Recommendation of the Magyar Nemzeti Bank No. 10/2026 (July 29) on Requirements for On-Balance Sheet Simple, Transparent and Standardised Securitisation

I. Purpose and Scope of the Recommendation

The purpose of this Recommendation is to formulate the expectations of the Magyar Nemzeti Bank (hereinafter: MNB) regarding the criteria for qualifying on-balance sheet Simple, Transparent and Standardised (STS) securitisation, thereby increasing the predictability of legal application and facilitating the uniform application of relevant legislation.

According to Article 26a of Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 on the general framework for the determination of the framework for securitisation, on the creation of a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EU) No 1060/2009 and (EU) No 648/2012 (hereinafter: Securitisation Regulation), synthetic securitisations meeting the requirements defined in Articles 26b–26e of the Securitisation Regulation shall be considered on-balance sheet Simple, Transparent and Standardised (hereinafter: STS) securitisation.

The European Banking Authority issued guidelines on STS criteria for on-balance sheet securitisation on 27 May 2024 (EBA/GL/2024/05 1; hereinafter: EBA Guidelines). Based on the expectations formulated in the EBA Guidelines, this Recommendation defines the MNB's expectations regarding the requirements for STS criteria for on-balance sheet securitisation and the practice to be followed by the participants in the securitisation process. By publishing this Recommendation, the MNB ensures compliance with the EBA Guidelines.

The addressees of this Recommendation are special purpose entities (hereinafter: SPE) subject to the scope of the Act on Capital Markets of 2001 (hereinafter: Capital Markets Act), institutional investors under the Securitisation Regulation (hereinafter: investors), securitisation initiators, sponsors, original lenders, credit servicing providers, and third parties authorised by the MNB to check compliance with STS criteria under Article 28 of the Securitisation Regulation.

This Recommendation does not refer exhaustively to legal provisions when formulating principles and expectations; however, the addressees of this Recommendation remain obliged to comply with the relevant legal provisions.

This Recommendation does not provide guidance on data protection or data processing issues; it contains no expectations regarding the processing of personal data, and the requirements contained herein cannot be interpreted in any way as authorisation for the processing of personal data. Data processing in connection with the fulfilment of supervisory expectations set out in this Recommendation may only be carried out in compliance with the applicable data protection legislation.

II. Interpretative Provisions

1. The concepts used in this Recommendation shall be interpreted in accordance with the Securitisation Regulation and the Capital Markets Act, unless otherwise provided.

III. Criteria for Simplicity

III.1. Balance Sheet Exposures 2

2. According to the MNB's expectation, for the application of Article 26b(3) of the Securitisation Regulation, the term 'balance sheet' refers to the accounting balance sheet of the securitisation initiator or an entity belonging to the same group as the securitisation initiator.

III.2. Prohibition of Coverage Beyond Credit Risk Hedging Agreements 3

3. To ensure that the pool of underlying exposures is not covered more than once, the criterion under Article 26b(4) of the Securitisation Regulation is, according to the MNB's expectation, to exclude the application of multiple credit risk hedging to the credit risk of the pool of underlying exposures, regardless of whether the additional credit risk hedging relates to a tranche of the transaction, a part of a tranche, or the credit risk of a specific underlying exposure.

4. For the application of point 3, separate credit risk hedging provided for separate tranches, separate parts of tranches, or separate underlying exposures shall not be considered coverage beyond the coverage obtained through credit risk hedging agreements.

III.3. Representations and Warranties 4

5. For the application of Article 26b(6) of the Securitisation Regulation, the term 'group' in relation to the securitisation initiator or an entity belonging to the same group is, according to the MNB's expectation, to be understood as the consolidated group to which the entity belongs for accounting or prudential purposes. The concept of an entity belonging to the consolidated supervisory scope under Article 26b(6)(b) of the Securitisation Regulation shall be interpreted in accordance with Article 26b(3) of the Securitisation Regulation.

6. The MNB expects that, for the application of Article 26b(6)(e) of the Securitisation Regulation, the securitisation initiator shall compare the lending conditions applied to the securitised exposures with the lending conditions applied to similar exposures at the time the securitised exposures were originated.

7. In the MNB's view, compliance with the expectation under point 6 does not mean that the securitisation initiator or the original lender would need to hold similar exposures on their balance sheets at the time of selection of the securitised exposures or at the exact time of securitisation, nor does it mean that similar exposures must actually be originated at the time the securitised exposures were created.

8. For the application of Article 26b(6)(f) of the Securitisation Regulation, the condition of 'best knowledge' is, according to the MNB's expectation, fulfilled if the securitisation initiator uses information derived from any of the following sources and circumstances, or a combination thereof:
   a) information obtained at the time of creation of the exposures regarding the obligors; b) information obtained by the securitisation initiator in the course of managing its exposures or its risk management procedures; c) notifications sent to the securitisation initiator by a third party; d) publicly available information or information from one or more credit registers regarding entries related to the underlying exposures at the time of their creation, provided that such information has already been taken into account in connection with the information mentioned in points a), b), or c), and in accordance with applicable regulatory and supervisory requirements, including the requirements for sound lending criteria defined in Article 9 of the Securitisation Regulation.

