Principia Partners released the latest version of its structured finance platform called Principia SFP.
The latest functionality allows ABS, MBS and structured credit investors to comprehensively satisfy the European Union's (EU) operational credit analysis requirements, and avoid additional capital charges associated with a failure to comply.
The platform offers the due diligence, deal and portfolio risk exposure analysis, stress testing and operational tools necessary to efficiently implement Article 122a guidelines, as described by the European Banking Authority and EU prudential supervisors.
Article 122a specifies that EU credit institutions buying securitized assets must show that before investing, and on an ongoing basis, they have a comprehensive understanding of their ABS positions.
Formal policies and procedures must be in place to diligently analyze, manage and record the risk profile, performance and structural features of any individual deal and across portfolios.
It also stated that credit institutions must not rely on third-party due diligence and that the process should remain within the institution's full responsibility and control.
The penalty for any judged infringement is a proportionate additional capital risk weighting for each position.
“Investors interested in structured finance want to truly understand the positions they are entering and Article 122a will be key to ensuring that credit institutions do so in a sustainable way,” said Douglas Long, executive vice president in business strategy at Principia. “By developing an out-of-the-box solution to perform their own due diligence, Principia’s software provides banks of all sizes with the control and analytical rigor to address the current requirements of Article 122a, as well as a robust framework to maintain compliance as amendments are introduced in 2012.”