Additional Operational Requirements for Guarantees
CA-4.5.2
In addition to the legal certainty requirements in Paragraphs CA-4.1.8 and CA-4.1.9, in order for a guarantee to be recognised, the following conditions must be satisfied:
(a) On the qualifying default/non-payment of the counterparty, theconventional bank licensee may in a timely manner pursue the guarantor for any monies outstanding under the documentation governing the transaction. The guarantor may make one lump sum payment of all monies under such documentation to theconventional bank licensee , or the guarantor may assume the future payment obligations of the counterparty covered by the guarantee. Theconventional bank licensee must have the right to receive any such payments from the guarantor without first having to take legal actions in order to pursue the counterparty for payment;(b) The guarantee is an explicitly documented obligation assumed by the guarantor; and(c) Except as noted in the following sentence, the guarantee covers all types of payments the underlying obligor is expected to make under the documentation governing the transaction, for example notional amount, margin payments etc. Where a guarantee covers payment of principal only, interests and other uncovered payments must be treated as an unsecured amount in accordance with Paragraph CA-4.5.10.January 2015