III.4. Securitisation Terms, Active Portfolio Management 5

9. For the application of Article 26b(7) of the Securitisation Regulation, 'active portfolio management' is, according to the MNB's expectation, understood as portfolio management that:
   a) makes the performance of the securitisation dependent on both the performance of the underlying exposures and the performance of the securitisation portfolio management, thereby preventing investors from modelling the credit risk of the underlying exposures without taking into account the portfolio manager's strategy; b) is carried out for speculative purposes with the aim of achieving better performance, higher yield, or generally greater financial return, or obtaining other purely financial or economic benefits.

10. According to the MNB's assessment, portfolio management methods that do not constitute active portfolio management include:
    a) substitution of underlying exposures subject to regulatory dispute or investigation, provided that the purpose of the substitution is to facilitate the resolution of the dispute or the conclusion of the investigation; b) purchase of new underlying exposures during the 'ramp-up' period with the aim of increasing the value of the underlying exposures to no more than the value of the securitisation obligations.

11. For the application of Article 26b(7) of the Securitisation Regulation, 'clear securitisation terms' are, according to the MNB's expectation, understood as criteria under which the court has the legal and factual ability to determine their fulfilment.

12. According to the MNB's expectation, for the application of Article 26b(7) of the Securitisation Regulation, 'fulfilment of securitisation terms that are no less strict than those applied during the original selection of the underlying exposures' means that the securitisation terms are no less strict than those applied to the original underlying exposures at the closing of the transaction. The MNB expects that the securitisation terms applied to the underlying exposures in accordance with the above shall be recorded in the transaction documentation and shall refer to the securitisation terms applied at the exposure level.

13. The MNB draws attention to the fact that Article 26b(7) of the Securitisation Regulation exhaustively lists the circumstances under which an underlying exposure may be removed from the transaction.

III.5. Homogeneity, Obligations Related to Underlying Exposures, Regular Payments, Prohibition of Transferable Securities 6

14. For the application of Article 26b(8) of the Securitisation Regulation, the phrase 'contractually binding and enforceable obligations for which the debtors and, where applicable, guarantors are liable without limit' is, according to the MNB's expectation, understood as all such obligations specified in the contractual specification of the underlying exposures that are material from the perspective of investors, as they affect the payment or collateral provision obligations of the debtor and, where applicable, the guarantor.

15. For the application of the third subparagraph of Article 26b(8) of the Securitisation Regulation, exposures with specified regular payments are expected to include:
    a) bullet repayment exposures, according to Article 26b(12)(a) of the Securitisation Regulation, in the case of revolving securitisation; b) exposures related to credit card credit facilities; c) exposures where repayments cover only interest, and the principal amount is repaid at maturity, including interest-only mortgage loans; d) exposures where repayments include interest and part of the principal amount, provided that one of the following conditions is met:
    da) the remaining principal amount is repaid at maturity; db) the repayment of the principal amount depends on the sale of assets serving as collateral for the exposure; e) exposures where payment is temporarily suspended in accordance with the contract between the debtor and the lender.

III.6. Lending Conditions, Expertise of the Securitisation Initiator 7

16. According to the MNB's expectation, for the application of the first subparagraph of Article 26b(10) of the Securitisation Regulation, the phrase 'material changes to lending conditions, for which full information must be provided' refers to material changes to lending conditions applied to exposures that are added to the pool of underlying exposures in connection with replenishment or portfolio management under point 12 of this Recommendation after the closing of the securitisation.

17. According to the MNB's assessment, changes in lending conditions are considered material if:
    a) they affect the requirement defined in Article 1(1)(b) of Commission Delegated Regulation (EU) 2019/1851 of 28 May 2019 supplementing Regulation (EU) No 2017/2402 of the European Parliament and of the Council as regards regulatory technical standards on the homogeneity of exposures underlying securitisation (hereinafter: RTS on Homogeneity of Exposures); or b) they have a significant impact on the overall credit risk or expected average performance of the pool of underlying exposures without resulting in a significantly different approach to assessing the credit risks related to the underlying exposures.

18. It is expected that information regarding any changes in lending conditions shall also include an explanation of the purpose of such changes.

19. According to the MNB's expectation, with regard to customer receivables arising other than in the form of loans, the reference to 'lending conditions' under the first subparagraph of Article 26b(10) of the Securitisation Regulation shall be interpreted as referring to the payment purposes in which the securitisation initiator and the original lender apply such conditions to similar types of short-term loans originated by them, in connection with the sale of their products and services to customers.

20. According to the MNB's expectation, the requirement under the second subparagraph of Article 26b(10) of the Securitisation Regulation 8 does not apply to mortgage loans that were approved but were not offered on the assumption that the borrower or intermediary was informed that the lender might not verify the provided information, or that the borrower or intermediary would learn of this after the loan was approved.

