6. Criteria relating to transparency

For the purposes of Article 26d(1) of Regulation (EU) 2017/2402, where the originator cannot provide data in line with the data requirements contained therein, external data that are publicly available or are provided by a third party, such as a rating agency or another market participant, may be used, provided that all of the other requirements of that article are met.

Substantially similar exposures

For the purposes of Article 26d(1) of Regulation (EU) 2017/2402, the term ‘substantially similar exposures’ should be understood as referring to exposures for which both of the following conditions are met:

• a. the most relevant factors determining the expected performance of the underlying exposures are similar;
• b. as a result of the similarity referred to in point (a) it could reasonably have been expected, on the basis of indications such as past performance or applicable models, that, over the life of the transaction, or over a maximum of four years, where the life of the transaction is longer than four years, their performance would not be significantly worse than that of the securitised exposures.

For the purposes of Article 26d(1) of Regulation (EU) 2017/2402, the substantially similar exposures should not be limited to exposures held on the balance sheet of the originator.

Verification of a sample of the underlying exposures (Article 26d(2) of Regulation (EU) 2017/2402)

Sample of the underlying exposures subject to external verification

For the purposes of Article 26d(2) of Regulation (EU) 2017/2402, the underlying exposures that should be subject to verification prior to the closing date of the transaction should be a representative sample of the provisional portfolio from which the securitised pool is extracted and which is in a reasonably final form before the closing date of the transaction.

Party executing the verification

For the purposes of Article 26d(2) of Regulation (EU) 2017/2402, a party should be deemed appropriate and independent when it meets both of the following conditions:

• a. it has the experience and capability to carry out the verification;
• b. it is none of the following:
• i. a credit rating agency;
• ii. a third party verifying STS compliance in accordance with Article 28 of Regulation (EU) 2017/2402;
• iii. an entity affiliated to the originator, sponsor, investor or SSPE.

Scope of the verification

For the purposes of Article 26d(2) of Regulation (EU) 2017/2402, the verification should be carried out applying an appropriate statistical method and based on a random sample of underlying exposures extracted from the underlying exposures in the securitisation, while the size of the sample should be determined so as to ensure that the probability (confidence level) to correctly reject the hypothesis that there are no exceptions to the requirement in the entire pool of the underlying exposures in the securitisation is at least 95% (i.e. the probability of the so-called type II error of falsely accepting an entire pool without exceptions should be 5%).

In any case, the minimum number of the underlying exposures in the sample should be 50. For securitisations where the pool of underlying exposures consists of less than 50 underlying exposures, the sample should consist of all the underlying exposures.

The verification should include a check of the originator’s database or IT systems against the credit protection agreement and related documentation in order to confirm that the occurrence of a credit event would trigger a credit protection payment by the investor where losses on the underlying exposure subject to a credit event would be assigned to the protected tranche(s) with respect to the exposures which are subject to the verification. Where this verification is not possible using the originator’s dat abase or IT systems, the party executing the verification should check other types of documents or records to perform the verification.

The verification should be carried out in the form of an agreed-upon procedures report.

Confirmation of the verification

For the purposes of Article 26d(2) of Regulation (EU) 2017/2402, confirmation that this verification has occurred and that no significant adverse findings have been found should be disclosed.

Prior to the closing of the transaction

For the purposes of Article 26d(2) of Regulation (EU) 2017/2402, where no notes are issued under a synthetic securitisation the term prior to the closing of the transaction should be interpreted as referring to the time prior to the guarantee or credit derivative under the credit protection agreement becoming effective.

Liability cash flow model (Article 26d(3) of Regulation (EU) 2017/2402)

Precise representation of the contractual relationship

For the purposes of Article 26d(3) of Regulation (EU) 2017/2402, the liability cash flow model should be considered to have been done ‘precisely’ where it is done accurately and with an amount of detail sufficient to allow investors to model the payment obligations, including those of the SSPE, where applicable, and to price the securitisation accordingly. This may include algorithms that permit investors to model a range of different scenarios that will affect cash flows, such as different prepayment or default rates.

Third parties

For the purposes of Article 26d(3) of Regulation (EU) 2017/2402, where the liability cash flow model is developed by third-party providers the originator should remain responsible for making the information available to potential investors.

Environmental performance and sustainability disclosures of the assets (Article 26d(4) of Regulation (EU) 2017/2402)

Available information related to the environmental performance and the principal adverse impacts on sustainability factors

The requirement in Article 26d(4) of Regulation (EU) 2017/2402 should be applicable only if the information on the energy performance certificates referred to in the first subparagraph is available, or where the information on the principal adverse impacts on sustainability factors of the assets financed by the underlying exposures referred to in the second subparagraph is available to the originator and the originator decides to apply that second subparagraph, and where the respective information is captured in its internal database or IT systems. Where any such information is available only for a proportion of the underlying exposures, the requirement should apply only in respect of the proportion of the underlying exposures for which information is available.

Compliance with disclosure requirements under Article 7 (Article 26d(5) of Regulation (EU) 2017/2402)

For the purposes of Article 26d(5) of Regulation (EU) 2017/2402, the competent authorities des-ignated 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.