Fitch Ratings launched its Basel II supervisory formula approach (SFA) tool that calculates capital charges on a set of unrated tranches of standard securitizations.
The tool, which is for banks that use an internal ratings-based (IRB) approach to credit risk, covers the most common asset types, including RMBS, ABS, CMBS and CDOs of corporates and structured finance.These have loan assets where all relevant IRB risk parameters are — such as probability of default, loss given default, maturity adjustment factor and potentially SME turnover adjustment — and where there is a clear seniority structure of the liabilities.
The SFA Tool will be available to subscribers. It comprises two Excel sheets — one for data input and the second for the calculation output — and a user guide which facilitates the use of the tool.
Users are required to input details including covering the portfolio type, collateral pool that underlies the securitization, and also the capital structure of the securitization.
The tool can be used for securitizations of one single type of assets only (e.g. SME, retail-mortgages, credit cards, etc).