SRT and Capital Relief
Definition
Output Floor
The CRR3/Basel IV requirement that IRB model-derived RWAs cannot fall below 72.5% of standardised RWAs (phasing 2025–2027). Limits capital relief achievable via internal model-based SRT.
Deep Dives
Related Terms
CRR3
EU regulation (2024/1623) implementing Basel IV in the EU, effective January 1, 2025. Introduces output floor phasing to 72.5% of standardised RWAs by January 2027. Materially affects SRT economics and bank capital models.
Significant Risk Transfer (SRT)
A securitisation or synthetic structure where a bank transfers a material portion of credit risk of a reference portfolio, satisfying regulatory tests that allow reduction of regulatory capital. EU test: quantitative (RWA ratio) or qualitative; EBA Guidelines (July 2023) govern assessment.
p-factor
Multiplier in the SEC-SA method for retained securitisation positions. p=1.0 for non-STS; p=0.5 for STS. Lower p-factor halves the capital charge — key incentive to obtain STS designation.