21. For the application of the second subparagraph of Article 26b(10) of the Securitisation Regulation, it is expected that the provided 'information' shall contain only relevant information. According to the MNB's expectation, the relevance of the information shall be based on the fact that the information is a relevant credit assessment metric, such as a metric considered relevant for assessing the borrower's creditworthiness, assessing access to collateral, or reducing the risk of fraud.

22. According to the MNB's expectation, the scope of relevant information generally includes income for general non-income-generating residential mortgage loans, and generally rental income for income-generating residential mortgage loans. Information that cannot be used as a credit assessment metric, such as mobile phone numbers, shall not be considered relevant information.

23. It is expected that, for the application of the third subparagraph of Article 26b(10) of the Securitisation Regulation, the creditworthiness of third-country borrowers shall be determined in accordance with the relevant provisions of Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises and Act CLXII of 2009 on Consumer Credit, as well as taking into account the following principles:
    a) before concluding the loan contract, the lender shall assess the borrower's creditworthiness to an appropriate extent based on appropriate information, including information obtained from the borrower and, if necessary, by querying relevant databases; b) if the parties agree after concluding the loan contract to change the total amount of the loan, the lender shall update the financial information available regarding the borrower, and it is expected that the lender shall assess the borrower's creditworthiness before any significant increase in the total amount of the loan; c) the lender shall thoroughly assess the borrower's creditworthiness before concluding the loan contract, taking into account factors that verify whether the borrower is likely to fulfil the obligations under the loan contract; d) the procedures and information forming the basis of the assessment shall be documented and preserved; e) the creditworthiness assessment shall not be based predominantly on the fact that the value of the residential property exceeds the loan amount, or on the assumption that the value of the residential property will increase, unless the purpose of the loan contract is the construction or renovation of residential property; f) the lender shall not have the right to terminate the loan contract or modify it to the detriment of the borrower after conclusion on the grounds that the creditworthiness check was performed incorrectly; g) the lender may only make the loan available to the borrower if the result of the creditworthiness assessment indicates that the obligations arising from the loan contract are likely to be fulfilled as prescribed in the contract; h) before any significant increase in the total amount of the loan after the conclusion of the loan contract, the borrower's creditworthiness shall be re-evaluated based on updated information, unless the additional loan was planned and included in the original creditworthiness assessment by the lenders.

24. According to the MNB's expectation, when determining whether the securitisation initiator or the original lender has expertise in extending exposures similar to the securitised exposures under Article 26b(10) of the Securitisation Regulation, the following aspects shall be taken into account:
    a) members of the governing body of the securitisation initiator or the original lender, as well as senior management responsible for directing the creation of exposures similar to the securitised exposures, shall have appropriate knowledge and skills in extending exposures similar to the securitised exposures; b) regarding the quality of expertise, one of the following principles shall be taken into account:
    ba) members of the governing body and senior management have appropriate roles, responsibilities, and capabilities; bb) members of the governing body and senior management have gained sufficient experience in previous positions and received appropriate education and training; bc) members of the governing body and senior management are sufficiently involved in the management structure of the operational area related to the creation of exposures; or bd) in the case of a prudentially supervised entity, the activities, operating licenses, and authorizations are considered relevant for extending exposures similar to the securitised exposures.

25. According to the MNB's expectation, the securitisation initiator or the original lender has the necessary expertise if:
    a) the business activity of the entity or the consolidated group to which the entity belongs for accounting or prudential supervisory purposes has extended to extending exposures similar to the securitised exposures for at least five years; or b) at least two members of the governing body individually have at least five years of relevant professional experience in extending exposures similar to the securitised exposures, and senior management responsible for directing the creation of exposures similar to the securitised exposures at the entity individually have at least five years of relevant professional experience in extending exposures similar to the securitised exposures.

26. It is expected that the securitisation initiator or the original lender shall provide detailed information on the relevant expertise in accordance with applicable confidentiality requirements to verify the number of years of professional experience, in order to enable investors to fulfil their obligations under Article 5 of the Securitisation Regulation.

27. According to the MNB's expectation, for the application of the fourth subparagraph of Article 26b(10) of the Securitisation Regulation, exposures shall be considered similar if:
    a) they belong to one of the asset categories defined in Article 1(a)(i)–(iii) or (v)–(vii) of the RTS on Homogeneity of Exposures; b) they belong to the asset category defined in Article 1(a)(iv) of the RTS on Homogeneity of Exposures and to the same type of obligation defined in Article 2(3)(a) of the RTS on Homogeneity of Exposures; or c) they belong to the asset category defined in Article 1(a)(viii) of the RTS on Homogeneity of Exposures and have similar characteristics regarding any of the homogeneity factors defined in Article 2(6) of the RTS on Homogeneity of Exposures.

