Additional Guidance for Criterion A1
Effective from Dec 28 2022 - Dec 31 2022
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| 18.101 | The “homogeneity” criterion should be assessed taking into account the following principles: | ||
| (1) | The nature of assets should be such that there would be no need to analyze and assess materially different legal and/or credit risk factors and risk profiles when carrying out risk analysis and due diligence checks for the transaction. | ||
| (2) | Homogeneity should be assessed on the basis of common risk drivers, including similar risk factors and risk profiles. | ||
| (3) | Credit claims or receivables included in the securitization should have standard obligations, in terms of rights to payments and/or income from assets and that result in a periodic and well-defined stream of payments to investors. Credit card facilities should be deemed to result in a periodic and well-defined stream of payments to investors for the purposes of this criterion. | ||
| (4) | Repayment of the securitization exposure should mainly rely on the principal and interest proceeds from the securitized assets. Partial reliance on refinancing or re-sale of the asset securing the exposure may occur provided that re-financing is sufficiently distributed within the pool and the residual values on which the transaction relies are sufficiently low and that the reliance on refinancing is thus not substantial. | ||
| 18.102 | Examples of “commonly encountered market interest rates” would include: | ||
| (1) | Interbank rates and rates set by monetary policy authorities, such as Libor, Euribor and the fed funds rate; and | ||
| (2) | Sectoral rates reflective of a lender’s cost of funds, such as internal interest rates that directly reflect the market costs of a bank’s funding or that of a subset of institutions. | ||
| 18.103 | Interest rate caps and/or floors would not automatically be considered exotic derivatives. | ||
| 18.104 | The transaction level requirement is still met if the conduit does not purchase the underlying asset with a refundable purchase price discount but instead acquires a beneficial interest in the form of a note which itself might qualify as a securitization exposure, as long as the securitization exposure is not subject to any further tranching (i.e. has the same economic characteristic as the purchase of the underlying asset with a refundable purchase price discount). | ||