1.This Standard provides requirements for risk-based capital for securitisation-related exposures in the banking book for banks in the UAE. It is based closely on requirements of the securitisation framework for capital adequacy developed by the Basel Committee on Banking Supervision (BCBS), specifically as articulated in Revisions to the securitisation framework, (BCBS 374, published December 2014, revised July 2016).

2.The Central Bank securitisation framework aims to ensure that banks in the UAE adopt practices to manage the risks associated with securitisation, and to ensure that banks hold sufficient regulatory capital against the associated credit risk.

3.Regulatory capital is required for banks’ securitisation exposures, including those arising from the provision of credit risk mitigants to a securitisation transaction, investments in asset-backed securities, retention of subordinate tranches, and extension of liquidity facilities or credit enhancements, as set forth below.

4.This Standard formulates capital adequacy requirements that needs to be applied to all banks in UAE on a consolidated basis. Banks must apply the Central Bank securitisation framework for determining regulatory capital requirements on banking book exposures arising from traditional and synthetic securitisations or similar structures. Banks should consult with Central Bank when there is uncertainty about whether a given transaction should be considered a securitisation.

5.The Standards follow the calibration developed by the Basel Committee, which includes a maximum risk weight of 1250%, calibrated on a total capital adequacy requirement of 8%. The UAE instituted a higher minimum capital requirement of 10.5% (excluding capital buffers), applicable to all licensed banks. Consequently, the maximum capital charge for a single exposure will be the lesser of the value of the exposure after applying valid credit risk mitigation, netting and haircuts, and the capital resulting from applying a risk weight of 952% (reciprocal of 10.5%) to this exposure.