III.7. Prohibition of Non-Performing Exposures and Exposures to Borrowers or Guarantors with Adverse Credit Histories 9

28. For the application of Article 26b(11) of the Securitisation Regulation, non-performing exposures are defined in accordance with the prudential requirements for credit institutions and amending Regulation (EU) No 648/2012 of 26 June 2013, Regulation (EU) No 575/2013.

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1 https://www.eba.europa.eu/sites/default/files/2024-10/c2643528-9d43-4f64-863b053864465f96/GL%20STS%20criteria%20for%20OBS%20securitisation%20%28EBA%20GL%202024%2005%29_HU2.pdf 2 Related to Article 26b(3) of the Securitisation Regulation 3 Related to Article 26b(4) of the Securitisation Regulation 4 Related to Article 26b(6) of the Securitisation Regulation 5 Related to Article 26b(7) of the Securitisation Regulation 6 Related to Article 26b(8) of the Securitisation Regulation 7 Related to Article 26b(10) of the Securitisation Regulation 8 The pool of underlying exposures shall not contain mortgage loans that were offered and granted on the assumption that the borrower or intermediaries were informed that the lender might not verify the provided information. 9 Related to Article 26b(11) of the Securitisation Regulation

interpreted in accordance with Article 178(1) of the Regulation of the European Parliament and of the Council (CRR), which concept has been further refined by the Commission Delegated Regulation (EU) 2018/171 of 19 October 2017 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards on the materiality threshold for delinquent exposures, the Regulation of the National Bank of Hungary No. 44/2018 (December 5) on the consideration of non-financial controlling shareholdings and the materiality threshold for delinquent exposures, and the Recommendation of the National Bank of Hungary No. 9/2022 (May 3) on the application of the concept of default under Article 178 of Regulation (EU) No 575/2013.

29. In the opinion of the MNB, if the originator of the securitisation or the original lender is not an institution subject to the CRR, the originator of the securitisation must comply with the expectation set out in point 28 to such an extent that it does not constitute an undue burden. In this case, it is expected that the originator of the securitisation or the original lender uses information obtained from the borrower at the time of the placement of the exposures, information obtained from the originator of the securitisation during the management of its exposures or its risk management procedures, or information obtained from a third party.

30. According to the MNB's expectation, in the application of Article 26b(11) of the Securitisation Regulation, the circumstances specified in points (a) to (c) of that paragraph shall be interpreted as adverse credit history. Other possible circumstances of adverse credit history not included in points (a) to (c) of Article 26b(11) of the Securitisation Regulation shall be interpreted as not falling within the scope of this requirement.

31. According to the MNB's expectation, the prohibition on including exposures to "borrowers or guarantors with adverse credit history" in the pool of underlying exposures means that, at the time of selection, there must be a right of recourse available for at least one party without adverse credit history, regardless of whether that party is a borrower or a guarantor. Consequently, the MNB expects that the pool of underlying exposures does not include any of the following exposures:

a) exposure to a borrower with adverse credit history where there is no guarantor for the full amount of the securitised exposure, b) exposure to a borrower with adverse credit history that has a guarantor with adverse credit history.

32. According to the MNB's expectation, the phrase "to the best of his knowledge" in the application of Article 26b(11) of the Securitisation Regulation is considered fulfilled if the information derives exclusively from any of the following combinations of sources and circumstances:

a) from the borrower at the time of the placement of the exposure, b) from the originator of the securitisation during the management of its exposures or its risk management procedures, c) from notifications sent to the originator of the securitisation by a third party, or d) from publicly available information or information regarding entries in one or more credit registers concerning persons with adverse credit history at the time of the placement of the underlying exposures, but only if these information have already been taken into account in connection with points (a), (b) and (c), and in accordance with applicable regulatory and supervisory requirements, including the sound lending criteria defined in Article 9 of the Securitisation Regulation. This does not apply to customer claims arising not in the form of loans, which do not need to meet lending criteria.

33. According to the MNB's expectation, in the application of Article 26b(11)(a) of the Securitisation Regulation, the requirement to exclude exposures to borrowers or guarantors with adverse credit history who have undergone a debt rescheduling procedure regarding their defaulting exposures shall be interpreted as applying equally to the rescheduled exposures of the affected borrower or guarantor, as well as to those exposures that were not rescheduled. The MNB further expects that, in the application of this point of the recommendation, rescheduled exposures meeting the conditions set out in Article 26b(11)(a)(i) and (ii) of the Securitisation Regulation shall not lead to the borrower or guarantor being declared as having adverse credit history.

34. It is expected that the requirements defined in Article 26b(11)(b) of the Securitisation Regulation shall be limited to exposures to borrowers or guarantors where, at the time of the placement of the underlying exposures:

a) the borrower or guarantor was explicitly designated in the credit register as a person or entity with adverse credit history due to their adverse situation or negative information stored in the Central Credit Information System (hereinafter: credit register) as defined by Act CXXII of 2011 on the Central Credit Information System, and b) the borrower or guarantor appears in the credit register for reasons that are material from the perspective of credit risk assessment.

