-supervised institution's risk-weighted asset amount for the securitization exposure as follows:
    - (i) **Full coverage.** If the protection amount of the eligible guarantee or eligible credit derivative equals or exceeds the amount of the securitization exposure, the FDIC-supervised institution may set the risk-weighted asset amount for the securitization exposure equal to the risk-weighted asset amount for a direct exposure to the eligible guarantor (as determined in the wholesale risk weight function described in [§ 324.131](/cfr/12/324.131.md)), using the FDIC-supervised institution's PD for the guarantor, the FDIC-supervised institution's LGD for the guarantee or credit derivative, and an EAD equal to the amount of the securitization exposure (as determined in [§ 324.142(e)](/cfr/12/324.142.md?p=e)).
    - (ii) **Partial coverage.** If the protection amount of the eligible guarantee or eligible credit derivative is less than the amount of the securitization exposure, the FDIC-supervised institution may set the risk-weighted asset amount for the securitization exposure equal to the sum of:
      - (A) **Covered portion.** The risk-weighted asset amount for a direct exposure to the eligible guarantor (as determined in the wholesale risk weight function described in [§ 324.131](/cfr/12/324.131.md)), using the FDIC-supervised institution's PD for the guarantor, the FDIC-supervised institution's LGD for the guarantee or credit derivative, and an EAD equal to the protection amount of the credit risk mitigant; and
      - (B) **Uncovered portion.** (1) 1.0 minus the ratio of the protection amount of the eligible guarantee or eligible credit derivative to the amount of the securitization exposure); multiplied by

        (2) The risk-weighted asset amount for the securitization exposure without the credit risk mitigant (as determined in [§§ 324.142 through 324.146](/cfr/12/324.142..324.146.md)).

  - (4) **Mismatches.** The FDIC-supervised institution must make applicable adjustments to the protection amount as required in § [324.134(d)](/cfr/12/324.134.md?p=d), [(e)](/cfr/12/324.134.md?p=e), and [(f)](/cfr/12/324.134.md?p=f) for any hedged securitization exposure and any more senior securitization exposure that benefits from the hedge. In the context of a synthetic securitization, when an eligible guarantee or eligible credit derivative covers multiple hedged exposures that have different residual maturities, the FDIC-supervised institution must use the longest residual maturity of any of the hedged exposures as the residual maturity of all the hedged exposures.

## Notes

### Authority

Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233, 105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note), Pub. L. 115-174; section 4014 § 201, Pub. L. 116-136, 134 Stat. 281 (15 U.S.C. 9052).

### Source

Source: 78 FR 55471, Sept. 10, 2013, unless otherwise noted.