Minimum Capital Requirements for Credit Risk

To assist investors in conducting appropriate due diligence prior to investing in a new programme offering, the sponsor should provide to potential investors sufficient aggregated data that illustrate the relevant risk characteristics of the underlying asset pools in accordance with applicable laws. To assist investors in conducting appropriate and ongoing monitoring of their investments’ performance and so that investors who wish to purchase commercial paper have sufficient information to conduct appropriate due diligence, the sponsor should provide timely and sufficient aggregated data that provide the relevant risk characteristics of the underlying pools in accordance with applicable laws. The sponsor should ensure that standardized investor reports are readily available to current and potential investors at least monthly. Cut off dates of the aggregated data should be aligned with those used for investor reporting. Criterion A6: Initial and Ongoing Data (Transaction Level) 18.124 The sponsor should ensure that the individual sellers (in their capacity of servicers) provide it with: (1) Sufficient asset level data in accordance with applicable laws or, in the case of granular pools, summary stratification data on the relevant risk characteristics of the underlying pool before transferring any credit claims or receivables to such underlying pool. (2) Timely asset level data in accordance with applicable laws or granular pool stratification data on the risk characteristics of the underlying pool on an ongoing basis. Those data should allow the sponsor to fulfil its fiduciary duty at the conduit level in terms of disclosing information to investors including the alignment of cut off dates of the asset level or granular pool stratification data with those used for investor reporting. 18.125 The seller may delegate some of these tasks and, in this case, the sponsor should ensure that there is appropriate oversight of the outsourced arrangements. Additional Requirement for Criterion A6 18.126 The standardized investor reports which are made readily available to current and potential investors at least monthly should include the following information: (1) Materially relevant data on the credit quality and performance of underlying assets, including data allowing investors to identify dilution, delinquencies and defaults, restructured receivables, forbearance, repurchases, losses, recoveries and other asset performance remedies in the pool; (2) The form and amount of credit enhancement provided by the seller and sponsor at transaction and conduit levels, respectively; (3) Relevant information on the support provided by the sponsor; and (4) The status and definitions of relevant triggers (such as performance, termination or counterparty replacement triggers). Criterion B7: Full Support (Conduit Level Only) 18.127 The sponsor should provide the liquidity facility(ies) and the credit protection support 101 for any ABCP programme issued by a conduit. Such facility(ies) and support should ensure that investors are fully protected against credit risks, liquidity risks and any material dilution risks of the underlying asset pools financed by the conduit. As such, investors should be able to rely on the sponsor to ensure timely and full repayment of the commercial paper. 101 A sponsor can provide full support either at ABCP programme level or at transaction level, i.e. by fully supporting each transaction within an ABCP programme. Additional Requirement for Criterion B7 18.128 While liquidity and credit protection support at both the conduit level and transaction level can be provided by more than one sponsor, the majority of the support (assessed in terms of coverage) has to be made by a single sponsor (referred to as the “main sponsor”). 102 An exception can however be made for a limited period of time, where the main sponsor has to be replaced due to a material deterioration in its credit standing.