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  • CA-6.2 CA-6.2 Definitions and General Terminology

    • Originating Bank

      • CA-6.2.1

        For risk-based capital purposes, a bank is considered to be an originator with regard to a certain securitisation if it meets either of the following conditions:

        (a) The bank originates directly or indirectly underlying exposures included in the securitisation; or
        (b) The bank serves as a sponsor of an asset-backed commercial paper (ABCP) conduit or similar programme that acquires exposures from third-party entities. In the context of such programmes, a bank would generally be considered a sponsor and, in turn, an originator if it, in fact or in substance, manages or advises the programme, places securities into the market, or provides liquidity and/or credit enhancements.
        Apr 08

    • Asset Backed Commercial Paper (ABCP) Programme

      • CA-6.2.2

        An asset-backed commercial paper (ABCP) programme predominately issues commercial paper with an original maturity of one year or less that is backed by assets or other exposures held in a bankruptcy-remote, Special Purpose Securitisation Vehicle (SPSV).

        Apr 08

    • Clean-up Call

      • CA-6.2.3

        A clean-up call is an option that permits the securitisation exposures (e.g. asset-backed securities) to be called before all of the underlying exposures or securitisation exposures have been repaid. In the case of traditional securitisations, this is generally accomplished by repurchasing the remaining securitisation exposures once the pool balance or outstanding securities have fallen below some specified level. In the case of a synthetic transaction, the clean-up call may take the form of a clause that extinguishes the credit protection.

        Apr 08

    • Credit Enhancement

      • CA-6.2.4

        A credit enhancement is a contractual arrangement in which the bank retains or assumes a securitisation exposure and, in substance, provides some degree of added protection to other parties to the transaction.

        Apr 08

    • Credit Enhancing Interest-Only strip

      • CA-6.2.5

        A credit-enhancing interest-only strip (I/O) is an on-balance sheet asset that (i) represents a valuation of cash flows related to future margin income, and (ii) is subordinated.

        Apr 08

    • Early Amortization

      • CA-6.2.6

        Early amortisation provisions are mechanisms that, once triggered, allow investors to be paid out prior to the originally stated maturity of the securities issued. For risk-based capital purposes, an early amortisation provision will be considered either controlled or non-controlled. A controlled early amortisation provision must meet all of the following conditions:

        (a) The bank must have an appropriate capital/liquidity plan in place to ensure that it has sufficient capital and liquidity available in the event of an early amortisation;
        (b) Throughout the duration of the transaction, including the amortisation period, there is the same pro-rata sharing of interest, principal, expenses, losses and recoveries based on the bank's and investors' relative shares of the receivables outstanding at the beginning of each month;
        (c) The bank must set a period for amortisation that would be sufficient for at least 90% of the total debt outstanding at the beginning of the early amortisation period to have been repaid or recognised as in default; and
        (d) The pace of repayment should not be any more rapid than would be allowed by straight-line amortisation over the period set out in criterion (c).
        Amended: April 2011
        Apr 08

      • CA-6.2.7

        An early amortisation provision that does not satisfy the conditions for a controlled early amortisation provision must be treated as a non-controlled early amortisation provision.

        Apr 08

    • Excess Spread

      • CA-6.2.8

        Excess spread is generally defined as gross finance charge collections and other income received by the trust or SPSV (specified in paragraph CA-6.2.10) minus certificate interest, servicing fees, charge-offs, and other senior trust or SPSV expenses.

        Apr 08

    • Implicit Support

      • CA-6.2.9

        Implicit support arises when a bank provides support to a securitisation in excess of its predetermined contractual obligation.

        Apr 08

      • SPSV

        • CA-6.2.10

          An SPSV is a corporation, trust, or other entity organised for a specific purpose, the activities of which are limited to those appropriate to accomplish the purpose of the SPSV, and the structure of which is intended to isolate the SPSV from the credit risk of an originator or seller of exposures. SPSVs are commonly used as financing vehicles in which exposures are sold to a trust or similar entity in exchange for cash or other assets funded by debt issued by the trust.

          Apr 08