35. According to the MNB's expectation, in the application of Article 26b(11)(c) of the Securitisation Regulation, exposures to borrowers or guarantors with adverse credit history shall be considered to have a credit rating or credit scoring indicating that the risk of failure to fulfill the contractual payment obligations is significantly higher than that of similar, non-securitised exposures to other borrowers or guarantors owned by the originator of the securitisation, if:

a) the most important factors determining the expected performance of the underlying exposures and similar exposures are similar, and b) as a result of the similarity referred to in point (a), it was reasonably expected, based on historical performance or information related to applicable models, that their performance would not differ significantly during the term of the transaction, or – if the term of the transaction is longer than four years – over a maximum of four years.

36. According to the MNB's expectation, the requirement set out in point 35 is considered fulfilled if the pool of underlying exposures does not include:

a) exposures classified as doubtful, with adverse credit history, defaulting, or having a similar effect based on relevant accounting principles, or b) exposures to borrowers or guarantors whose credit quality is significantly worse, based on credit ratings or other credit quality thresholds, than the credit quality of borrowers or guarantors of similar exposures placed by the originator in its general lending operations in accordance with its credit risk strategy.

III.8. At least one repayment made 10

37. According to the MNB's expectation, in the application of Article 26b(12) of the Securitisation Regulation, additional advances and drawdowns granted for a given exposure, or the rescheduling of the same exposure for a given borrower, do not result in a new requirement regarding the "already repaid at least once" condition. It is expected that the planned selection of different, separate exposures for the same borrower shall result in a new requirement regarding the "already repaid at least once" condition.

38. The MNB expects that, in the application of Article 26b(12) of the Securitisation Regulation, the repayment specified therein – according to which they must have "repaid at least once" by the time of transfer – shall be rent payment, principal repayment, or interest payment, and any other type of traditional payment specified in the contractual agreement related to the exposure.

IV. Criteria for standardisation

IV.1. Adequate mitigation of interest rate and currency risks 11

39. According to the MNB's expectation, in the application of the third subparagraph of Article 26c(2) of the Securitisation Regulation, exposures in the pool of underlying exposures that contain only a derivative component serving exclusively to directly hedge the interest rate risk or currency exchange rate risk of that underlying exposure, and which are not themselves derivative products, shall not be considered prohibited. In the application of the third subparagraph of Article 26c(2) of the Securitisation Regulation, standard international financial practices include documentation standards accepted by the International Swaps and Derivatives Association (hereinafter: ISDA) or similar nationally accepted documentation standards.

IV.2. Interest payments based on reference rates 12

40. It is expected that, in the application of Article 26c(3) of the Securitisation Regulation, interest rates to be considered as appropriate reference base rates for interest payments based on reference rates shall include:

a) interbank offered rates, including Libor, Euribor, BUBOR, and other recognized reference indices, b) other accepted reference interest rates, such as €STR, SONIA, SOFR, and TONA, c) interest rates determined by monetary authorities, including the base rate and central bank discount rates, and d) sectoral interest rates reflecting the lender's funding costs, including general variable interest rates and internal interest rates directly reflecting the market financing costs of a subsidiary of an institution, provided that sufficient data is available to investors to evaluate the relationship of sectoral interest rates with other market interest rates.

41. According to the MNB's expectation, interest caps and floors in the application of Article 26c(3) of the Securitisation Regulation do not result in a complex formula or derivative transaction.

IV.3. Requirements following notification of enforcement 13

42. According to the MNB's expectation, in the application of the second subparagraph of Article 26c(4) of the Securitisation Regulation, the amount of funds trapped at the Collateral General Account (KCGE) must be determined as specified in the transaction documentation.

43. According to the MNB's expectation, in the application of Article 26c(4) of the Securitisation Regulation, it is permissible for funds to remain at the KCGE in the form of a reserve fund for future use, provided that the use of the reserve fund is limited exclusively to the purposes defined in the second subparagraph of Article 26c(4) of the Securitisation Regulation, including the proper repayment to investors.

IV.4. Sharing of losses and repayment of transaction tranches 14

44. According to the MNB's expectation, in the application of Article 26c(5) of the Securitisation Regulation, in addition to the minimally prescribed triggering events, the parties involved in the transaction may agree to consider other performance-related triggering events. The occurrence of any triggering event related to these performance events shall result in the repayment of securitisation transaction tranches reverting to the sequential repayment of transaction tranches, regardless of whether other triggering events exist.

45. According to the MNB's expectation, in the application of the third subparagraph of Article 26c(5) of the Securitisation Regulation, after the repayment reverts to sequential repayment due to the breach of any of the performance-related triggering events, further reversion to non-sequential repayment is not permitted based on the transaction documentation.

IV.5. Transaction documentation 15

46. According to the MNB's expectation, in the application of Article 26c(7)(d) of the Securitisation Regulation, servicing rules shall be understood as the rules specified in the transaction documentation regarding servicing, which must be complied with throughout the entire life of the securitisation transaction.

