This market notice was updated on 11 October 2019.
Published on
19 July 2010
2. In order to be eligible for the Bank’s operations, the following additional eligibility requirements for asset backed securities and covered bonds will be introduced:
- Loan level information will be required to be made publicly available at a frequency of not less than quarterly and within a defined period after the relevant bond payment date for the following assets classes: RMBS, covered bonds, CMBS, CLOs, and securitisations of auto, consumer, lease and private student loans. This will be in a format to be determined by the Bank, but the Bank’s intention is to be consistent wherever possible with the requirements of other authorities in this area, where these have been defined.
- The prospectus, together with the closing transaction documents (excluding legal opinions), will be required to be made freely and publicly available. These will include, but not be limited to: the asset sale agreement (and any relevant declaration of trust), servicing, administration and cash management agreements, trust deed, security deed, agency agreement, incorporated terms or master trust framework or master definitions agreement, swap documentation and liquidity facility agreements, as applicable, as well as any other relevant underlying documentation. Transaction documentation updates must be freely and publicly available.
- A transaction summary in a standardised format for any new issuance will be required to be produced and made freely and publicly available.
- Standardised monthly investor reports will be required to be provided. These reports will include information on: asset performance; a detailed cash flow allocation; a list of all triggers and their status; a list of all counterparties involved in a transaction, their role and their credit ratings; details of cash injected into the transaction by the originator/sponsor or any other support provided to the transaction including any drawings under or utilisation of any liquidity or credit support and support provided by a third party; amounts standing to the credit of guaranteed investment contract and other bank accounts; details of any swaps (e.g. rates, payments and notionals) and other hedging arrangements to the transaction, including any related collateral postings; and definitions of key terms (such as delinquencies, defaults and pre-payments).
- A cash flow model will be required to be made freely and publicly available by or on behalf of the originator/issuer.
3. The Bank initially envisages that all of the above information be placed on a website maintained by the issuer/originator (or by another party on their behalf), and that it be made freely and readily available to interested third parties. The Bank would not object to a shared infrastructure being developed but does not intend to mandate this at present.
4. In certain circumstances the Bank may request additional information to support its analysis, including historic performance information. Timescale for implementation and transition measures for ABS
5. The Bank intends to issue a further market notice later this year setting out full details regarding implementation, including timescales.
6. The Bank’s intention is that the publication of transaction documentation, as set out in 12 (ii) above, will be required from July 2011 for all asset classes.
7. It is the Bank’s intention to apply its full requirements first to RMBS and covered bonds, for which detailed requirements will be finalised over the summer. The Bank will establish small working groups of market participants in conjunction with the relevant industry bodies to further refine its requirements in the following areas: loan level information, cash flow models, standardised investor reports and standardised transaction summaries. The requirements for other asset classes will be introduced at a later date.
8. Except where explicitly stated these eligibility requirements will apply to all existing and any newly issued securities. The Bank will, for a short period after the implementation period for the new eligibility requirements, continue to accept securities that do not fully meet its requirements, but will apply increasing haircuts. There will be no grandfathering.
9. There will be an implementation period of 12 months allowed for each asset class following the publication of detailed requirements. Implementation periods will commence following publication of each of the appropriate templates for loan level data, cash flow models, investor reporting and transaction summaries for each asset class by the Bank. More details will be provided in the market notice to be issued later this year.
10. The Bank notes the current lack of standardisation in the use of Credit Bureaux scores, and the constraints over their wider availability, but believes that the public availability of this information would be of benefit. It therefore endorses the proposal made by some issuers and originators to establish a task force to agree how standardised scores will be made publicly available and incorporated in loan and portfolio level reporting.
11. The Bank also notes that there appears to be widespread support for greater pricing transparency and greater standardisation of definitions and looks forward to progress being made in these areas.