6.An originating bank may exclude underlying exposures from the calculation of risk-weighted assets only if all of the following conditions for risk transference have been met.

1. a.Significant credit risk associated with the underlying exposures has been transferred to third parties.
2. b.Banks should obtain legal opinion that confirms true sale, that the transferor does not maintain effective or indirect control over the transferred exposures; that is, that the exposures are legally isolated from the transferor in such a way (e.g., through the sale of assets or through sub-participation) that the exposures are put beyond the reach of the transferor and its creditors, even in bankruptcy or receivership.
3. c.The transferor is not able to repurchase from the transferee the previously transferred exposures in order to realize their benefits and is not obligated to retain the risk of the transferred exposures.
4. d.The securities issued are not obligations of the transferor. Thus, investors who purchase the securities only have a claim on the underlying exposures.
5. e.The transferee is an SPE and the holders of the beneficial interests in that entity have the right to pledge or exchange them without restriction.
6. f.Clean-up calls satisfy the conditions set out in Section D below.
7. g.The securitisation does not contain clauses that (i) require the originating bank to alter the underlying exposures such that the pool’s credit quality is improved unless this is achieved by selling exposures to independent and unaffiliated third parties at market prices; (ii) allow for increases in a retained first-loss position or credit enhancement provided by the originating bank after the transaction’s inception; or (iii) increase the yield payable to parties other than the originating bank, such as investors and third-party providers of credit enhancements, in response to a deterioration in the credit quality of the underlying pool.
8. h.There are no termination options or triggers except eligible clean-up calls meeting the requirements of Section D below, termination for specific changes in tax and regulation, or early amortization provisions that result in the securitisation transaction failing the operational requirements set out in Section D below.
9. i.Such other conditions as the Central Bank shall provide after notification to banks pursuant to a circular or otherwise.

Banks meeting these above conditions must still hold regulatory capital against any exposure they retain under the securitisation.

7.The transferor’s retention of servicing rights to the exposures does not in itself constitute indirect control of the exposures.