IBANK 10.2.26 Recognition of risk transference (asset derecognition criteria)

The originator of a sukuk issuance may exclude, from the calculation of its risk-weighted assets, exposures relating to the securitised assets only if:

(a) the immediate transferee of the underlying assets is an SPE, and the holders of the legal or beneficial interests in the SPE have the right to pledge or exchange such interests without restriction;
(b) substantially all credit risks (and price risk, if any) associated with the securitised assets have been transferred;
(c) the originator has no direct or indirect control over the securitised assets;
(d) the securitised assets are bankruptcy-remote from the originator;
(e) the securitised assets held by the issuer cannot be consolidated with the assets of the originator or the issuer's parent in case of bankruptcy of any of them;
(f) a qualified legal counsel (whether external or in-house) has given a written reasoned opinion that paragraphs (c) to (e) are satisfied;
(g) clean-up calls:
(i) must be at the discretion of the issuer;
(ii) must not provide credit enhancement; and
(iii) may be exercised only when 10% or less of the purchase consideration for the securitised assets remains to be paid; and

Note A clean-up call is an option that permits the securitisation exposures to be called before all of the underlying exposures or securitisation exposures have been repaid.
(h) sukuk holders have a claim only on the securitised assets, and have no claim against the originator.

Note Under rule 10.4.1, an originator that meets the requirements set out in this rule must, however, hold regulatory capital against any exposures that it retains in relation to the securitisation (including exposures arising from the provision of credit enhancements and liquidity facilities).
Inserted by QFCRA RM/2017-1 (as from 1st April 2017).