ANNEX VIIICREDIT RISK MITIGATION

PART 1Eligibility

1.FUNDED CREDIT PROTECTION

1.3.Collateral

1.3.3.Additional eligibility for calculations under Articles 84 to 89

(a)Real estate collateral

13.Residential real estate property which is or will be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, and commercial real estate property, that is, offices and other commercial premises, may be recognised as eligible collateral where the following conditions are met:

  1. (a)

    the value of the property does not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower; and

  2. (b)

    the risk of the borrower does not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral.