STS Criterion 23. Timely resolution of conflicts between investors

From Open Risk Manual

Description

Timely resolution of conflicts between investors [1]

Content

The transaction documentation should include clear provisions that facilitate the timely resolution of conflicts between different classes of investors. Where an SSPE is used within a synthetic securitisation to issue notes placed with investors, voting rights should be clearly defined and allocated to noteholders and the responsibilities of the trustee and other entities with fiduciary duties to investors should be clearly identified.

Rationale

See overarching rationale for consistency with traditional qualifying framework.

This requirement aims to quickly resolve any potential conflicts between investors, as an additional safeguard to appointment of a verification agent - particularly where the credit risk of the securitised portfolio is transferred to more than one investor (e.g. where CLNs of different seniority are issued by an SSPE), the appointment of a trustee or other entity with fiduciary duties to investors appears necessary.

Issues and Challenges

References

  1. EBA STS Framework for Synthetic Securitisation, EBA/DP/2019/01