Question
Under the US NPR, the Fed has indicated that because the credit risk is to the agency and not the pool, the tranching doesn't count for CSR purposes, and thus the proper risk class to calculate is CSR_NS (not CSR_SNC). Banks in the US subject to FRTB have been following this convention as part of the Fed's Hypothetical Portfolio Exercise. Does the EU expect to follow this interpretation as well?
Background on the question
The background is when you have institutions that are subject to multi-jurisdiction rules and given that the mortgage market is predominantly in the US, having banking players following two different regulatory frameworks would seem misaligned.
Answer
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