D1/2012: Information Requirements for Securitisation Applications

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South African Reserve Bank
From the Office of the Registrar of Banks

D1/2012

2012-01-23

To banks, branches of foreign institutions, controlling companies and auditors of banks or controlling companies

Directive 1/2012 issued in terms of Section 6(6) of the Banks Act, 1990

Information to be included in applications in terms of the Securitisation Notice - Designation of an activity not falling within the meaning of “the business of a bank” (Securitisation Notice)

Executive Summary

Following the global financial markets crisis, this Office communicated its intention to enhance the work performed in respect of securitisation activities in Directive 1/2011.

This Office has therefore further reviewed and amended its information requirements in respect of applications submitted to it in terms of the Securitisation Notice, published in Government Gazette No. 30628 dated 1 January 2008.

The purpose of this directive is to require banks, controlling companies, eligible institutions and any other person (collectively referred to as ‘applicants’) to furnish specified information as part of future applications in terms of the Securitisation Notice.

1. Introduction

1.1 The Banks Act, 1990 (Act No. 94 of 1990 – the Act) under section 1 – definition of “the business of a bank” provides that the Registrar of Banks may, with the approval of the Minister of Finance, designate an activity to be excluded from “the business of a bank”.

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1.2 The Securitisation Notice, under paragraph 2, describes the designated activity to be “the acceptance by a special-purpose institution of money from the general public against the issue of commercial paper by aforementioned special-purpose institution, in respect of either a traditional or synthetic securitisation scheme”, provided that such a scheme and all role-players strictly comply with the provisions of the Securitisation Notice.

1.3 The Securitisation Notice provides for and is applicable to not only banking institutions, but also non-banking institutions acting in a primary or secondary role (or both) in respect of either a traditional or synthetic securitisation scheme.

1.4 An application to conduct a securitisation scheme predominantly constitutes an exemption from the Act.

2. Factors influencing the final decision

2.1 Following the global financial markets crisis, this Office communicated its intention to enhance the work performed in respect of securitisation activities in Directive 1/2011.

2.2 Securitisation schemes may be structured in many different ways and therefore pose a number of risks, especially when a bank is involved, irrespective of whether it is in a primary or secondary role.

2.3 Supervisors are required to, among other things, ensure that the capital treatment of a securitisation exposure is determined on the basis of its economic substance rather than its legal form.

2.4 In addition, the Joint Forum¹ recently released a ‘Report on asset securitisation incentives – July 2011’ (the Report). The Report not only recognises that regulators are able to play a role in the establishment of a framework for securitisation schemes that will promote the prudent management of securitisation schemes, but also that such schemes continue to be an alternative funding source for institutions which, in turn, contributes to the availability of credit to support the real economy.

2.5 Among other things, the Report further recommends that authorities encourage the improvement of transparency to ensure that investors, other market participants, and supervisors have access to relevant and reliable information.

2.6 To this end, this Office deems it necessary that a duly-completed information sheet should accompany each application submitted in respect of a new securitisation scheme in terms of the Securitisation Notice. This Office is of the opinion that the additional information will assist it in evaluating all the relevant risk factors when considering an application in terms of the Securitisation Notice.

¹ The Joint Forum was established in 1996 under the aegis of the Basel Committee on Banking Supervision, the International Organisation of Securities Commissions, and the International Association of Insurance Supervisors to deal with issues common to the banking, securities and insurance sectors, including the regulation of financial conglomerates.

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3. Directive

3.1 Applicants shall submit the proposed information sheet as part of each application submitted in respect of a new securitisation scheme in terms of the Securitisation Notice.

The proposed information sheet is attached hereto as Annexure A.

4. Acknowledgement of receipt

4.1 Two additional copies of this directive are enclosed for the use of your institution’s independent auditors. The attached acknowledgement of receipt, duly completed and signed by both the chief executive officer of the institution and the said auditors, should be returned to this Office at the earliest convenience of the aforementioned signatories.

[Signature]

René van Wyk
Registrar of Banks

The previous directive issued was Directive 5/2011 dated 22 November 2011.

[Name of SPV/Conduit]	Summary: Information on new securitisation applications
Main objective/purpose of transaction/programme
Transaction/Programme Information
Synthetic or traditional securitisation
Standalone/single issue transaction or Programme
Transaction/programme type (i.e. revolving or static transaction)
Transaction/programme inception date
Transaction/programme Originator
Transaction/programme Servicer
Transaction/programme Administrator
Transaction/programme Standby servicer
Special Purpose Vehicle / Conduit Overview
Type of Conduit/SPV
Type of underlying assets (underlying/reference pool)
Weighted average time to maturity of the assets
Average time to maturity of the assets
Maximum transaction/programme size
Issuance under current application
Transaction/programme commercial paper rated by
	Class
Currency
Amount
Coupon rate
Type of Notes
International Scale Rating: Long Term
International Scale Rating: Short Term
Expected Margin
Step-up Margin
Scheduled Maturity
Final Legal Maturity
Step-up call date
Credit Enhancement (%)
Liquidity Facility
Liquidity Facilities Available	Yes / No
Purpose of Liquidity Facilities
Total Size of Liquidity Facilities
Breakdown of Liquidity Facilities	Provider	Rating of Provider	Maximum limits
Super Senior Liquidity Facility (i.e. capital and interest payments ranks senior to most senior class of notes)
Senior Liquidity Facility (i.e. capital and interest payments ranks pari passu with most senior class of notes)
Mezzanine/Junior Liquidity Facility

[Name of SPV/Conduit]	Summary: Information on new securitisation applications
Credit Enhancement
Transaction/programme credit enhancement available	Yes / No
Available to each note holder	Yes / No
Provider
Rating of Provider
Form of credit enhancement
Current value of credit enhancement
Types of Credit Enhancement
Hedge Counterparty
Hedge Counterparty
Rating of Provider
Type provided
Other Facilities (such as Make Whole Facilities, Prepayment Facilities etc.)
Provider
Rating of Provider
Type and Purpose of Facility
Regulatory Capital Treatment (i.e. STA, rating-based, inferred rating, internal assessment, Standard Formula, etc.)
Proposed treatment for regulatory reporting
ADDITIONAL INFORMATION
(Such as Credit Committee highlights, other material risks, specific concerns, mitigating factors, NPL Facility)