STS Criterion 33. Verification agent

From Open Risk Manual


Verification agent [1]


A third party verification agent should be appointed by the originator at the outset of the transaction, in order to verify, at a minimum, the following points for each of the underlying exposures in relation to which a credit event notice was given:

  • that the credit event in the credit event notice occurred in accordance with terms of the credit protection agreement;
  • that the underlying exposure was included in the securitisation at the time of the occurrence of the relevant credit event;
  • that the underlying exposure met the eligibility criteria, at the time of inclusion in the reference portfolio;
  • that where an underlying exposure has been added as result of a replenishment, such replenishment complied with the replenishment conditions;
  • the accuracy of the final loss amount work out procedure, also in relation to the losses registered in the profit and loss statement by the originator;
  • that at the time where the final protection payment is made, the allocation of losses to investors in relation to the underlying exposures has been conducted correctly.

The verification agent should be independent of the originator and, where an SSPE is used within a synthetic securitisation, of the SSPE and should have been appointed, and its appointment accepted, on or before the closing date.

Such verification by the verification agent may be performed on a sample basis rather than for each individual underlying exposure for which a protection payment is sought but in all cases, any investor must have the right that the eligibility of a particular underling exposures is subject to verification including in case if it is not satisfied with the sample verification.

The originator should undertake in the securitisation documentation that it should provide to the verification agent all the necessary information to verify the requirements set out in the first paragraph.


The appointment of a verification agent is a widespread market practice that enhances legal certainty in the transaction for all parties involved, thus decreasing the likelihood of disputes and litigations that could arise in relation to the loss allocation process. This contributes to decreasing the overall riskiness of both retained securitisation positions and securitisation positions placed with investors and is instrumental to a well-functioning of a transaction.

Issues and Challenges


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