29.In the case of tranched credit protection, the original securitisation tranche should be decomposed into protected and unprotected sub-tranches. However, this decomposition is a theoretical construction, and should not be viewed as creating a new securitisation transaction. Similarly, the resulting sub- tranches should not be considered resecuritisations solely due to the presence of the credit protection.

30.For a bank using the SEC-ERBA for the original securitisation exposure, the bank should use the risk weight of the original securitisation for the sub-tranche of highest priority. Note that the term “sub-tranche of highest priority” only describes the relative priority of the decomposed tranche. The calculation of the risk weight of each sub-tranche is independent from the question of whether the sub-tranche is protected (i.e., risk is taken by the protection provider) or is unprotected (i.e., risk is taken by the protection buyer).