Criterion A5: Asset Selection and Transfer
| No: 44047144 | Date(g): 27/12/2022 | Date(h): 4/6/1444 | Status: In-Force |
Effective from Jan 01 2023 - Dec 31 2022
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| 18.77 | Whilst recognizing that credit claims or receivables transferred to a securitization will be subject to defined criteria,82 the performance of the securitization should not rely upon the ongoing selection of assets through active management83 on a discretionary basis of the securitization’s underlying portfolio. Credit claims or receivables transferred to a securitization should satisfy clearly defined eligibility criteria. Credit claims or receivables transferred to a securitization after the closing date may not be actively selected, actively managed or otherwise cherry- picked on a discretionary basis. Investors should be able to assess the credit risk of the asset pool prior to their investment decisions. | |
| 18.78 | In order to meet the principle of true sale, the securitization should effect true sale such that the underlying credit claims or receivables: | |
| (1) | Are enforceable against the obligor and their enforceability is included in the representations and warranties of the securitization; | |
| (2) | Are beyond the reach of the seller, its creditors or liquidators and are not subject to material recharacterisation or clawback risks; | |
| (3) | Are not effected through credit default swaps, derivatives or guarantees, but by a transfer of the credit claims or the receivables to the securitization; | |
| (4) | Demonstrate effective recourse to the ultimate obligation for the underlying credit claims or receivables and are not a securitization of other securitizations; and | |
| (5) | For regulatory capital purposes, an independent third-party legal opinion must support the claim that the true sale and the transfer of assets under the applicable laws comply with the points under 18.78 (1) to 18.78 (4). | |
| 18.79 | Securitizations employing transfers of credit claims or receivables by other means should demonstrate the existence of material obstacles preventing true sale at issuance84 and should clearly demonstrate the method of recourse to ultimate obligors.85 In such jurisdictions, any conditions where the transfer of the credit claims or receivable is delayed or contingent upon specific events and any factors affecting timely perfection of claims by the securitization should be clearly disclosed. The originator should provide representations and warranties that the credit claims or receivables being transferred to the securitization are not subject to any condition or encumbrance that can be foreseen to adversely affect enforceability in respect of collections due. | |
82 Eg the size of the obligation, the age of the borrower or the loan-to- value of the property, debt-to-income and/or debt service coverage ratios.
83 Provided they are not actively selected or otherwise cherry-picked on a discretionary basis, the addition of credit claims or receivables during the revolving periods or their substitution or repurchasing due to the breach of representations and warranties do not represent active portfolio management.
84 Eg the immediate realization of transfer tax or the requirement to notify all obligors of the transfer.
85 Eg equitable assignment, perfected contingent transfer.