18. Securitization: General Provisions

In order to provide the sponsor with sufficient information on the performance history of each asset type backing the transactions and to conduct appropriate due diligence and to have access to a sufficiently rich data set to enable a more accurate calculation of expected loss in different stress scenarios, verifiable loss performance data, such as delinquency and default data, should be available for credit claims and receivables with substantially similar risk characteristics to those being financed by the conduit, for a time period long enough to permit meaningful evaluation by the sponsor. Additional Requirement for Criterion A2 18.107 The sponsor of the securitization, as well as the original lender who underwrites the assets, must have sufficient experience in the risk analysis/underwriting of exposures or transactions with underlying exposures similar to those securitized. The sponsor should have well documented procedures and policies regarding the underwriting of transactions and the ongoing monitoring of the performance of the securitized exposures. The sponsor should ensure that the seller(s) and all other parties involved in the origination of the receivables have experience in originating same or similar assets, and are supported by a management with industry experience. For the purpose of meeting the short-term STC capital criteria, investors must request confirmation from the sponsor that the performance history of the originator and the original lender for substantially similar claims or receivables to those being securitized has been established for an "appropriately long period of time”. This performance history must be no shorter than a period of five years for non-retail exposures. For retail exposures, the minimum performance history is three years. Criterion A3: Asset Performance History (Conduit Level) 18.108 The sponsor should, to the best of its knowledge and based on representations from sellers, make representations and warranties to investors that the criterion set out in 18.109 below is met with respect to each transaction. Criterion A3: Asset Performance History (Transaction Level) 18.109 The sponsor should obtain representations from sellers that the credit claims or receivables underlying each individual transaction are not, at the time of acquisition of the interests to be financed by the conduit, in default or delinquent or subject to a material increase in expected losses or of enforcement actions. Additional Requirement for Criterion A3 18.110 To prevent credit claims or receivables arising from credit-impaired borrowers from being transferred to the securitization, the original seller or sponsor should verify that the credit claims or receivables meet the following conditions for each transaction: (1) The obligor has not been the subject of an insolvency or debt restructuring process due to financial difficulties in the three years prior to the date of origination; 98 (2) The obligor is not recorded on a public credit registry of persons with an adverse credit history; (3) The obligor does not have a credit assessment by an external credit assessment institution or a credit score indicating a significant risk of default; and (4) The credit claim or receivable is not subject to a dispute between the obligor and the original lender.