CUADRO 3.01: PROGRAMACIÓN DE OBRA

363. For receivables belonging unambiguously to one asset class, the IRB risk weight for default risk is based on the risk-weight function applicable to that particular exposure type, as long as the banking corporation can meet the qualification standards for this particular risk-weight function. For example, if a banking corporation cannot comply with the standards for qualifying revolving retail exposures (defined in Paragraph 234), it shall use the risk-weight function for

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other retail exposures. For hybrid pools containing mixtures of different exposure types, if the purchasing banking corporation cannot separate the exposures by type, it shall apply the risk-weight function that elicits the highest capital requirements for the exposure types in the receivable pool.

(i) Purchased retail receivables

364. For purchased retail receivables, a banking corporation must meet the risk quantification standards that apply to retail exposures but may utilize external and internal reference data to estimate the PDs and LGDs. The estimates for PD and LGD (or EL) must be calculated for the receivables on a stand-alone basis, i.e., irrespective of any assumption of recourse or guarantees from the seller or other parties.

(ii) Purchased corporate receivables

365. For purchased corporate receivables, the purchasing banking corporation is expected to apply the existing IRB risk quantification standards for the bottom- up approach. However, for eligible purchased corporate receivables and where the Banking Supervision Department permits, a banking corporation may use the following top-down procedure for calculating IRB risk weights for default risk:

 The purchasing banking corporation estimates the pool’s one-year EL ofor default risk, expressed in percentage of the exposure amount (i.e., the total EAD amount to the banking corporation by all obligors in the receivables pool). The estimated EL must be calculated for the receivables on a stand- alone basis, i.e., without regard to any assumption of recourse or guarantees from the seller or other parties. The treatment of recourse or guarantees covering default risk (and/or dilution risk) is discussed separately below.

 Given the EL estimate for the pool’s default losses, the risk weight for default risk is determined on the basis of the risk-weight function for

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corporate exposures.83 As described below, the precise calculation of risk weights for default risk depends on the banking corporation’s ability to decompose EL into its PD and LGD components in a reliable manner. Banking corporations can utilize external and internal data to estimate PDs and LGDs. However, the advanced approach will not be available for banking corporations that use the foundation approach toward corporate exposures.

Foundation IRB treatment

366. If the purchasing banking corporation is unable to decompose EL into its PD and LGD components in a reliable manner, it shall determine the risk weight from the corporate risk-weight function using the following specifications: if the banking corporation can demonstrate that the exposures are exclusively senior claims to corporate borrowers, an LGD of 45% can be used. PD is calculated by dividing the EL using this LGD. EAD is calculated as the outstanding amount minus the capital charge for dilution prior to credit-risk mitigation (KDilution).

Otherwise, PD is the banking corporation’s estimate of EL; LGD will be 100%; and EAD is the amount outstanding minus KDilution. EAD for a revolving

purchase facility is the sum of the current amount of receivables purchased plus 75% of any undrawn purchase commitments minus KDilution. If the purchasing

banking corporation is able to estimate PD in a reliable manner, it shall determine the risk weight from the corporate risk-weight functions according to the specifications for LGD, M and the treatment of guarantees under the foundation approach as specified in Paragraphs 287–296, 299, 300–305, and 318.

Advanced IRB treatment

367. If the purchasing banking corporation can estimate either the pool’s default- weighted average loss rates given default (as defined in Paragraph 468) or 83 _{The firm-size adjustment for SMEs, as defined in Paragraph 273, is the weighted average by individual}

exposure of the pool of purchased corporate receivables. If the banking corporation does not have the requisite information to calculate the average size of the pool, the firm-size adjustment shall not apply.

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average PD in a reliable manner, it may estimate the other parameter on the basis of an estimate of the expected long-run loss rate. The banking corporation may (i) use an appropriate PD estimate to infer the long-run default-weighted average loss rate given default, or (ii) use a long-run default-weighted average loss rate given default to infer the appropriate PD. In either case, it is important to recognize that the LGD used for the IRB capital calculation for purchased receivables cannot be less than the long-run default-weighted average loss rate given default and must be consistent with the concepts defined in Paragraph 468. The risk weight for the purchased receivables is determined using the banking corporation’s estimated PD and LGD as inputs to the corporate risk- weight function. Similar to the foundation IRB treatment, EAD is the amount outstanding minus KDilution. EAD for a revolving purchase facility is the sum of

the current amount of receivables purchased plus 75% of any undrawn purchase commitments minus KDilution. Banking corporations using the advanced IRB

approach may not use their internal EAD estimates for undrawn purchase commitments.

368. For drawn amounts, M equals the pool’s exposure-weighted average effective maturity (as defined in Paragraphs 320–324). This same value of M is also used for undrawn amounts under a committed purchase facility provided the facility contains effective covenants, early amortization triggers, or other features that protect the purchasing banking corporation against a significant deterioration in the quality of the future receivables it is required to purchase over the facility’s term. Absent such effective protections, the M for off-balance-sheet[11פי]

amounts is calculated as the sum of (a) the longest-dated potential receivable under the purchase agreement and (b) the remaining maturity of the purchase facility.

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