• PRU 4.14.6 PRU 4.14.6

    In order to qualify for using the Rules specified in this Section, and particularly the risk weighting approach outlined below, an Authorised Person must demonstrate the following:

    (a) a comprehensive understanding of the risk characteristics of its individual securitisation Exposures, whether on balance sheet or off balance sheet, as well as the risk characteristics of the pools underlying securitisation Exposures;
    (b) ability to access the performance information on the underlying pools on an on-going basis in a timely manner; and
    (c) a thorough understanding of all structural features of a securitisation transaction that would materially impact the performance of the Authorised Person's Exposure to the transaction, such as waterfall triggers, Credit Enhancements, liquidity enhancements, market value triggers and deal specific definitions of default.

    • Guidance

      1. An Authorised Person which is an investor, Originator or Sponsor of a Securitisation should fully understand the risks it has assumed in order to ensure that it can accurately determine the Capital Requirements for the Exposures arising from the securitisation in accordance with the Rules in this Section.
      2. For the purposes of Rule 4.14.6(b) information should include the percentage of loans 30, 60, 90 days past due, default rates, prepayment rates, loans in foreclosure, property type, occupancy, average credit score etc. For Re-securitisations, Authorised Persons should have information relating to not only the underlying securitisation transactions but also the characteristics and performance of the underlying pools of such transactions.