5. Criteria relating to standardisation

For the purposes of Article 26c(1) of Regulation (EU) 2017/2402, the competent authorities designated pursuant to Article 29(5) of that Regulation and the competent authorities referred to in Article 29, paragraphs 2 to 4, of that Regulation should cooperate closely in accordance with Article 36 of that Regulation, where they are different.

Appropriate mitigation of interest and currency risks (Article 26c(2) of Regulation (EU) 2017/2402)

Derivatives

For the purposes of Article 26c(2), third subparagraph, of Regulation (EU) 2017/2402, exposures in the pool of underlying exposures that merely contain a derivative component exclusively serving the purpose of directly hedging the interest rate risk or currency risk of the respective underlying exposure itself, which are not themselves derivatives, should not be understood to be prohibited.

Common standards in international finance

For the purposes of Article 26c(2), third subparagraph, of Regulation (EU) 2017/2402, common standards in international finance should include ISDA or similar established national documentation standards.

Referenced interest payments (Article 26c(3) of Regulation (EU) 2017/2402)

Referenced interest rates

For the purposes of Article 26c(3) of Regulation (EU) 2017/2402, interest rates that should be considered to be an adequate reference basis for referenced interest payments should include all of the following:

• a. interbank rates including Libor, Euribor and other recognised benchmarks;
• b. other established reference interest rates such as €STR, SONIA, SOFR and TONA ;
• c. rates set by monetary policy authorities, including federal funds rates and central banks’ discount rates;
• d. sectoral rates reflective of a lender’s cost of funds, including standard variable rates and internal interest rates that directly reflect the market costs of funding of a bank or a subset of institutions, to the extent that sufficient data are provided to investors to allow them to assess the relation of the sectoral rates to other market rates.

Complex formulae or derivatives

For the purposes of Article 26c(3) of Regulation (EU) 2017/2402, interest rate caps or floors should not be understood to constitute a complex formula or derivatives .

Requirements after enforcement notice (Article 26c(4) of Regulation (EU) 2017/2402)

Amount trapped in the SSPE

For the purposes of Article 26c(4), second subparagraph, of Regulation (EU) 2017/2402, the amount of cash to be considered as trapped in the SSPE should be determined as set out in the transaction documentation.

For the purposes of Article 26c(4) of Regulation (EU) 2017/2402, it should be permissible to trap the cash in the SSPE in the form of a reserve fund for future use, as long as the use of the reserve fund is exclusively limited to the purposes set out in Article 26c(4), second subparagraph, of that Regulation including orderly repayment to the investors.

Allocation of losses and amortisation of tranches (Article 26c(5) of Regulation (EU) 2017/2402)

Triggers

For the purposes of Article 26c(5) of Regulation (EU) 2017/2402, in addition to the minimum required triggers, the parties to the transaction may agree to include other performance-related triggers. The occurrence of a trigger event for any such performance-related triggers should lead to the amortisation of the securitisation tranches reverting to a sequential payment in order of seniority, irrespective of whether other triggers apply or not.

Reversion to non-sequential amortisation

For the purpose of Article 26c(5), third subparagraph, of Regulation (EU) 2017/2402, once the reversion of the amortisation to sequential payment is applied as a consequence of the breach of any performance-related trigger, a further reversion back to non-sequential amortisation should not be allowed in accordance with the transaction documentation.

Transaction documentation (Article 26c(7) of Regulation (EU) 2017/2402)

Servicing standards

For the purposes of Article 26c(7), point (d), of Regulation (EU) 2017/2402, servicing standards should be understood as standards related to servicing specified in the transaction documentation that have to be met throughout the life of the securitisation transaction. Servicing procedures

For the purposes of Article 26c(7), point (c), of Regulation (EU) 2017/2402, the servicing procedures should be understood as actual procedures necessary to ensure compliance with the servicing standards. The procedures may be adapted throughout the life of the securitisation transaction as long as the servicing standards continue to be met.

Transaction counterparties

For the purposes of Article 26c(7), point (b), of Regulation (EU) 2017/2402, the trustee and the third-party verification agent should always differ from the servicer, the investor and the originator. The third-party verification agent should additionally meet the requirements specified in paragraph 73.

Servicer’s expertise and servicing requirements (Article 26c(8) of Regulation (EU) 2017/2402)

Criteria for determining the expertise of the servicer

For the purposes of determining whether a servicer has expertise in servicing exposures of a similar nature to those securitised in accordance with Article 26c(8) of Regulation (EU) 2017/2402, both of the following should apply:

• a. the members of the management body of the servicer and the senior staff, other than members of the management body, responsible for servicing exposures of a

the servicing of exposures similar to those securitised;

• b. any of the following principles on the quality of the expertise should be taken into account in the determination of the expertise:

A servicer should be deemed to have the required expertise where either of the following applies:

• a. the business of the entity, or of the consolidated group to which the entity belongs for accounting or prudential purposes, has included the servicing of exposures of a similar nature to those securitised for at least five years;
• b. where the requirement referred to in point (a) is not met, it complies with all of the following:

For the purpose of demonstrating the number of years of professional experience, the relevant expertise should be disclosed in sufficient detail and in accordance with the applicable confidentiality requirements to permit investors to carry out their obligations referred to in Article 5 of Regulation (EU) 2017/2402.

Exposures of a similar nature

For the purposes of Article 26c(8) of Regulation (EU) 2017/2402, the interpretation of the term ‘exposures of a similar nature’ should follow the interpretation provided in paragraph 37.

Well-documented and adequate policies, procedures and risk-management controls

For the purposes of Article 26c(8) of Regulation (EU) 2017/2402, the servicer should be considered to have ‘ well-documented and adequate policies, procedures and risk-management controls relating to the servicing of exposures’ where either of the following conditions is met:

• a. the servicer is an entity that is subject to prudential and capital regulation and supervision in the Union and its regulatory authorisations or permissions are deemed relevant to the servicing;
• b. the servicer is an entity that is not subject to prudential and capital regulation and supervision in the Union, and a proof of existence of well-documented and adequate policies and risk-management controls is provided, which also includes a proof of adherence to good market practices and reporting capabilities. The proof should be substantiated by an appropriate third-party review, such as by a credit rating agency or external auditor.

Timely resolution of conflicts between investors (Article 26c(10) of Regulation (EU) 2017/2402)

Clear provisions facilitating the timely resolution of conflicts between different classes of investors

For the purposes of Article 26c(10) of Regulation (EU) 2017/2402, provisions of the transaction documentation that ‘facilitate the timely resolution of conflicts between different classes of investors’ for securitisation transactions with more than one investor should include all of the following:

• a. the method for calling meetings or arranging conference calls;
• b. the maximum timeframe for setting up a meeting or conference call;
• c. the required quorum;
• d. the minimum thresholds of votes to validate such a decision, with clear differentiation between the minimum thresholds for each type of decision;
• e. where applicable, a location for the meetings which should be in the Union.

For the purposes of Article 26c(10) of Regulation (EU) 2017/2402, where mandatory statutory provisions exist in the applicable jurisdiction that set out how conflicts between investors have to be resolved, the transaction documentation may refer to those provisions.