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  • 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