Scope
CA-6.4.32
An originating bank is required to hold capital against all or a portion of the investors' interest (i.e. against both the drawn and un-drawn balances related to the securitised exposures) when:
(a) It sells exposures into a structure that contains an early amortisation feature; and(b) The exposures sold are of a revolving nature. These involve exposures where the borrower is permitted to vary the drawn amount and repayments within an agreed limit under a line of credit (e.g. credit card receivables and corporate loan commitments).January 2015CA-6.4.33
The capital requirement should reflect the type of mechanism through which an early amortisation is triggered.
January 2015CA-6.4.34
For securitisation structures wherein the underlying pool comprises revolving and term exposures, a
conventional bank licensee must apply the relevant early amortisation treatment (outlined in Paragraphs CA-6.4.36 to CA-6.4.47) to that portion of the underlying pool containing revolving exposures.January 2015CA-6.4.35
Conventional bank licensees are not required to calculate a capital requirement for early amortisations in the following situations:(a) Replenishment structures where the underlying exposures do not revolve and the early amortisation ends the ability of theconventional bank licensee to add new exposures;(b) Transactions of revolving assets containing early amortisation features that mimic term structures (i.e. where the risk on the underlying facilities does not return to the originating bank);(c) Structures where a bank securitises one or more credit line(s) and where investors remain fully exposed to future draws by borrowers even after an early amortisation event has occurred; and(d) The early amortisation clause is solely triggered by events not related to the performance of the securitised assets or the selling bank, such as material changes in tax laws or regulations.January 2015
