BCL Circular 2006/194 of 18 April 2006 — Modification of the General Conditions of the BCL

Luxembourg, 18 April 2006

To all credit institutions and to the financial services of the Post and Telecommunications Company (post office cheques account service)

BCL CIRCULAR 2006/194
MODIFICATION OF THE GENERAL CONDITIONS OF THE BCL

Dear Sirs,

Annex 8 of the BCL's General Conditions for Operations has been updated and supplemented.

The modifications made have as their primary objective to clarify the criteria used to assess the eligibility of asset-backed securities (ABS) used within the framework of the Eurosystem's credit operations.

Previously, the Eurosystem did not apply specific eligibility criteria to these securities, which fall under the category of debt securities. Indeed, it interpreted the general eligibility criterion applicable to Level 1 assets, according to which debt securities must have a "fixed, unconditional principal amount," as excluding asset-backed securities for which credit risk had been transferred to a special purpose vehicle through credit derivatives. The introduced modifications therefore aim to strengthen the overall transparency of the collateral framework by specifying the precise criteria that must be met by asset-backed securities, in addition to those applying generally to debt securities.

2

Given the introduction of the new criteria, it has also been decided that the requirement regarding the "fixed, unconditional principal amount" will no longer apply to asset-backed securities. Indeed, the principal of all asset-backed securities generally depends on the performance of the underlying assets.

The new criteria relate to the following five aspects:

i) Structure of the transaction
The assets generating cash flows must have been validly acquired in accordance with the law of a Member State by the special purpose vehicle involved in the securitization, from the originator or an intermediary, in a manner that the Eurosystem considers to be a true sale enforceable against third parties. They must be out of reach of the originator and its creditors, including in the event of the originator's insolvency.

ii) Composition of the asset pool
The assets generating cash flows must not be composed of credit-linked notes or similar claims resulting from the transfer of credit risk through credit derivatives.

iii) Subordination ranking of tranches
Debt securities conferring rights, on the principal and/or interest, that are subordinated to the rights of holders of other debt securities of the same issuer (or, within the framework of a structured issuance, subordinated to other tranches of the same issuance) are excluded from the list of Level 1 assets. A tranche (or sub-tranche) is considered not to be subordinated to other tranches (or sub-tranches) of the same issuance and is senior if, in accordance with the applicable payment priority after the notification of an enforcement notice, as provided in the offering circular, this tranche (or sub-tranche) receives priority payment (principal and interest) compared to other tranches or other sub-tranches or is the last to bear losses related to the underlying assets.

iv) Country of residence of the issuer
Asset-backed securities issued by entities established in G10 countries not belonging to the European Economic Area (EEA), currently the United States, Canada, Japan, and Switzerland, are not eligible. This criterion is introduced to avoid additional legal complexities that would arise if the Eurosystem had to assess whether its rights are sufficiently protected under the legislation of these countries.

v) Assessment of eligibility
The Eurosystem reserves the right to request any clarification and/or legal confirmation from any interested third party (such as the issuer, the originator, or the arranger) that it deems necessary for the assessment of the eligibility of asset-backed securities.

It should be noted, however, that the criteria mentioned above, as well as the exception regarding the requirement for a "fixed, unconditional principal amount," do not apply to covered bonds issued by banks in accordance with Article 22(4) of the UCITS Directive (amending Directive 85/611/EEC).

The modifications made to Annex 8 of the General Conditions for Operations reproduce all corresponding modifications affecting the General Documentation. The General Documentation is an annex to ECB/2005/17 amending ECB/2000/7 concerning instruments and procedures of monetary policy of the Eurosystem. ECB/2005/17 was adopted by the Governing Council of the ECB, and the modifications will apply as of 1 May 2006.

Asset-backed securities that are eligible under ECB/2005/2 but do not meet the above criteria remain eligible during a transitional period until 15 October 2006.

The modifications detailed above occurred on the following pages of Annex 8: 4-11 (new first bullet point); 4-13 (second bullet point, last line); 4-15 (new first bullet point).

Annex 8, as modified, enters into force on 1 May 2006.

4

The updated version of Annex 8 is available from 19 April 2006 on the BCL website: www.bcl.lu. The currently valid version of Annex 8 remains available on the website until 30 April 2006. A printed version of the BCL's General Conditions is available upon request.

Please accept, Sirs, the assurance of our distinguished sentiments.

BANQUE CENTRALE DU LUXEMBOURG
The Management

Serge KOLB Andrée BILLON Yves MERSCH