STS Criterion 7. Underwriting standards and material changes thereto

Description

Underwriting standards and material changes thereto

Content

The underwriting standards pursuant to which the underlying exposures are originated and any material changes from prior underwriting standards should be fully disclosed to potential investors without undue delay.

The underlying exposures are underwritten with full recourse to an obligor who is an individual, an SME or a corporate and who is not a special purpose entity.

No broker intermediary or similar party was involved in the credit or underwriting decisions relating to the underlying exposures.

Rationale

See overarching rationale for consistency with traditional qualifying framework.

Some arbitrage synthetic securitisations have been structured in the past with SSPEs as underlying obligors or involving third parties such as broker intermediaries in the credit or underwriting decisions with respect to the underlying exposures. To ensure that only genuine balance sheet securitisations of underlying exposures that are part of core/business activity of the originator can be eligible under the STS framework, no SSPEs should be allowed as obligors and no broker intermediaries and similar parties should be involved in the underwriting decisions.