Document ID: chunk:federal_register_of_legislation:F2024L01073:reg:4:p14
Version: federal_register_of_legislation:F2024L01073
Segment Type: reg
Provision Reference: reg 4 (pt 14/21)
Character Range: 113524–116454

in effect at the time of such failure;
                 2.          the bankruptcy, insolvency or inability of the borrower of the underlying exposure to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as those debts become due, or analogous events; and
                 3.        subject to paragraph 9 of this Attachment, the restructuring of the underlying exposure, including any forgiveness or postponement of principal, interest or fees that results in a credit loss event (i.e. write-off, provision for a defaulted exposure or other similar debit to the profit and loss account of the ADI);
         2.            not terminate prior to the expiration of any grace period required for a default on the underlying obligation to occur as a result of a failure to pay; and
         1.           clearly identify those parties responsible for determining whether a credit event has occurred. This determination must not be the sole right of the protection seller. An ADI buying the credit protection must have the right and ability to inform the protection seller of the occurrence of a credit event.
 1.              Where the credit derivative is based on cash settlement, the ADI must have a robust valuation process in order to reliably estimate losses on the reference obligation specified in the credit derivative contract, including a defined period for obtaining post credit event valuations of the reference obligation.
 2.              Where an ADI purchases credit protection and an existing credit exposure of the ADI is the deliverable obligation under the credit derivative contract, the terms of the underlying exposure must allow for its transfer to the protection seller. If the protection purchaser's right and ability to transfer the underlying obligation to the protection provider is required for settlement, the terms of the underlying obligation must provide that any required consent to such transfer may not be unreasonably withheld.
 3.              An exception to paragraph 7 of this Attachment applies where there is a restriction on the transfer of the existing credit exposure and this restriction only applies in the event of restructuring. In this case, the limit described in paragraph 9 of this Attachment applies as if restructuring of the underlying exposure was not included within the terms of the credit derivatives contract.
     1.              If restructuring of the underlying exposure is not included within the terms of the credit derivative contract but all other requirements of paragraphs 5 to 7 of this Attachment are met, an ADI may recognise 60 per cent of the lesser of the amount of the credit protection purchased and the amount of the underlying exposure.
     2.          Where there is a mismatch between the underlying obligation and the reference obligation under the credit derivative, including the obligation used