Question
The supervisory factor for the credit risk category add-on is to be assigned based on the rating assigned to the issuer of the underlying credit derivative. For securitisations, should the rating of the SPV issuing the various tranches be used or can the rating of the tranche be used? If the SPV is not rated but the tranches are, should the exposure be considered unrated?
Background on the question
Article 280c states that the supervisory factor shall be reduced to one of the six supervisory factors set out in Table 3 in the Article on the basis of an external credit assessment by a nominated ECAI of the corresponding individual issuer. For securitisation, the rating for the individual tranche is usually provided. Instead, the SPV issuing the securitisation is unrated
Answer
This question has been rejected because the issue it deals with is already explained or addressed in Article 280c(5)(b) of Regulation (EU) No 575/2013 (Capital Requirements Regulation). For further information on the purpose of this tool and on how to submit questions, please see 'Additional background and guidance for asking questions'.