3.

Section 6.2.1.1 is replaced by the following: ‘6.2.1.1. Type of asset 1. Common eligibility requirements It must be a debt instrument having: (a) a fixed, unconditional principal amount (1); and (b) a coupon that cannot result in a negative cash flow and is one of the following: (i) fixed, zero and multi-step coupons, i.e. instruments with a predefined coupon schedule and predefined coupon values; (ii) flat floating coupons linked to only one index corresponding to a euro money market rate, e.g. EURIBOR, LIBOR and similar indices, or a constant maturity swap rate, e.g. CMS, EIISDA, EUSA indices; (iii) leveraged and de-leveraged floating coupons linked to only one index corresponding to a euro money market rate, e.g. EURIBOR, LIBOR and similar indices, or a constant maturity swap rate, e.g. CMS, EIISDA, EUSA indices; (iv) flat, leveraged and de-leveraged floating coupons linked to the yield of one euro area government bond that has a maturity of one year or less (either an index or a gross benchmark yield); (v) flat inflation-floaters linked to euro area inflation indices, containing no discrete range, range accrual, ratchet or similar complex structures. The following coupon structures are notably excluded: all floaters linked to foreign currency interest rates, commodity and equity indices and exchange rates, dual floaters and floaters linked to swap spreads or to another combination of indices, and any kind of ratchet and range accrual coupons, as well as inverse floaters and coupons that depend on a credit rating. Moreover, complex term structures such as target redemption notes and options to change the coupon type by making use of additional calling rights are excluded. Eligible coupons should have no issuer optionalities, i.e. they should not allow changes in the coupon definition during the life of the instrument that are contingent on an issuer’s decision. In addition, if caps or floors exist, these shall be fixed and pre-defined. The classification of an instrument as regards its coupon, in case the coupon is multi-step, will be based on a forward-looking perspective. Non-compliance with the above-mentioned eligibility criteria also precludes assets from being eligible even if they only apply to parts of the remuneration structure (such as a premium) and even if a non-negative coupon payment and a repayment of at least the principal amount is explicitly guaranteed. The requirements under paragraph 1(a) and (b) apply until the obligation has been redeemed. Debt instruments may not give rise to rights to the principal and/or the interest that are subordinated to the rights of holders of other debt instruments of the same issuer. 2. Additional eligibility criteria applicable to asset-backed securities For the purpose of the Eurosystem legal framework related to monetary policy, covered bonds are not considered asset-backed securities. Paragraph 1(a) does not apply to asset-backed securities. The Eurosystem assesses the eligibility of asset-backed securities against the additional criteria laid down in this Section. The cash flow generating assets backing the asset-backed securities must fulfil the following requirements: (a) the acquisition of such assets must be governed by the law of an EU Member State; (b) they must be acquired from the originator or from an intermediary by the securitisation special purpose vehicle in a manner which the Eurosystem considers to be a “true sale” that is enforceable against any third party, and is beyond the reach of the originator and its creditors or the intermediary and its creditors, including in the event of the originator’s or the intermediary’s insolvency (2); (c) they must be originated and sold to the issuer by an originator incorporated in the EEA and, if applicable, an intermediary incorporated in the EEA; (d) they must not consist, in whole or in part, actually or potentially, of tranches of other asset-backed securities (3). In addition, they must not consist, in whole or in part, actually or potentially, of credit-linked notes, swaps or other derivatives instruments (4) or synthetic securities; (e) if they are credit claims, the obligors and the creditors must be incorporated (or, if natural persons, resident) in the EEA and, if relevant, the related security must be located in the EEA. The law governing those credit claims must be the law of an EEA country. If they are bonds, the issuers must be incorporated in the EEA, they must be issued in an EEA country under the law of an EEA country and any related security must be located in the EEA. As laid down in Section 6.2.1.7, the issuer of an asset-backed security must be established in the EEA. In cases where originators or, if applicable, intermediaries, were incorporated in the euro area, or in the United Kingdom, the Eurosystem has verified that there were no severe clawback provisions in those jurisdictions. If the originator or, if applicable, the intermediary, is incorporated in another EEA country, the asset-backed securities can only