Decree No. 89 / 2011 Coll.
Decree amending Decree No. 123 / 2007 Coll., on the rules of prudent business of banks, savings and credit cooperatives and securities dealers, as amended
Valid
Effective from 01.04.2011
89
DECLARATION
of 16 March 2011
amending Decree No. 123 / 2007 Coll., on the prudential business rules of banks, savings and credit cooperatives and securities dealers, as amended
The Czech National Bank provides pursuant to § 12a (8) (a) of Act No. 21 / 1992 Coll., on Banks, as amended by Act No. 41 / 2011 Coll., pursuant to § 8 (9) (a) of Act No. 87 / 1995 Coll., on Savings and Credit Cooperatives and certain measures related thereto and on Addition to the Act of the Czech National Council No. 586 / 1992 Coll., on Income Taxes, as amended, as amended by Act No. 41 / 2011 Coll., and under § 199 (2) of Act No. 256 / 2004 Coll., on Business in Capital Market, as amended by Act No. 230 / 2008 Coll.:
Decree No. 123 / 2007 Coll., on the prudential business rules of banks, savings and credit cooperatives and securities dealers, as amended, is amended as follows:
1. In Article 1, point (c) is added at the end of the text, "and rules on risk transfer '.
2. Paragraph 3 (2) reads as follows:
"(2) This decree shall also apply to a mandatory person who is a securities dealer pursuant to § 8a (1), (2) or (3) of the Capital Market Act, with the exception of the provisions of Title II of Part Three, Title II, Part Five, Title 6 and the provisions on more detailed requirements for managing selected risks as set out in Annex 1 to this Decree; a mandatory person who is a securities dealer pursuant to § 8a (2), (3) or § 9b (2) of the Capital Market Business Act shall not be subject to Part Five, Title I. ';
3. in Part Five, the following Title II is inserted after Title I:
RISK TRANSFER RULES
Maintenance of net economic interest
(1) A obliged entity, except where it is the originator, sponsor or original lender, may be exposed to credit risk from a securitisation exposure in a trading or investment portfolio only if it is explicitly informed by the originator, sponsor or original lender that it keeps a significant net economic interest on an ongoing basis.
(2) Keeping a significant net economic share means keeping
(a) at least 5% of the nominal value of each tranche transferred to investors;
(b) the originator's share of at least 5% of the nominal value of the securitised exposures in the event of the securitisation of revolving exposures;
(c) randomly selected exposures which correspond to at least 5% of the nominal value of the securitised exposures and which would otherwise be securitised under the securitisation transaction, provided that the number of exposures initially assigned to the securitisation is at least 100; or
(d) tranches of first loss and, where applicable, other tranches which entail the same or higher risk than tranches transferred to investors and which are not due before tranches transferred to investors in such a way that the exposures that are retained total amount to at least 5% of the nominal value of the securitised exposures.
(3) The amount of the net economic interest shall be determined according to the nominal value of off-balance sheet items at the beginning of the securitisation and shall be maintained on an ongoing basis. The net economic share cannot be transferred, nor can it be subject to collateral or short position.
(4) The requirement to retain a significant net economic interest shall not apply repeatedly to one securitisation transaction.
(1) On a consolidated basis, the European Controlling Bank or the European financial holding person may fulfil the requirement of maintaining a net economic interest if it itself or through a controlled person is in the position of originator or sponsor of the exposure of several credit institutions, securities dealers or financial institutions supervised on a consolidated basis.
(2) Paragraph 1 shall apply only where a credit institution, a securities dealer or a financial institution that is the originator of securitised exposures has undertaken to comply with the requirements of Paragraph 189e (1) and provides to the next originator or sponsor and the relevant European controlling bank or European financial holding company the information necessary to comply with the requirements of Article 189e (3) without undue delay.
(3) The requirement to retain a significant net economic interest shall not apply where the securitised exposure constitutes a claim or a contingent claim against:
(a) the central government or the central bank;
(b) the regional government, local authority or public sector organisation from a Member State;
(c) an institution assigned a risk weight of 50% or less under the Standardised Approach; or
(d) the International Development Bank.
(4) The requirement to retain a significant net economic interest shall also not apply where the securitised exposure constitutes a claim or a contingent claim which is secured to the full by the unconditional and irrevocable guarantee of the person referred to in paragraph 3.
(5) The requirement to maintain a significant net economic interest shall no longer apply to:
(a) transactions based on a clear, transparent and accessible index, the underlying reference instruments of which are the same as the instruments that form the widely traded index, or the underlying reference instruments of which are other marketable securities that are not securitised exposures; and
(b) syndicated loans, purchased receivables or credit default swaps, unless those instruments are used to hedge or re-securitisation a securitisation that is subject to the requirement to retain a significant net economic interest.
