Document ID: chunk:federal_register_of_legislation:F2023L01572:front:0:p6
Version: federal_register_of_legislation:F2023L01572
Segment Type: other
Provision Reference: 
Character Range: 13836–16596

payments and calculating write-offs in relation to such loans;
(aa)       synthetic securitisation — a securitisation whereby the credit risk, or part of the credit risk, of a pool is transferred to a third party which need not be an SPV. The transfer of credit risk can be undertaken through the use of funded (e.g. credit linked notes) or unfunded (e.g. credit default swaps) credit derivatives or guarantees; and
(bb)      traditional securitisation — a securitisation where the pool is transferred (or assigned) to, and held by, or otherwise held directly in its name by, an SPV.

Separation and disclosure

Separation
13.         There must be clear limitations governing the extent of an ADI's involvement in a securitisation. Any undertakings given by an ADI in a securitisation must be expressed clearly in the legal documentation relating to the securitisation and must be fixed as to time and amount.
14.         An ADI must, except in the case of a self-securitisation:[6]
(a)          deal with an SPV and the securitisation's investors on an arm's-length basis and on market terms and conditions; and
(b)          not provide, or knowingly create or encourage a perception that it will provide, implicit support for a securitisation.

Requirements for an SPV
15.         In a securitisation, an SPV must satisfy the following criteria:
(a)          the SPV must be a corporation, trust or other entity organised for a specific purpose; and
(b)          the purpose of the SPV must be clearly defined as facilitating securitisation and the activities of the SPV must be limited to those associated with the securitisation.
16.         In a securitisation, an originating ADI must not:
(a)          own or hold a material direct, indirect or beneficial interest[7] in any share capital, including ordinary shares or preference shares, of an SPV where the SPV is a corporation;
(b)          own or hold a material direct, indirect or beneficial interest in any share capital in the trustee where the SPV is a trust;
(c)          include, permit or acquiesce to the inclusion of the word 'bank', 'banking', 'building society', 'credit union', 'authorised deposit-taking institution' or 'ADI' in the name of an SPV;
(d)          allow any of the ADI's directors, officers or employees to sit on the Board of an SPV, or on the Board of a trustee of an SPV, unless the Board has at least four members. The ADI, however, may be represented by one director on a Board of four to six directors and by no more than two directors on a Board of seven or more directors;
(e)          act, or allow any of its directors, officers or employees to act, in any circumstances as a trustee of an SPV, or in any similar role. The trustee must not be part of the group,