3. If premia paid to credit protection provides are not recognised in the profit and loss account …

If premia paid to credit protection provides are not recognised in the profit and loss account of the originator institution, competent authorities should consider whether premia paid to credit protection providers are excessively high to the extent that SRT will be undermined. This could be assessed in a number of ways such as by looking at the premia paid compared to (i) the yield of the asset pool, or (ii) the losses being covered by the protection, or (iii) fair market rates, or (iv) some combination of these various factors. Competent authorities should also consider whether there are other features of the transaction outside of premia, such as fees, which effectively increase the cost of the protection being provided to the extent that credit risk transfer will be undermined.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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