The prudent investor
(1) The obligor, having regard to the composition of the trading or investment portfolio and in proportion to the risk profile of his investment in securitised exposures, applies procedures that allow for a comprehensive and thorough recording, analysis and understanding of the following information concerning each securitisation exposure:
(a) the information provided by the originator or sponsor for the purpose of defining the net economic interest that it will maintain in the securitisation;
(b) the risk characteristics of individual securitised exposures;
(c) the risk characteristics of the underlying exposures of the securitised exposure;
(d) the reputation and losses arising from previous securitisations of the originator or sponsor in the relevant classes of underlying exposures of the securitised exposure;
(e) information provided by the originator, sponsor, their agent or consultant on the performance of proper control of the securitised exposures and, where relevant, on the performance of proper control of the underlying exposures;
(f) the methods and concepts on which the valuation of underlying exposures is based, where relevant, and the procedures adopted by the originator or sponsor to ensure the independence of the valuer; and
(g) any structural features of the securitisation that may have a significant impact on the performance of the securitised exposure.
(2) Compliance with the requirements laid down in paragraph 1 shall be demonstrated by the obliged entity to the Czech National Bank before the investment takes place and, where justified, thereafter.
(3) The obligor who is an investor carries out regular stress testing that is proportionate to the relevant securitisation exposure. It may use financial models from the credit rating agency, provided that it is able to demonstrate on request that it has taken professional care before carrying out the investment in validating the relevant assumptions and structure of the model and understanding the procedure, assumptions and results.
(4) A obligor who is not the originator, sponsor or original lender shall establish, for the purpose of continuous and timely monitoring of the performance of securitised exposures, procedures corresponding to the composition of its trading or investment portfolio and proportionate to the risk profile of its investments in securitised exposures. Where relevant, it shall also monitor the data on the type of exposure, the proportion of underlying exposures past maturity of 30, 60 or 90 days, default rates, early repayment rates, underlying exposures that have been initiated for the recovery of collateral, the type of collateral and the rate of use of collateral, the spread of the frequency of quantitative credit assessment or any other measure of creditworthiness of underlying exposures, sectoral and geographical breakdown, the distribution of the frequency of the credit ratio to the value of the property with a bandwidth that allows the necessary analysis of the sensitivity of underlying exposures.
(5) Where the underlying exposure is also a securitised exposure, the obligor that is not the originator, sponsor or original creditor shall have the data referred to in paragraph 4 in relation to those underlying securitised exposures as well as in relation to the characteristics and performance of their underlying pools.
(6) The obligor who is not the originator, sponsor or original lender must be fully aware of any structural elements of the securitised exposure that could significantly affect the performance of the exposure, in particular as regards the contractual distribution of cash flows and associated trigger mechanisms, credit enhancement, liquidity enhancement, market-based trigger mechanisms or the special definition of default for the transaction.
(7) If the requirements laid down in paragraphs 1 to 6 and Paragraph 189e (3) are not met in any significant respect due to the action of the obligor, the securitisation exposure shall be subject to an appropriate additional risk weight set by the Czech National Bank of at least 2,5 times the risk weight assigned to the relevant positions under Annex 17 or 18 to this Decree. The additional risk weight increases with any breach of the obligation to act with professional care. The resulting risk weight shall not exceed 1 250%. The Czech National Bank may take into account the exemptions under Article 189c (3) to (5) and reduce the risk weight applied under this paragraph.
Coefficient of the originator and sponsor
(1) The obligor, being a sponsor or originator, shall apply the credit granting rules in accordance with Annex 1, Part 1, point (b) to the securitisation exposure. A. points Even this decree as if it were an exposure to be included in its own trading or investment portfolio. The mandatory person referred to in the first sentence shall apply the same approval procedures and, where relevant, to the completion, renewal and refinancing of the credit. In addition, the obligor shall apply the same standards for the analysis of holdings or underwriting in securitisation issues acquired from another person, regardless of whether it classifies those interests or underwriting in a trading or investment portfolio.
(2) If the requirements of paragraph 1 are not met, the originator obligor shall not proceed in accordance with Sections 109 (1) and 110 (1) and shall not exclude securitised exposures from the determination of the capital requirement.
(3) The obligor who is a sponsor or originator provides the investor with information on the extent of his obligation to maintain a net economic interest in the securitisation. In addition, the obligor shall ensure that any future investor has easy access to all relevant relevant relevant credit quality and performance data on individual underlying exposures, cash flows and collateral, as well as data necessary to carry out comprehensive and informationally high-quality stress cash flow testing and collateral values of the underlying exposure. The relevant relevant relevant data shall be determined at the date of the securitisation or later where justified by the nature of the securitisation. ';
Transitional provisions
1. The provisions of Sections 189b to 189e of Decree No. 123 / 2007 Coll., as effective from the date of entry into force of this Order, shall apply to securitisations which take place from the date of entry into force of this Order.
2. As from 1 January 2015, the provisions of Sections 189b to 189e of Decree No. 123 / 2007 Coll., as effective from the date of entry into force of this Order, shall also apply to securitisations that took place before the date of entry into force of this Order, provided that, from the date of entry into force of this Order, those securitisations are supplemented or replaced by new underlying exposures.
Efficacy
This decree shall take effect on the day of its publication.
Governor:
Ing. Singer, Ph.D., v. r.
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Regulation Information
| Citation | Decree No. 89 / 2011 Coll., amending Decree No. 123 / 2007 Coll., on prudential business rules for banks, savings and credit cooperatives and securities dealers, as amended |
|---|---|
| Regulation Type | - |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 01.04.2011 |
|---|---|
| Effective from | 01.04.2011 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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