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Status: You are viewing the version of the handbook as on 2009-03-31.

BIPRU 9.4 Traditional securitisation

Minimum requirements for recognition of significant credit risk transfer

BIPRU 9.4.1RRP

The originator of a traditional securitisation may exclude securitised exposures1 from the calculation of risk weighted exposure amounts and expected loss amounts if significant credit risk associated with the securitised exposures has been transferred to third parties and the transfer complies with the conditions in BIPRU 9.4.2 RBIPRU 9.4.10 R.

[Note: BCD Annex IX Part 2 point 1 (part)]

BIPRU 9.4.2RRP

The securitisation documentation must reflect the economic substance of the transaction.

[Note: BCD Annex IX Part 2 point 1 (part)]

BIPRU 9.4.3RRP

The securitised exposures must be put beyond the reach of the originator and its creditors, including in bankruptcy and receivership. This must be supported by the opinion of qualified legal counsel.

[Note: BCD Annex IX Part 2 point 1 (part)]

BIPRU 9.4.4GRP

Legal counsel's opinions should be reviewed as necessary. For example, an opinion should be reviewed if a relevant statutory provision is amended or where a new decision or judgment of a court might have a bearing on the conclusions reached.

BIPRU 9.4.5RRP

The securities issued must not represent payment obligations of the originator.

[Note: BCD Annex IX Part 2 point 1 (part)]

BIPRU 9.4.6RRP

The transferee must be a securitisation special purpose entity.

[Note: BCD Annex IX Part 2 point 1 (part)]

BIPRU 9.4.7RRP

The originator must not maintain effective or indirect control over the transferred exposures.

[Note: BCD Annex IX Part 2 point 1 (part)]

BIPRU 9.4.8RRP

Where there is a clean-up call option, the following conditions must be satisfied:

  1. (1)

    the clean-up call option is exercisable at the discretion of the originator;

  2. (2)

    the clean-up call option may only be exercised when 10% or less of the original value of the exposures securitised remains unamortised; and

  3. (3)

    the clean-up call option is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to provide credit enhancement.

    [Note: BCD Annex IX Part 2 point 1 (part)]

BIPRU 9.4.9RRP

The securitisation documentation must not contain clauses that:

  1. (1)

    other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator including but not limited to altering the underlying credit exposures or increasing the yield payable to investors in response to a deterioration in the credit quality of the securitised exposures; or

  2. (2)

    increase the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool.

    [Note: BCD Annex IX Part 2 point 1 (part)]

BIPRU 9.4.10RRP

For the purposes of BIPRU 9.4.7 R, an originator will be considered to have maintained effective control over the transferred exposures if it has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is obligated to re-assume transferred risk. The originator's retention of servicing rights or obligations in respect of the exposures does not of itself constitute indirect control of the exposures.

[Note: BCD Annex IX Part 2 point 1 (part)]