Decision on More Detailed Criteria for Identifying Arrangements and Agreements and Counterparties Arising from Partial Transfer of the Assets, Rights or Liabilities of the Credit Institution under Resolution

[Unofficial translation]
Pursuant to Article 44 paragraph 2 item 3 of the Central Bank of Montenegro Law (OGM 40/10, 6/13, 70/17, 125/23) and Article 140 paragraph (5) of the Law on Resolution of Credit Institutions (OGM 72/19, 8/21, 113/24), the Council of the Central Bank of Montenegro, at its meeting held on 17 March 2025, passed the following DECISION ON MORE DETAILED CRITERIA FOR IDENTIFYING ARRANGEMENTS AND AGREEMENTS AND COUNTERPARTIES ARISING FROM PARTIAL TRANSFER OF THE ASSETS, RIGHTS OR LIABILITIES OF THE CREDIT INSTITUTION UNDER RESOLUTION Subject matter
Article 1
This Decision shall prescribe in more detail the criteria for identifying arrangements and agreements and counterparties arising from partial transfer of the assets, rights or liabilities of the credit institution under resolution. Definitions
Article 2
The terms used in this Decision shall have the following meaning:
1) netting arrangement means an arrangement under which a number of claims or
obligations can be converted into a single net claim, including close-out netting arrangements under which, on the occurrence of an enforcement event (however or wherever defined) the obligations of the parties are accelerated so as to become immediately due or are terminated, and in either case are converted into or replaced by a single net claim, including close-out netting provisions and netting;
2) close-out netting provisions mean provisions of a financial collateral arrangement, or
of an arrangement including a financial collateral, or, in the absence of any such provision, any statutory rule by which, on the occurrence of an enforcement event whether through the operation of netting or set-off or otherwise:
a) the obligations of the parties are accelerated so as to be immediately due and expressed as an obligation to pay an amount representing their estimated current value, or are terminated and replaced by an obligation to pay such an amount; and/or b) an account is taken of what is due from each party to the other in respect of such obligations, and a net sum equal to the balance of the account is payable by the party from whom the larger amount is due to the other party;

_______________________________________________________________________________________________________ Decision on more detailed criteria for identifying arrangements and agreements and counterparties arising from partial transfer of the assets, rights or liabilities of the credit institution under resolution (OGM, 29/25) 2
3) securitisation means a transaction or scheme, whereby the credit risk associated with
an exposure or pool of exposures is tranched, having all of the following characteristics:
a) payments in the transaction or scheme are dependent upon the performance of the underlying exposure or underlying pool of exposures; b) the subordination of tranches determines the distribution of losses during the life of the transaction or scheme; c) transaction or scheme does not create exposures towards business undertakings in the form of specialised financing, which included exposures which possess the following characteristics:

• the exposure is to an entity which was specifically established for financing or
  is an economically comparable exposure;
• the contractual arrangement gives the lender a substantial degree of control
  over the assets and the income that they generate; and
• the primary source of repayment of the obligation is the income generated by
  the assets being financed rather than the independent cash flows that such entity generates in its operations;

4. synthetic securitisation means a securitisation where the transfer of risk is achieved
   by the use of credit derivatives or guarantees, and the exposures being securitised remain exposures of the originator;
5. originator means the credit institution which:
   a) itself or through connected persons, directly or indirectly, was involved in the original agreement which created direct or contingent liabilities of the debtor or potential debtor giving rise to the exposure being securitised; or b) purchases a third party's exposures for its own account and then securitises them;
6. set-off arrangement means an arrangement under which two or more claims or
   obligations owed between the credit institution under resolution and a counterparty can be set off against each other. Security arrangements
   Article 3
   (1) Security arrangements shall include the following:
   1) arrangements stipulating sureties and guarantees;
   2) liens and other rights arising from sureties;
   3) securities lending transactions which do not imply a transfer of full ownership of the
   security (collateral) and which involve one party (the lender) lending securities to the other party (the borrower) for a fee or interest payment and in which the borrower provides the lender with security (collateral) for the duration of the loan. (2) Within the meaning of this Decision, a security arrangement shall be an agreement by which the rights or assets to which the lien is attached or would attach upon an enforcement event are sufficiently identified or identifiable in accordance with the terms of the arrangement and the law.