47. According to the MNB's expectation, in the application of Article 26c(7)(c) of the Securitisation Regulation, servicing procedures shall be understood as the actual procedures necessary to ensure compliance with the servicing rules. The procedures may be modified throughout the duration of the securitisation transaction, provided that the servicing rules are still met.

48. According to the MNB's expectation, in the application of Article 26c(7)(b) of the Securitisation Regulation, the servicer and the third party performing the verification must always differ from the provider of loan servicing services, the investor, and the originator of the securitisation. The third party performing the verification must also meet the requirements defined in point 59.

IV.6. Expertise of the loan servicing provider and loan servicing requirements 16

49. According to the MNB's expectation, when determining whether the loan servicing provider has expertise in managing exposures similar to the securitised exposures in accordance with Article 26c(8) of the Securitisation Regulation, the following aspects must be taken into account:

a) members of the governing body of the loan servicing provider, as well as senior management responsible for directing the creation of exposures similar to the securitised exposures, other than members of the governing body, must have appropriate knowledge and skills in the creation of exposures similar to the securitised exposures, and b) regarding the quality of expertise, one of the following principles must be taken into account:
ba) members of the governing body and senior management have appropriate roles and responsibilities, as well as skills, bb) members of the governing body and senior management have gained sufficient experience in their previous positions, and have received appropriate education and training, bc) members of the governing body and senior management are sufficiently involved in the management structure of the operational area related to the creation of exposures, bd) in the case of a prudentially supervised organization, business or operating licenses, or authorizations are considered relevant for the placement of exposures similar to the securitised exposures.

50. According to the MNB's expectation, the loan servicing provider has the necessary expertise if:

a) the business activity of the organization or the consolidated group to which the organization belongs for accounting or prudential supervisory purposes has extended to the management of exposures similar to the securitised exposures for at least five years, or b) at least two members of the governing body individually have at least five years of relevant professional experience in managing exposures similar to the securitised exposures, and senior management responsible for directing the management of exposures similar to the securitised exposures within the organization, other than members of the governing body, individually have at least five years of relevant professional experience in managing exposures similar to the securitised exposures, and the operational area of the organization engaged in loan servicing services is supported by a portfolio management support service provider as specified in point (a).

51. It is expected that the loan servicing provider shall provide information with sufficient detail regarding the relevant expertise, in accordance with applicable confidentiality requirements, to verify the number of years of professional experience, in order to enable investors to fulfill their obligations under Article 5 of the Securitisation Regulation.

52. According to the MNB's expectation, in the application of Article 26c(8) of the Securitisation Regulation, the concept of "exposures of similar nature" shall be interpreted according to point 27.

53. According to the MNB's expectation, in the application of Article 26c(8) of the Securitisation Regulation, the policies, procedures, and risk management control measures of the loan servicing provider regarding the management of exposures shall be considered adequately documented if the loan servicing provider is:

a) an organization subject to prudential and capital regulation and under supervision in the European Union, and such supervisory licenses or authorizations are considered relevant for the management of exposures similar to the securitised exposures, or b) an organization not subject to prudential and capital regulation or under supervision in the European Union, which demonstrates the existence of sufficiently documented and appropriate policies and risk management control measures, follows best market practices, and possesses the capabilities necessary for reporting. The demonstration must be supported by the review of a third party, such as a credit rating agency or external auditor.

IV.7. Handling conflicts among investors 17

54. According to the MNB's expectation, in the application of Article 26c(10) of the Securitisation Regulation, the provisions of the transaction documentation that "facilitate the timely handling of conflicts between different classes of investors" shall contain provisions regarding:

a) the method for calling meetings or organizing conference calls, b) the maximum time frame for creating a meeting or conference call, c) the quorum required for decision-making, d) the minimum threshold for votes for the validity of a decision, clearly distinguishing the lower thresholds for each type of decision, e) where necessary, providing a venue for meetings within the European Union.

55. In the application of Article 26c(10) of the Securitisation Regulation, if there are mandatory legal provisions in the applicable jurisdiction that determine the method of resolving conflicts among investors, the transaction documentation may refer to these provisions.

V. Criteria for transparency

V.1. Historical default and loss data 18

56. It is expected that, in the application of Article 26d(1) of the Securitisation Regulation, if the originator of the securitisation is unable to provide the data in accordance with the data requirements specified in the referenced provision, publicly available external data or data provided by third parties – such as credit rating agencies or other market participants – shall be used, provided that all other requirements of Article 26c of the Securitisation Regulation are met.

57. According to the MNB's expectation, in the application of Article 26d(1) of the Securitisation Regulation, "fundamentally similar exposures" shall be understood as exposures that are not limited to exposures listed in the balance sheet of the originator of the securitisation, and which:

a) are similar in terms of the most important factors determining the expected performance of the underlying exposures, and b) as a result of the similarity referred to in point (a), it was reasonably expected, based on historical performance or information related to applicable models, that their performance would not be significantly worse than that of the securitised exposures during the term of the transaction, or – if the term of the transaction is longer than four years – over a maximum of four years.

