The sponsor should make representations and warranties to investors that the criteria at the transaction level are met, and explain how this is the case on an overall basis. Only if specified should this be done for each transaction.

Provided that each individual underlying transaction is homogeneous in terms of asset type, a conduit may be used to finance transactions of different asset types.

Program-wide credit enhancement should not prevent a conduit from qualifying for STC, regardless of whether such enhancement technically creates a type of resecuritisation.

The assets underlying a transaction in a conduit should be credit claims or receivables that are homogeneous, in terms of asset type. (This does not automatically exclude securitisations of equipment leases and securitisations of auto loans and leases from the short-term STC framework.)

The assets underlying each individual transaction in a conduit should not be composed of “securitisation exposures” as defined in the Central Bank’s Standard on Required Capital for Securitisation Exposures. The transaction-level requirement is still met if the conduit does not purchase the underlying asset with a refundable purchase price discount but instead acquires a beneficial interest in the form of a note which itself might qualify as a securitisation exposure, as long as the securitisation exposure is not subject to any further tranching (i.e. has the same economic characteristic as the purchase of the underlying asset with a refundable purchase price discount).

Credit claims or receivables underlying a transaction in a conduit should have contractually identified periodic payment streams relating to rental,¹¹ principal, interest, or principal and interest payments. Credit claims or receivables generating a single payment stream would equally qualify as eligible. Any referenced interest payments or discount rates should be based on commonly encountered market interest rates, but should not reference complex or complicated formulae or exotic derivatives.

In order to provide investors with sufficient information on the performance history of the asset types backing the transactions, the sponsor should make available to investors sufficient loss performance data on claims and receivables with substantially similar risk characteristics, such as delinquency and default data on similar claims, and for a time period long enough to permit meaningful evaluation. The sponsor should disclose to investors the sources of such data and the basis for claiming similarity to credit claims or receivables financed by the conduit.

Such loss performance data may be provided on a stratified basis. Examples of such data might include:

• •all materially relevant data on the conduit’s composition (outstanding balances, industry sector, obligor concentrations, maturities etc) and conduit’s overview; and
• •all materially relevant data on the credit quality and performance of underlying transactions, allowing investors to identify collections, and, as applicable, debt restructuring, forgiveness, forbearance, payment holidays, repurchases, delinquencies and defaults.

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 risk characteristics substantially similar to those being financed by the conduit, for a time period long enough to permit meaningful evaluation by the sponsor.

The sponsor should, to the best of its knowledge and based on representations from sellers, make representations and warranties to investors that the STC criteria at the transaction level are met with respect to each transaction.

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.

The sponsor should make representations and warranties to investors that:

1. 1.It has taken steps to verify that, for the transactions in the conduit, any underlying credit claims and receivables have been subject to consistent underwriting standards, and explain how; and
2. 2.When there are material changes to underwriting standards, it will receive from sellers disclosure about the timing and purpose of such changes.

The sponsor should also inform investors of the material selection criteria applied when selecting sellers (including where they are not financial institutions).

The sponsor should ensure that sellers (in their capacity as original lenders) in transactions with the conduit demonstrate to it that:

The sponsor should also ensure that sellers disclose to it the timing and purpose of material changes to underwriting standards.

The sponsor should:

1. 1.Provide representations and warranties to investors about the checks, in terms of their nature and frequency, it has conducted regarding enforceability of underlying assets; and
2. 2.Disclose to investors the receipt of appropriate representations and warranties from sellers that the credit claims or receivables being transferred to the transactions in the conduit are not subject to any condition or encumbrance that can be foreseen to adversely affect enforceability in respect of collections due.

The sponsor should ensure that credit claims or receivables transferred to or through a transaction financed by the conduit:

An in-house legal opinion or an independent third-party legal opinion must support the claim that the true sale and the transfer of assets under the applicable laws comply with points (a) and (b) at the transaction level.

The sponsor should be able to assess thoroughly the credit risk of the asset pool prior to its decision to provide full support to any given transaction or to the conduit.

The sponsor should ensure that the transactions in the conduit effect true sale such that the underlying credit claims or receivables:

1. 1.Are enforceable against the obligor;
2. 2.Are beyond the reach of the seller, its creditors, or liquidators and are not subject to material re-characterization risks or claw-back risks (in which the insolvency or bankruptcy of the seller could result in the assets being taken back from the pool by creditors or liquidators);
3. 3.Are not effected through credit default swaps, derivatives or guarantees, but by a transfer¹⁴ of the credit claims or the receivables to the transaction; and
4. 4.Demonstrate effective recourse to the ultimate obligation for the underlying credit claims or receivables and are not a re-securitisation position.

The sponsor should ensure that, in applicable jurisdictions, for conduits employing transfers of credit claims or receivables by other means, sellers can demonstrate to it the existence of material obstacles preventing true sale at issuance¹⁵ and should clearly demonstrate the method of recourse to ultimate obligors.¹⁶ In such jurisdictions, any conditions where the transfer of the credit claims or receivables is delayed or contingent upon specific events and any factors affecting timely perfection of claims by the conduit should be clearly disclosed.

The sponsor should ensure that it receives from the individual sellers (in their capacity either as original lender or servicer) representations and warranties that the credit claims or receivables being transferred to or through the transaction are not subject to any condition or encumbrance that can be foreseen to adversely affect enforceability in respect of collections due.

To assist investors in conducting appropriate due diligence prior to investing in a new program 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 convey 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.

The sponsor should ensure that the individual sellers (in their capacity as servicers) provide it with:

The seller may delegate some of these tasks, in which case the sponsor should ensure that there is appropriate oversight of the outsourced arrangements.