Detailed Eligibility Requirements for Commercial Mortgage Backed Securities, Small-Medium Enterprise Loan Backed Securities and Asset Backed Commercial Paper

The Bank is today releasing further details of the eligibility requirements for Commercial Mortgage Backed Securities (CMBS), Small-Medium Enterprise Loan Backed Securities (SME CLO) and Asset-Backed Commercial Paper (ABCP) delivered as collateral against transactions in the Bank’s operations.
Published on 20 December 2011

2. These criteria build upon the high level proposals published by the Bank in its Market Notice of 19 July 20101 and complement the detailed requirements for RMBS and covered bonds backed by residential mortgages which came into effect on 1 December 2011.

3. The detailed criteria are available on the Bank’s website.

Implementation Timetable

4. The eligibility requirements for CMBS, ABCP and SME CLO securities that are being published today will come into effect from 1 January 2013. The Bank expects issuers who intend their securities to remain eligible for use as collateral with the Bank to use the period between now and 1 January 2013 to put in place the systems and processes required to enable compliance with the criteria. The Bank encourages early compliance where possible to allow sufficient time to deal with any problems encountered in meeting the criteria.

5. Securities not meeting the new transparency requirements will continue to be accepted until 1 January 2013, without penalty. A further transitional period will then operate between 1 January 2013 and 31 December 2013. During this period securities which do not meet the new requirements may remain eligible, though will be subject to increasing haircuts. Specifically, an additional 5 percentage point haircut will be applied at the beginning of this period, and the haircut will increase by an additional 5 percentage points every month during the transition. This haircut will be applied to any security within the relevant asset class until the Bank deems that the security meets all the transparency requirements.

6. Any securities not meeting the criteria by 31 December 2013 will be ineligible for use as collateral in any of the Bank’s operations.

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