The originator credit institution of a traditional securitisation may exclude securitised exposures from the calculation of risk‐weighted exposure amounts and expected loss amounts if significant credit risk associated with the securitised exposures has been transferred to third parties and the transfer complies with the following conditions:

1. (a)

   The securitisation documentation reflects the economic substance of the transaction;

2. (b)

   The securitised exposures are put beyond the reach of the originator credit institution and its creditors, including in bankruptcy and receivership. This shall be supported by the opinion of qualified legal counsel;

3. (c)

   The securities issued do not represent payment obligations of the originator credit institution;

4. (d)

   The transferee is a securitisation special-purpose entity (SSPE);

5. (e)

   The originator credit institution does not maintain effective or indirect control over the transferred exposures. An originator shall be considered to have maintained effective control over the transferred exposures if it has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is obligated to re-assume transferred risk. The originator credit institution's retention of servicing rights or obligations in respect of the exposures shall not of itself constitute indirect control of the exposures;

6. (f)

   Where there is a clean-up call option, the following conditions are satisfied:

   1. (i)

      The clean-up call option is exercisable at the discretion of the originator credit institution;

   2. (ii)

      The clean-up call option may only be exercised when 10 % or less of the original value of the exposures securitised remains unamortised; and

   3. (iii)

      The clean-up call option is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to provide credit enhancement; and

7. (g)

   The securitisation documentation does not contain clauses that

   1. (i)

      other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution including but not limited to altering the underlying credit exposures or increasing the yield payable to investors in response to a deterioration in the credit quality of the securitised exposures; or

   2. (ii)

      increase the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool.

An originator credit institution of a synthetic securitisation may calculate risk‐weighted exposure amounts, and, as relevant, expected loss amounts, for the securitised exposures in accordance with points 3 and 4 below, if significant credit risk has been transferred to third parties either through funded or unfunded credit protection and the transfer complies with the following conditions:

1. (a)

   The securitisation documentation reflects the economic substance of the transaction;

2. (b)

   The credit protection by which the credit risk is transferred complies with the eligibility and other requirements under Articles 90 to 93 for the recognition of such credit protection. For the purposes of this point, special purpose entities shall not be recognised as eligible unfunded protection providers.

3. (c)

   The instruments used to transfer credit risk do not contain terms or conditions that:

   1. (i)

      impose significant materiality thresholds below which credit protection is deemed not to be triggered if a credit event occurs;

   2. (ii)

      allow for the termination of the protection due to deterioration of the credit quality of the underlying exposures;

   3. (iii)

      other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution;

   4. (iv)

      increase the credit institutions' cost of credit protection or the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool; and

4. (d)

   An opinion is obtained from qualified legal counsel confirming the enforceability of the credit protection in all relevant jurisdictions.

In calculating risk‐weighted exposure amounts for the securitised exposures, where the conditions in point 2 are met, the originator credit institution of a synthetic securitisation shall, subject to points 5 to 7, use the relevant calculation methodologies set out in Part 4 and not those set out in Articles 78 to 89. For credit institutions calculating risk‐weighted exposure amounts and expected loss amounts under Articles 84 to 89, the expected loss amount in respect of such exposures shall be zero.

For clarity, point 3 refers to the entire pool of exposures included in the securitisation. Subject to points 5 to 7, the originator credit institution is required to calculate risk‐weighted exposure amounts in respect of all tranches in the securitisation in accordance with the provisions of Part 4 including those relating to the recognition of credit risk mitigation. For example, where a tranche is transferred by means of unfunded credit protection to a third party, the risk weight of that third party shall be applied to the tranche in the calculation of the originator credit institution's risk‐weighted exposure amounts.