be considered eligible if the Eurosystem ascertains that its rights would be protected in an appropriate manner against clawback provisions considered relevant by the Eurosystem under the law of the relevant EEA country. For this purpose, an independent legal assessment in a form acceptable to the Eurosystem must be submitted setting out the applicable clawback rules in the country, before the asset-backed securities can be considered eligible. To decide whether its rights are adequately protected against clawback rules, the Eurosystem may require other documents, including a solvency certificate from the transferee, for the suspect period. Clawback rules which the Eurosystem considers to be severe and therefore not acceptable include rules under which the sale of cash flow generating assets backing the asset-backed securities can be invalidated by the liquidator solely on the basis that it was concluded within a certain period (suspect period) before the declaration of insolvency of the seller (originator/intermediary), or where such invalidation can only be prevented by the transferee if they can prove that they were not aware of the insolvency of the seller (originator/intermediary) at the time of the sale. Within a structured issue, in order to be eligible, a tranche (or sub-tranche) may not be subordinated to other tranches of the same issue. A tranche (or sub-tranche) is considered to be non-subordinated vis-à-vis other tranches (or sub-tranches) of the same issue if, in accordance with the priority of payment applicable after the delivery of an enforcement notice, as set out in the prospectus, no other tranche (or sub-tranche) is given priority over that tranche or sub-tranche in respect of receiving payment (principal and interest), and thereby such tranche (or sub-tranche) is last in incurring losses among the different tranches or sub-tranches of a structured issue. For structured issues where the prospectus provides for the delivery of an acceleration and an enforcement notice, non-subordination of a tranche (or sub-tranche) must be ensured under both acceleration and enforcement notice-related priority of payments. For asset-backed securities to become or to remain eligible for Eurosystem monetary policy operations, the Eurosystem requires comprehensive and standardised loan-level data on the pool of cash flow generating assets underlying an asset-backed security to be submitted by the relevant parties in the asset-backed security, in accordance with Appendix 8. To determine the eligibility of asset-backed securities, the Eurosystem takes into account the data entered in the mandatory fields in the relevant loan-level data reporting template, within the meaning of Appendix 8. In its eligibility assessment the Eurosystem takes account of: (a) any failure to deliver data; and (b) how frequently individual loan-level data fields are found to contain no meaningful data. In order to be eligible, an asset-backed security must be backed by cash flow generating assets which the Eurosystem considers to be homogeneous, i.e. that cash flow generating assets backing an asset-backed security consist of only one type of assets belonging to either residential mortgages, commercial real estate mortgages, loans to small- and medium-sized enterprises, auto loans, consumer finance loans or leasing receivables. Asset-backed securities are not eligible for Eurosystem monetary policy operations if the pool of assets underlying them is comprised of heterogeneous assets, because they cannot be reported using a single template for the specific asset class (5). The Eurosystem reserves the right to request from any relevant third party, e.g. the issuer, the originator or the arranger, any clarification and/or legal confirmation that it considers necessary to assess the eligibility of asset-backed securities and with regard to the provision of loan-level data. Non-compliance with such requests may lead to suspension of or refusal to grant eligibility to the asset-backed security transaction in question. 3. Additional eligibility criteria applicable to covered bonds Covered bonds shall be subject, from 31 March 2013, to the following additional requirements: The cover pool of a covered bond shall not contain asset-backed securities, with the exception of asset-backed securities which: (a) comply with the requirements laid down in Directives 2006/48/EC and 2006/49/EC in respect of asset-backed securities in covered bonds; (b) were originated by a member of the same consolidated group of which the issuer of the covered bonds is also a member or by an entity affiliated to the same central body to which the issuer of the covered bonds is also affiliated; (c) are used as a technical tool to transfer mortgages or guaranteed real-estate loans from the originating entity into the cover pool. Covered bonds which were on the list of eligible asset-backed securities from 28 November 2012 and did not comply with requirements (a) to (c) will remain eligible until 28 November 2014.