Directive 2006/48/EC of the European Parliament and of the council (repealed)Show full title

1. MINIMUM REQUIREMENTS FOR RECOGNITION OF SIGNIFICANT CREDIT RISK TRANSFER IN A TRADITIONAL SECURITISATION

1. The originator credit institution of a traditional securitisation may exclude securitised exposures 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 following conditions:

(a)

The securitisation documentation reflects the economic substance of the transaction;

(b)

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

(c)

The securities issued do not represent payment obligations of the originator credit institution;

(d)

The transferee is a securitisation special-purpose entity (SSPE);

(e)

The originator credit institution does not maintain effective or indirect control over the transferred exposures. An originator shall 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 credit institution's retention of servicing rights or obligations in respect of the exposures shall not of itself constitute indirect control of the exposures;

(f)

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

(i)

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

(ii)

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

(iii)

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; and

(g)

The securitisation documentation does not contain clauses that

(i)

other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution 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

(ii)

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