Helaba’s capital requirements for securitisation exposures rose to an all-time high in the first quarter after the bank shifted a significant amount of underlying exposures under the securitisation standardised approach (SEC-SA).

SEC-SA risk-weighted assets (RWAs) increased nearly fivefold to €1.6 billion ($1.7 billion) from €329 million, eclipsing the previous record of €518 million set in Q1 2020.

Conversely, RWAs for securitisation exposures under the internal ratings-based approach (SEC-IRBA) fell by 63.9% to €252 million, the lowest figure since the bank first adopted the framework in 2020.

Helaba also reported €643 million under the securitisation external ratings-based approach (SEC-ERBA), up 10.3% over the same period.

As a result of the switch, Helaba’s total securitisation RWAs rose 53% to €2.5 billion.

What is it?

The Securitisation Regulation came into force in the European Union on January 1, 2019, establishing a new framework for determining capital charges for securitisations.

Banks are required to categorise securitisations into one of three risk-calculation methodologies: an internal ratings-based approach, applicable only to their own-originated transactions; an external ratings-based approach, which relies on data from credit rating agencies; and a standardised approach, which uses the standardised credit risk profile of underlying exposures as the primary input.

Why it matters

The rise in Helaba’s securitisation RWAs was not driven by a jump in the underlying exposures, but rather by a change in their mapping under the different methodologies employed by the bank.

A spokesperson told Risk Quantum that this was due to adjustments in the areas the different rating systems were applied.

Of the total securitisation RWAs, SEC-SA made up 62.8%, up from 19.9%, while SEC-IRBA constituted 10%, down from 42.1%. The remaining 25.4% was accounted for by SEC-ERBA.

This increased reliance on the SEC-SA carries a number of implications. On one hand, Helaba is likely to benefit from increased simplicity, lower costs and reduced regulatory burden. The SEC-SA is a more straightforward methodology that does not require banks to develop expensive internal models or complex rating systems. Moreover, it makes regulatory compliance easier and limits the regulatory scrutiny associated with internal model validation.

On the other hand, the SEC-SA is less sensitive to varying levels of risk compared with the SEC-IRBA or even the SEC-ERBA. As a result, capital requirements might not fully reflect the actual risk profile of the securitisation exposures. Additionally, the SEC-SA often results in higher capital charges, as the standard risk weights tend to be more conservative to compensate for the lack of granularity in the approach. 

In this delicate balancing act, Helaba must navigate the trade-offs between operational simplicity and potentially higher capital costs.

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