9.A securitisation exposure is considered a senior exposure if it is effectively backed or secured by a first claim on the entire amount of the assets in the underlying securitised pool.

10.While this generally includes only the most senior position within a securitisation tranche, in some instances there may be other claims that, in a technical sense, may be more senior in the waterfall (e.g., a swap claim) but may be disregarded for the purpose of determining which positions are treated as senior.

11.If a senior tranche is retranched or partially hedged (i.e., not on a pro rata basis), only the new senior part would be treated as senior for capital purposes.

12.In some cases, several senior tranches of different maturities may share pro rata in loss allocation. In that case, the seniority of these tranches is unaffected – they all are considered to be senior – since they all benefit from the same level of credit enhancement. (Note that in this case, the material effects of differing tranche maturities are captured by maturity adjustments to the risk weights assigned to the securitisation exposures, per the Standards.)

13.In a traditional securitisation where all tranches above the first-loss piece are rated, the most highly rated position should be treated as a senior tranche. When there are several tranches that share the same rating, only the most senior tranche in the cash flow waterfall should be treated as senior (unless the only difference among them is the effective maturity). In addition, when the different ratings of several senior tranches only result from a difference in maturity, all of these tranches should be treated as senior.

14.In a typical synthetic securitisation, an unrated tranche can be treated as a senior tranche provided that all of the conditions for inferring a rating from a lower tranche that meets the definition of a senior tranche are fulfilled.

15.Usually, a liquidity facility supporting an ABCP program would not be the most senior position within the program; instead, the commercial paper issued by the program, which benefits from the liquidity support, typically would be the most senior position. However, when a liquidity facility that is sized to cover all of the outstanding commercial paper and other senior debt supported by the pool is structured so that no cash flows from the underlying pool can be transferred to other creditors until any liquidity draws are repaid in full, the liquidity facility can be treated as a senior exposure. Otherwise, if these conditions are not satisfied, or if for other reasons the liquidity facility constitutes a mezzanine position in economic substance rather than a senior position in the underlying pool, the liquidity facility should be treated as a non-senior exposure.