_______________________________________________________________________________________________________ Decision on more detailed criteria for identifying arrangements and agreements and counterparties arising from partial transfer of the assets, rights or liabilities of the credit institution under resolution (OGM, 29/25) 3 Set-off arrangements and netting arrangements
Article 4
(1) Set-off arrangements entered into between a credit institution and a counterparty shall qualify as arrangements within the meaning of Article 140 paragraph (1) items 3) and 4) of the Law on Resolution of Credit Institutions (hereinafter: the Law), where they relate to rights and liabilities arising under financial contracts or derivatives. (2) Arrangements entered into between a credit institution and one or more counterparties shall qualify as set-off arrangements within the meaning of paragraph (1) of this Article where:
1) the arrangements are linked to the counterparty’s activity as a central counterparty, in
particular for the activity of a default fund within the meaning of regulations governing capital market; or
2) the arrangements are related to rights and obligations towards payment systems and
financial instruments netting systems, which are linked to their activity as payment or financial instruments netting systems. (3) By way of derogation from paragraphs (1) and (2) of this Article, the Central Bank of Montenegro (hereinafter: the Central Bank) may decide, in individual cases, that set-off arrangements, or netting arrangements entered into between a credit institution under resolution and one or more counterparties may qualify as set-off arrangements, or netting arrangements within the meaning of Article 140 paragraph (1) item 3) of the Law, where they are recognised for risk mitigation purposes under the applicable prudential rules and where the protection of such arrangements is a condition for that recognition. Structured finance arrangements related to securitisation
Article 5
(1) Structured finance arrangements related to securitisation shall qualify as the arrangements referred to in Article 140 paragraph (1) item 6) of the Law, where they include the following securitisations:
1) in which the underlying exposures have been placed into tranches and transferred by a
full title transfer from the balance sheet of the originator, to the credit institution under resolution (securitisation based on right to sell – traditional (true sale) securitisation);
2) by means of contractual instruments, where the underlying assets remain on the balance
sheet of the credit institution under restructuring (synthetic securitisation). (2) In the case of a true sale securitisation, any role of the originator in the structure, including servicing the loans, providing any form of risk protection or providing liquidity, shall be considered as a liability which forms part of the structured finance arrangements. (3) In the case of a synthetic securitisation, the lien shall be considered as a right which forms
part of the structured finance arrangements only if it is attached to specific and sufficiently
identified assets or identifiable in accordance with the terms of the arrangement and the law. (4) Agreements constituting a securitisation structure covering mutual relationships between originators, issuers, trustees, servicers, cash managers and swap and credit protection counterparties, shall be considered as forming part of structured finance arrangements if those mutual relationships are directly linked to the underlying assets and the payments to

_______________________________________________________________________________________________________ Decision on more detailed criteria for identifying arrangements and agreements and counterparties arising from partial transfer of the assets, rights or liabilities of the credit institution under resolution (OGM, 29/25) 4 be made from the proceeds generated by these assets to the holders of the structured instruments. (5) Mutual relationships referred to in paragraph (4) of this Article shall include rights and liabilities related to the underlying assets, liabilities under the instruments issued, and security arrangements, including derivative transactions, required for maintaining the flow of payments under these liabilities. (6) In addition to arrangements referred to in paragraph (4) of this Article, the Central Bank may, on a case-by-case basis and having regard to the structure of the structured finance arrangement pursuant to Article 140 paragraph (1) item 6) of the Law, determine that other agreements, such as loan servicing agreements, which are not directly linked to the underlying assets and the payments to be made, form part of such structured finance arrangement. Entry into force
Article 6
This Decision shall enter into force on the eighth day following that of its publication in the “Official Gazette of Montenegro”. THE COUNCIL OF THE CENTRAL BANK OF MONTENEGRO

CHAIRPERSON
Decision number: 0101- 2161 - 4/2025 G O V E R N O R Podgorica, 17 March 2025 Irena Radović, m.p.