1. User Guide
  2. Liquidity Coverage Ratio Calculation
  3. FR2052a and FR2052b Related Calculations
  4. Intermediate Calculations
  5. Treatment of Commingled Securitization Cash Flows

4.5.1.2 Treatment of Commingled Securitization Cash Flows

If the commingling indicator is ‘Yes’ for a particular securitization then all cash flows of such a securitization are commingled with the cash flows of its parent entity. Such commingled cash flows are treated as available for use by the parent entity under normal conditions that is, when there is no downgrade.

In case of a ratings downgrade that results in the activation of the downgrade trigger for the securitization, all access to commingled cash flows by the parent company becomes restricted and these are segregated from the parent company’s cash flows. In this case, all cash inflows and outflows related to the securitization are completely removed from the calculation of the net cash outflow, except the downgrade impact amount which is posted as an outflow.

In a consolidated Run, the application treats commingled securitization cash flows as follows:
  1. The application checks if the commingling indicator value for securitizations from SPV/SIV which is part of the consolidated entity’s organization structure. If the commingling indicator is ‘No’, the application treats the SPV/SIV as a standalone entity and does not commingle the cash flows. The regular consolidation process is followed, refer section Liquidity Coverage Ratio for more information.
  2. If commingling indicator is ‘Yes’ and Run type is Contractual Run, the cash inflows and outflows of the securitization are commingled with the parent company’s cash flows. Separate identification of the legal entity of such cash flows that is, SPV/SIV information is maintained.
  3. If commingling indicator is Yes and Run type is BAU or stress Run, the application checks if ratings downgrade is specified as part of the business assumption included in the Run. If downgrade is not specified, the cash flows continue to remain commingled.
  4. If ratings downgrade is specified, the application checks if a downgrade trigger exists for the securitization. If there is no downgrade trigger, the cash flows continue to remain commingled.
  5. If a downgrade trigger exists, the application checks if the trigger is activated based on the ratings downgrade specified as part of the business assumption included in the Run. If the downgrade trigger is not activated, the cash flows continue to remain commingled.
  6. If downgrade trigger is activated based on the downgrade specified, the application segregates and excludes all the securitization cash inflows and outflows from computation of net cash outflows and posts the downgrade impact amount calculated as per the procedure detailed as part of the above section Downgrade Impact Amount for Securitizations as an outflow.

Note:

In a Solo Run, the application does not include any cash flows from commingled securitizations in the parent company’s calculations. These are included only when calculations are done on a consolidated basis.