| a) |
Revolving assets refer to any credit exposure in respect of which the amount drawn by an obligor against a credit facility varies within an agreed limit. An example of revolving assets
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| b) |
When compared to other types of securitisation, schemes to securitise revolving assets normally introduce increased liquidity, counterparty, credit, legal and moral risk. The aforementioned risks arise from the complexity of the arrangements, the fluctuating nature and indefinite maturity of the underlying exposures, and the shared interest of the originator
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| c) |
Securitisation schemes in respect of revolving assets often provide for an early amortisation mechanism. |
| 2) |
Conditions relating to the securitisation of revolving assets |
| a) |
An institution that acts as an originator, which institution wishes to engage in the securitisation of revolving assets- |
| i) |
shall have in place board-approved policies and procedures, and adequate systems to identify, measure, monitor, control and report the risks relating to the scheme, including the increased credit, counterparty and liquidity risk; |
| ii) |
shall maintain capital against the sum of the originator's interest and the investors' interest in accordance with the relevant requirements specified in regulations 23(6)(h) or 23(11), as the case may be, of the Regulations relating to Banks. |
| i) |
the investors' interest in the said scheme is not systematically favoured over the originator's interest owing to the transfer of higher quality exposures; |
| ii) |
assets or risks that are transferred into the securitised pool are randomly selected from the underlying pool of exposures when only a portion of a particular class of revolving assets is securitised. |
| 3) |
Securitisation of revolving assets with no early amortisation features |
A bank or another institution within a banking group of which such a bank is a member, acting as an originator or a remote originator in respect of a traditional or synthetic securitisation scheme involving the ongoing transfer of revolving assets or risk relating to such assets, shall in accordance with the relevant requirements specified in regulations 23(6), 23(8), 23(11) or 23(13) of the Regulations relating to Banks, as the case may be, apply a credit-conversion factor and the relevant risk-weight attributable to the said revolving assets or risk concerned to the notional amount of the revolving assets or risks that are transferred to the special-purpose institution.
Protection of Businesses Act, 1978
