Title[ Part 2: The First Pillar - Minimum Capital Requirements
Section[ 3. Specific risk rules for non-qualifying issuers
712 (i). Instruments issued by a non-qualifying issuer will receive the same specific risk charge as a non-investment grade corporate borrower under the standardised approach for credit risk under this Framework. However, since this may in certain cases considerably underestimate the specific risk for debt instruments which have a high yield to redemption relative to government debt securities, each national supervisor will have the discretion:
w To apply a higher specific risk charge to such instruments; and/or
w To disallow offsetting for the purposes of defining the extent of general market risk between such instruments and any other debt instruments.
In that respect, securitisation exposures that would be subject to a deduction treatment under the securitisation framework set forth in this Framework (e.g. equity tranches that absorb first loss), as well as securitisation exposures that are unrated liquidity lines or letters of credit should be subject to a capital charge that is no less than the charge set forth in the securitisation framework.
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