Relevant factors for assessment

When assessing whether a transaction is not structured to provide support as set out in paragraph 11, all relevant circumstances should be considered, including the following criteria.

The factor contemplated in point (a) of Article 248(1) of Regulation (EU) No 575/2013 (the price of the repurchase) should also be applied to transactions other than a repurchase and, in such cases, the amounts payable or, as the case may be, receivable by the originator institution or by the sponsor institution should be considered. For all transactions, measures of market value should be considered, including quoted prices in active markets for similar transactions that the institution can access at the measurement date. If such measures are not identifiable, then inputs other than quoted prices that are directly or indirectly observable for the asset should be considered; and, if such inputs are not identifiable, then unobservable inputs for the asset should be considered. In the case of unobservable inputs, the originator institution or sponsor institution should provide evidence to its competent authority regarding how the receivable or payable amounts have been valued and which inputs were used. The originator institution or sponsor institution should also demonstrate that this assessment is in line with its credit review and approval process. A transaction should be considered as not having been executed at arm’s length conditions if the amounts receivable by the originator institution or, as the case may be, the sponsor institution are materially lower than, or the amounts payable by the originator institution or sponsor institution are materially higher than, the relevant market value.

The factor contemplated in point (b) of Article 248(1) of Regulation (EU) No 575/2013 (the institution’s capital and liquidity position before and after repurchase) should be considered as also being relevant in the case of transactions other than a repurchase. The conditions for significant risk transfer should be considered as no longer being satisfied if, as a result of the transaction, the reduction in risk-weighted exposure amounts the originator institution initially achieved is no longer justified by a commensurate transfer of credit risk to third parties, which should be the case if the originator institution’s capital or liquidity position is materially and adversely affected, directly or indirectly, by the transaction. In making such assessment, among other things, the accounting entries that the participants to the transaction made with respect to the transaction and the changes in their liquidity position should be considered.

Regarding the factor contemplated in point (c) of Article 248(1) of Regulation (EU) No 575/2013 (the performance of the securitised exposures), if the underlying exposures being subject to the transaction have been underperforming relative to other securitised exposures or have been reported as non-performing, it should be considered that the transaction is not executed at arm’s length conditions if either such underperformance or the foreseeable future performance of such exposures as a result of the circumstances having caused such underperformance is not adequately reflected in the price of the purchase or repurchase.

Regarding the factor contemplated in point (d) of Article 248(1) of Regulation (EU) No 575/2013 (the performance of the securitisation positions), if the securitisation positions being subject to the transaction have been underperforming relative to other securitisation positions or have been reported as non-performing, it should be considered (i) whether the cost of measures taken to improve the performance of these securitisation positions has been fully borne by the relevant securitisation investors and (ii) whether the institution which participated in the transaction is negatively affected, directly or indirectly, by the transaction.

Regarding the factor contemplated in point (e) of Article 248(1) of Regulation (EU) No 575/2013 (the impact of support on the losses expected to be incurred by the originator relative to investors), it should be considered whether the expected losses of a securitisation position are materially increased or reduced, having regard, among other things, to changes in the market price of the position, in the risk-weighted exposure amounts and in the ratings of securitisation positions.