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17.11.2009

EN

Official Journal of the European Union

L 302/111

3.

Paragraph 1 shall not apply where the securitised expo­

sures are claims or contingent claims on or fully, uncondi­

tionally and irrevocably guaranteed by:

  • (a)

    central governments or central banks;

  • (b)

    regional governments, local authorities and public sec­

tor entities of Member States;

  • (f)

    where applicable, the methodologies and concepts on which the valuation of collateral supporting the securi­ tised exposures is based and the policies adopted by the originator or sponsor to ensure the independence of the valuer; and

  • (g)

    all the structural features of the securitisation that can materially impact the performance of the credit institu­ tion’s securitisation position.

(c) institutions to which a 50 % risk weight or less is assigned under Articles 78 to 83; or

(d) multilateral development banks.

Paragraph 1 shall not apply to:

Credit institutions shall regularly perform their own stress tests appropriate to their securitisation positions. To this end, credit institutions may rely on financial models developed by an ECAI provided that credit institutions can demonstrate, when requested, that they took due care prior to investing to validate the relevant assumptions in and structuring of the models and to understand methodology, assumptions and results.

  • (a)

    transactions based on a clear, transparent and accessible index, where the underlying reference entities are iden­ tical to those that make up an index of entities that is widely traded, or are other tradable securities other than securitisation positions; or

  • (b)

    syndicated loans, purchased receivables or credit default swaps where these instruments are not used to package and/or hedge a securitisation that is covered by paragraph 1.

4.

Before investing, and as appropriate thereafter, credit

institutions, shall be able to demonstrate to the competent authorities for each of their individual securitisation posi­ tions, that they have a comprehensive and thorough under­ standing of and have implemented formal policies and procedures appropriate to their trading book and non-trading book and commensurate with the risk profile of their invest­ ments in securitised positions for analysing and recording:

5. Credit institutions, other than when acting as origina­ tors or sponsors or original lenders, shall establish formal procedures appropriate to their trading book and non-trading book and commensurate with the risk profile of their invest­ ments in securitised positions to monitor on an ongoing basis and in a timely manner performance information on the exposures underlying their securitisation positions. Where relevant, this shall include the exposure type, the per­ centage of loans more than 30, 60 and 90 days past due, default rates, prepayment rates, loans in foreclosure, collat­ eral type and occupancy, and frequency distribution of credit scores or other measures of credit worthiness across under­ lying exposures, industry and geographical diversification, frequency distribution of loan to value ratios with band widths that facilitate adequate sensitivity analysis. Where the underlying exposures are themselves securitisation positions, credit institutions shall have the information set out in this

subparagraph tranches, such

not only on the as the issuer name

underlying securitisation and credit quality, but also

on the characteristics and performance ing those securitisation tranches.

of

the

pools

underly­

  • (a)

    information disclosed under paragraph 1, by originators or sponsors to specify the net economic interest that they maintain, on an ongoing basis, in the securitisation;

  • (b)

    the risk characteristics of the individual securitisation position;

Credit institutions shall have a thorough understanding of all structural features of a securitisation transaction that would materially impact the performance of their exposures to the transaction such as the contractual waterfall and waterfall related triggers, credit enhancements, liquidity enhance­ ments, market value triggers, and deal-specific definition of default.

  • (c)

    the risk characteristics of the exposures underlying the securitisation position;

  • (d)

    the reputation and loss experience in earlier securitisa­ tions of the originators or sponsors in the relevant expo­ sure classes underlying the securitisation position;

(e) the statements and disclosures made by the originators or sponsors, or their agents or advisors, about their due diligence on the securitised exposures and, where appli­ cable, on the quality of the collateral supporting the securitised exposures;

Where the requirements in paragraphs 4, 7 and in this para­ graph are not met in any material respect by reason of the negligence or omission of the credit institution, Member States shall ensure that the competent authorities impose a proportionate additional risk weight of no less than 250 % of the risk weight (capped at 1 250 %) which would, but for this paragraph, apply to the relevant securitisation positions under Annex IX, Part 4, and shall progressively increase the risk weight with each subsequent infringement of the due diligence provisions. The competent authorities shall take into account the exemptions for certain securitisations pro­ vided in paragraph 3 by reducing the risk weight it would otherwise impose under this Article in respect of a securiti­ sation to which paragraph 3 applies.

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