Document ID: chunk:federal_register_of_legislation:F2023L01572:front:0:p8
Version: federal_register_of_legislation:F2023L01572
Segment Type: other
Provision Reference: 
Character Range: 19003–21858

response to deterioration in the credit quality of the pool.
23.         Representations and warranties provided by an ADI concerning the exposures transferred in a securitisation must:
(a)          be provided at the time the exposures are transferred to the SPV;
(b)          be provided by way of a formal written agreement and be in accordance with market practice;
(c)          refer to an existing state of facts that is capable of being verified by the ADI, and is within the control of the ADI, at the time the exposures are transferred to the SPV; and
(d)          not be open-ended or, in particular, relate to the future creditworthiness of the exposures, the performance of the SPV or the performance of the securities issued in a securitisation.
24.         An originating ADI must ensure the document of transfer specifies that, if cash flows relating to an exposure in a pool are rescheduled or renegotiated, the SPV will be subject to the rescheduled or renegotiated terms.
25.         An originating ADI must obtain written advice from legal counsel that:
(a)          the exposures in the pool are legally isolated from the ADI in such a way that the exposures are put beyond the reach of the ADI and its creditors, including in the case of the appointment of a statutory manager (or its equivalent), or its winding up and receivership; and
(b)          all agreements, deeds and other legal documentation relating to the securitisation are enforceable in all relevant jurisdictions.

Legal opinion
26.         APRA may, at its discretion, require an ADI to seek a legal opinion on any of the requirements relating to separation and disclosure (paragraphs 13 to 18), exposures transferred in a securitisation (paragraphs 19 to 25) and any other requirement of this Prudential Standard, from an independent legal counsel chosen by APRA, at the expense of the ADI.

General capital adequacy requirements
27.         The capital treatment of a securitisation must be determined on the basis of its economic substance rather than its legal form.

Securitisation start-up costs
28.         Where an ADI contributes to the start-up costs of a securitisation and these costs have been capitalised (rather than written off through the ADI's profit or loss), they must be deducted from the ADI's Common Equity Tier 1 Capital as capitalised expenses.

Spread accounts and similar surplus income arrangements
29.         Where an originating ADI has included any gain on sale, including expected future margin or servicing income from a securitisation, on its balance sheet or in its profit, then it must, until such income is irrevocably received, deduct from its Common Equity Tier 1 Capital the amounts involved. Where an originating ADI provides funds to establish a reserve or similar account, those amounts must be deducted from Common Equity