V.2. Verification of the sample taken from the underlying exposures 19

58. The MNB expects that, in the application of Article 26d(2) of the Securitisation Regulation, the underlying exposures subjected to verification before the closing date of the transaction shall constitute a representative sample of the temporary portfolio from which the securitised pool is drawn, and which must be in reasonably final form before the closing date of the transaction.

59. According to the MNB's expectation, in the application of Article 26d(2) of the Securitisation Regulation, a proper and independent party is one who:

a) has the experience and capability necessary to perform the verification, and b) is not:
ba) a credit rating agency, bb) a third party verifying compliance with STS criteria in accordance with Article 28 of the Securitisation Regulation, bc) an organization attributable to the originator of the securitisation.

60. It is expected that, in the application of Article 26d(2) of the Securitisation Regulation, the verification shall be performed using appropriate statistical methods and a sample of underlying exposures randomly selected from the underlying exposures used in the securitisation, and the sample size shall be determined such that the probability (confidence level) of appropriately rejecting the hypothesis that the underlying exposures used in the securitisation is at least 95%.

In the total set of service exposures, there are no exemptions from any requirement. That is, the probability of a so-called Type II error, when the entire set is incorrectly accepted as a set without exemptions, must be 5%.

61. The MNB expects that the minimum number of underlying exposures included in the sample must always be 50. In the case of securitisations where the set of underlying exposures consists of fewer than 50 underlying exposures, the sample must consist of all underlying exposures.

62. The MNB expects that the verification – which must be performed in the form of an approved procedural report – must include the verification of the data database or information systems of the originator based on the credit risk cover agreement and related documentation, to confirm that a credit event would trigger a credit risk cover payment by the investor, if the losses of the underlying exposure affected by the credit event were allocated to the covered transaction sub-series(ies) with respect to the exposures subject to verification. If this verification cannot be performed using the originator's database or information systems, it is expected that the party performing the verification examines other types of documents or records for the purpose of performing the verification.

63. The MNB expects that, in the application of Article 26d(2) of the Securitisation Regulation, it is necessary to publish confirmation that external verification has been carried out, and that it does not contain any significant adverse findings.

64. The MNB expects that, in the application of Article 26d(2) of the Securitisation Regulation, if no securities are issued within the framework of synthetic securitisation, the period prior to the closing of the transaction should be interpreted as referring to the period prior to the validity of the guarantee or credit derivative under the credit risk cover agreement.

V.3. Source-side cash flow model 20

65. In the application of Article 26d(3) of the Securitisation Regulation, the source-side cash flow model is considered "accurate" if it has been prepared appropriately and with sufficient detail so that investors can model the payment obligations, including, where applicable, the payment obligations of the KCGE, and accordingly price the securitisation. In the MNB's opinion, this may include algorithms that allow investors to model a wide range of different scenarios affecting cash flows, such as various prepayment or default rates.

66. It is expected that, in the application of Article 26d(3) of the Securitisation Regulation, if the source-side cash flow model is developed by third-party service providers, the originator remains responsible for making the information available to potential investors.

V.4. Environmental performance of assets and sustainability disclosures 21

67. The MNB expects that the requirement set out in Article 26d(4) of the Securitisation Regulation applies only if information regarding the energy certificates mentioned in the first subparagraph is available, or if information regarding the main adverse impacts on sustainability factors of assets financed by the underlying exposures mentioned in the second subparagraph is available to the originator, and the originator decides to apply the cited second subparagraph, and if the relevant information has been recorded in its internal database or information systems. If any of such information is available only for a part of the underlying exposures, the requirement must be applied only to that part of the underlying exposures for which the information is available.

VI. Specific criteria for securitisation with on-balance-sheet retention

VI.1. Credit events subject to the credit risk cover agreement 22

68. The MNB expects that, in the application of the first subparagraph of Article 26e(1) of the Securitisation Regulation, the requirement that the credit risk cover agreement must cover at least the credit events specified in the cited subparagraph does not prevent the parties from agreeing on additional credit events or stricter definitions of events defined in Chapter 4, Title II, Part Three of the CRR.

VI.2. Credit risk cover payments 23

69. The MNB expects that, in the application of Article 26e(2) of the Securitisation Regulation, if the amount of underlying exposure secured by the credit risk cover agreement is lower than the existing nominal amount of the underlying exposure, the interim and final credit risk cover payments must be calculated pro rata according to the existing nominal amount secured by the credit risk cover agreement.

70. The MNB expects that, in the application of point (b) of the second subparagraph of Article 26e(2) of the Securitisation Regulation, the phrase "where applicable" needs to be applied only if the originator has obtained permission from the competent supervisory authority to use the Internal Ratings-Based (IRB) method (hereinafter: IRB method) for determining the expected loss value for that underlying exposure, for which the assessment of the "higher amount" condition is performed, and if the rating system used for the underlying exposure has been evaluated by the competent supervisory authority accordingly with regard to the application of the IRB method.

