Entire Section

  • Operational Requirements for the Treatment of Clean-Up Calls

    • PIB A4.10.3

      Where a Clean-Up Call is included within a securitisation, the Authorised Firm which has the ability to exercise the Clean-Up Call must ensure that:

      (a) the exercise of the Clean-Up Call must not be mandatory, in form or substance;
      (b) the Clean-Up Call must not be structured to avoid allocating losses to Credit Enhancements, or positions held by investors or in any way structured to provide Credit Enhancement; and
      (c) the Clean-Up Call must only be exercisable when 10% or less of the original underlying Exposures or Securities issued in that securitisation remains, or in the case of a Synthetic Securitisation, when 10% or less of the original reference portfolio value remains.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A4.10.4

      Where the conditions listed in PIB Rule A4.10.3 are not met the Authorised Firm must hold capital against the Exposures as follows:

      (a) for a Traditional Securitisation the underlying Exposures must be treated as if they had not been securitised;
      (b) Authorised Firms must not include any gain-on-sale in any element or component of their Capital Resources;
      (c) for Synthetic Securitisations, the Authorised Firm must hold capital against the entire amount of securitised Exposures; and
      (d) where a Synthetic Securitisation incorporates a call that is not a Clean-Up Call, the Authorised Firm must treat the transaction in accordance with the relevant Credit Risk mitigation techniques in PIB section 4.13.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A4.10.5

      An Authorised Firm must treat a currency mismatch or a maturity mismatch between the underlying Exposure being hedged and the Credit Risk mitigation obtained through the Synthetic Securitisation in accordance with Rules in sections PIB 4.13 and PIB A4.3.

      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]