Detailed Eligibility Requirements for Consumer Loan, Auto Loan and Leasing Asset-Backed Securitisations

The Bank is today releasing further details of the eligibility requirements for asset-backed securities (ABS) backed by consumer loans, auto loans, and leases delivered as collateral against transactions in the Bank’s operations.
Published on 17 December 2012

2. These criteria complement the detailed requirements previously released for ABS backed by other collateral types, including residential mortgage-backed securities and covered bonds, which came into effect on 1 December 2011 and commercial mortgage backed securities (CMBS), small-and-medium-sized enterprise loan backed securities (SME CLO) and asset-backed commercial paper (ABCP), which come into effect on 1 January 2013.

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

Implementation Timetable

4. The eligibility requirements for consumer loan, auto loan and leasing ABS that are being published today will come into effect from 1 January 2014. 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 2014 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 2014, without penalty. A further transitional period will then operate between 1 January 2014 and 31 December 2014. 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 transitional period. 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 2014 will be ineligible for use as collateral in any of the Bank’s operations.

7. These transitional arrangements are in line with those previously established for other asset classes.

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