| (1) | The content of the relevant return is confidential and not available for inspection by the public. |
| (2) | The purpose of the return, amongst other things, is— |
| (a) | to determine the amount of assets securitised by the reporting bank; |
| (b) | to determine the required amount of capital and reserve funds of the reporting bank in respect of securitisation exposures; |
| (c) | to obtain selected information in relation to securitisation schemes, including selected information relating to the role(s) played by the reporting bank in respect of securitisation schemes. |
| (3) | When a bank or institution within a banking group of which the reporting bank is a member acts in a primary or secondary role, or both a primary and a secondary role, in respect of a traditional securitisation scheme or synthetic securitisation scheme, the said bank or banking group shall, at all times, amongst other things, comply with such conditions, directives and interpretations as may be specified in the exemption notice relating to securitisation schemes. |
| (4) | Since a bank's exposure to risk arising from securitisation or resecuritisation positions held in the bank's banking book forms an integral part of, inter alia, the bank's exposure to credit risk, a bank shall, based on the relevant requirements specified in, among others— |
| (a) | regulation 23 of these Regulations; |
| (b) | regulation 38 of these Regulations; |
| (c) | this regulation 35; and |
| (d) | the exemption notice relating to securitisation schemes, |
duly complete the form BA500.
| (5) | For the purposes of these Regulations, unless specifically otherwise provided— |
| (a) | a traditional securitisation scheme shall bear the meaning assigned to such as scheme in the exemption notice relating to securitisation schemes; |
| (b) | a synthetic securitisation scheme shall bear the meaning assigned to such as scheme in the exemption notice relating to securitisation schemes; |
| (c) | asset finance includes any moveable asset; |
| (d) | any word or expression to which a meaning has been assigned in the exemption notice relating to securitisation schemes, shall bear such meaning; |
| (e) | securitisation exposures may include, but are not restricted to— |
| (i) | asset-backed securities; |
| (ii) | mortgage-backed securities; |
| (iii) | credit-enhancement facilities or instruments; |
| (iv) | liquidity facilities or instruments; |
| (v) | interest-rate swaps or currency swaps; |
| (vi) | credit-derivative instruments; |
| (vii) | refundable price discounts; |
| (ix) | specified reserve accounts, such as a cash collateral account, which account subsequently is recorded by the relevant originating bank as an asset; |
| (f) | in order to avoid the risk of double counting, once a securitisation scheme has been perfected as envisaged in the exemption notice relating to securitisation schemes, an originator of the relevant transferred assets or exposures shall no longer include in the form BA 200 the relevant portfolio of underlying assets or exposures, provided that— |
| (i) | the provisions of this paragraph (f), to the extent that they are relevant, shall mutatis mutandis apply to any synthetic securitisation transaction or exposure; |
| (ii) | without derogating from the provisions of paragraph 17 of the exemption notice relating to securitisation schemes, which provisions relate to noncompliance, when a bank or another institution within a banking group of which such a bank is a member fails to comply with the relevant qualifying requirements specified in the aforesaid exemption notice, the relevant bank, amongst other things, shall report on the form BA 200, as part of the underlying pool of assets or exposures, the relevant assets or exposures; |
| (iii) | any uncertainty regarding the appropriate treatment or reporting of an asset or exposure shall be referred in writing to the Registrar for an appropriate directive. |
| (6) | As a minimum, when a bank invests in structured products and assesses the risks associated with securitisation or resecuritisation exposure, the bank— |
| (a) | shall conduct an appropriate analyses of the underlying risks, that is, the bank shall ensure that it fully understands the credit quality and the risk characteristics of the underlying exposures, including any potential risk concentrations; |
| (b) | shall not solely rely on the external credit ratings assigned to the securitisation or resecuritisation exposures by an external credit assessment institution; |
| (c) | shall review the maturity of the exposures underlying the structured credit transactions relative to the issued liabilities, in order to assess potential maturity mismatches; |
| (d) | shall track credit risk in the relevant securitisation or resecuritisation exposures at the transaction level and across securitisation or resecuritisation exposures within each relevant business line, and across business lines; |
| (e) | shall track all potential concentrations in securitisation or resecuritisation exposures, such as name, product or sector concentrations, and incorporate the said information into all relevant risk aggregation systems that track, for example, credit exposure to a particular obligor; |
| (f) | shall identify all relevant types of triggers, credit events or other legal provisions that may affect the performance of the bank's on-balance-sheet and off-balance-sheet exposures, and appropriately integrate the aforesaid triggers and provisions into the bank's funding, liquidity, credit and balance sheet management processes and systems; |
| (g) | shall duly consider and evaluate the impact of all relevant events or triggers on the bank's liquidity, credit, earnings and capital positions; |
| (h) | shall, for example, in relevant cases, as part of its risk management processes and stress testing, consider scenarios which may prevent the bank from securitising its assets, and identify the potential effect of such exposures on the bank's liquidity, earnings and capital adequacy. |
