1. (1)

   Where there is no available information on the specific exposures to be securitised, including where exposures accumulate before their securitisation or where they may be substituted into an existing revolving securitisation, an institution is deemed to fulfil its due diligence obligations referred to in Article 406 of Regulation (EU) No 575/2013, for each of its individual securitisation positions, on the basis of the relevant eligibility criteria for such exposures.

2. (2)

   When outsourcing certain tasks of the process for the fulfilment of the obligations set out in Article 406 of Regulation (EU) No 575/2013, including record keeping, institutions becoming exposed to the risks of a securitisation shall retain full control of that process.

1. (1)

   The risk characteristics of the individual securitisation position referred to in Article 406(1)(b) of Regulation (EU) No 575/2013 shall include the following most appropriate and material characteristics, such as:

   1. (a)

      tranche seniority level;

   2. (b)

      cash flow profile;

   3. (c)

      any existing rating;

   4. (d)

      historical performance of similar tranches;

   5. (e)

      obligations related to the tranches included in the documentation relating to the securitisation;

   6. (f)

      credit enhancement.

2. (2)

   The risk characteristics of the exposures underlying the securitisation position referred to in Article 406(1)(c) of Regulation (EU) No 575/2013 shall include the most appropriate and material characteristics, including the performance information referred to in Article 406(2) of Regulation (EU) No 575/2013 in relation to residential mortgage exposures. Institutions shall identify appropriate and comparable metrics for analysing the risk characteristics of other asset classes.

3. (3)

   Additional structural features as referred to in Article 406(1)(g) of Regulation (EU) No 575/2013 shall include derivative instruments, guarantees, letters of credit and other similar forms of credit support.

Institutions shall review their compliance with Article 406 of Regulation (EU) No 575/2013 after becoming exposed to a securitisation positions at least annually and more frequently, as soon as institutions become aware of a breach of the obligations included in the documentation relating to the securitisation or of a material change in any of the following:

1. (a)

   structural features that can materially impact on the performance of the securitisation position;

2. (b)

   the risk characteristics of the securitisation positions and of the underlying exposures.

1. (1)

   The stress tests referred to in the second subparagraph of Article 406(1) of Regulation (EU) No 575/2013, shall include all relevant securitisation positions and shall be incorporated into the stress testing strategies and processes that the institutions carry out in accordance with the internal capital adequacy assessment process specified in Article 73 of the Directive 2013/36/EU of the European Parliament and of the Council.

2. (2)

   In order to fulfil the stress testing requirements referred to in the second subparagraph of Article 406(1) of Regulation (EU) No 575/2013, institutions may make use of comparable financial models developed by third parties, in addition to those developed by ECAIs, provided that they can demonstrate, when requested that they took due care, prior to investing to validate the relevant assumptions in and structuring of the models and to understand methodology, assumptions and results.

3. (3)

   When conducting the stress tests referred to in Article 406(1) of Regulation (EU) No 575/2013 within an ABCP programme as referred to in Article 242(9) of Regulation (EU) No 575/2013, which is supported by a liquidity facility which fully covers the credit risk of the securitised exposures, institutions may carry out a stress test on the creditworthiness of the liquidity facility provider rather than on the securitised exposures.

1. (1)

   The holding of a securitisation position in the trading or non-trading book respectively shall not represent a sufficient justification in itself for the application of different policies and procedures or a different intensity of review to fulfil the due diligence obligations referred to in Article 406 of Regulation (EU) No 575/2013. In determining whether different policies and procedures or a different intensity of review shall be applied, all relevant factors materially impacting the risk profile of each of the books and of the relevant securitisation positions shall be considered, including the size of the positions, the impact on the institution's capital base during a period of stress, and the concentration of risk in one specific transaction, issuer, or asset class.

2. (2)

   Institutions shall ensure that any material change increasing the risk profile of the securitisation positions in their trading book and non-trading book is reflected by an appropriate change in their due diligence procedures as regards those securitisation positions. In this regard, institutions shall identify in their formal trading book and non-trading book policies and procedures the circumstances which would trigger a review of the due diligence obligations.

Article 406 of the Regulation (EU) No 575/2013 shall be deemed to be complied with where the following conditions are fulfilled:

1. (a)

   securitisation positions are either held in the correlation trading portfolio and are reference instruments as referred to in Article 338(1)(b) of that Regulation or are eligible for inclusion in the correlation trading portfolio;

2. (b)

   the institution complies with Article 377 of that Regulation with regard to calculating the own funds requirements in relation to its correlation trading portfolio;

3. (c)

   the institution's approach to calculating own funds in relation to its trading portfolio results in a comprehensive and thorough understanding of the risk profile of its investment in the securitisation positions;

4. (d)

   the institution has implemented formal policies and procedures appropriate to its correlation trading portfolio and commensurate with the risk profile of its investments in the corresponding securitised positions, for analysing and recording the relevant information referred to in Article 406(1) of Regulation (EU) No 575/2013.