71. The MNB expects that, in the application of Article 26e(2) of the Securitisation Regulation, the expected loss value must be calculated at the level of individual underlying exposures for which the credit event has occurred. As a deviation, the expected loss value may also be calculated at the sub-set level for retail exposures, in accordance with the regulatory technical standards supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council regarding the conditions for institutions to calculate the KIRB with respect to the underlying exposures of securitisation transactions, as per the Commission Delegated Regulation (EU) 2024/1780 of 13 March 2024.

VI.3. Debt restructuring and credit risk cover premiums 24

72. In the application of the third subparagraph of Article 26e(3) of the Securitisation Regulation, if the credit risk cover agreement covers only part of the performing securitised exposures, the MNB expects that the credit risk cover premiums payable under the credit risk cover agreement must be structured so that they depend on a portion of the existing nominal value of the performing securitised exposures covered by the credit risk cover agreement.

VI.4. Third party performing verification 25

73. Based on the MNB's expectations, in the application of Article 26e(4) of the Securitisation Regulation, the third party performing verification:
    a) has the experience and capability necessary to perform the verification, and b) does not qualify as:
    ba) a credit rating agency, bb) a third party verifying compliance with STS criteria in accordance with Article 28 of the Securitisation Regulation, bc) an entity connected to the originator, sponsor, investor, or KCGE.

74. The MNB expects that, in the application of the third subparagraph of Article 26e(4) of the Securitisation Regulation, without prejudice to the investors' right to request verification of the acceptability of any underlying exposure, the parties involved in the securitisation may agree that, in the case of securitisations containing mezzanine tranches, the sample verification process begins after the upper loss absorption limit of the first loss-absorbing transaction sub-series falls below a certain percentage of the upper loss absorption limit determined on the closing date of the transaction.

75. The MNB expects that, in the application of point (e) of the first subparagraph of Article 26e(4) of the Securitisation Regulation, the "final loss value" means the "final loss estimate presented by the originator" mentioned in the first subparagraph of Article 26e(3) of the said Regulation, if no final credit risk cover payment for the underlying exposure subject to the credit event has been made by the end of the extension period defined in the credit risk cover agreement.

VI.5. Events of early termination by the originator 26

76. The MNB expects that, in the application of point (d) of the first subparagraph of Article 26e(5) of the Securitisation Regulation, when calculating the weighted average life of the original reference portfolio of underlying exposures, time-weighting should be applied exclusively to principal repayments, and assumptions regarding prepayments or payments by the obligors of the underlying exposures related to fees or interest should not be taken into account for the calculation.

77. The MNB expects that, in the application of point (d) of the first subparagraph of Article 26e(5) of the Securitisation Regulation, if a replenishment or revolving period exists, the weighted average life must be equal to the sum of the replenishment or revolving period and the estimated weighted average life calculated at the end of the replenishment or revolving period. For this estimation, the originator must, for every securitised exposure that matures before the end of the replenishment or revolving period, adjust the planned maturity so that it equals the sum of the current maturity of the exposure and the longest permitted maturity of an exposure that can be included in the securitised portfolio during the replenishment or revolving period. These adjustments must be made as many times as necessary, if the adjusted maturity duration is shorter than the duration of the replenishment or revolving period.

78. The MNB expects that, in the application of point (b) of the first subparagraph of Article 26e(5) of the Securitisation Regulation, in the case of securities issued by the KCGE related to a credit event, the reference to the investor should be interpreted as a reference to the KCGE or any other provider of credit risk cover who entered into a credit risk cover agreement with the originator.

VI.6. Synthetic securitisation premium 27

79. The MNB expects that, in the application of Article 26e(7) of the Securitisation Regulation, when calculating the annual regulatory expected loss value for all underlying exposures for a given year, as many payment periods as correspond to one year must be taken into account, and the percentage ratio that the expected loss amount represents for the securitised exposures at the closing time of the transaction must be multiplied by the total portfolio balance of the performing securitised exposures at the beginning of that one-year period.

80. In the application of point (a) of Article 26e(7) of the Securitisation Regulation, the "fixed synthetic securitisation premium" is, in the MNB's expectation, the amount of the synthetic securitisation premium for which the originator undertakes to use it as credit enhancement in every period. It is expected that this amount must be determined in each period as the product of the fixed percentage of the existing performing portfolio balance.

81. In the application of point (d) of Article 26e(7) of the Securitisation Regulation, for originators that do not apply the IRB method, the MNB expects that the calculation of the "annual expected loss value" must be performed in accordance with the risk provisioning under applicable accounting regulations, or if this method results in a loss coverage that is not sufficiently representative of the expected future losses of the securitised exposures, the originator institution must model the expected loss values based on other internal risk parameters – such as parameters considered in its Internal Capital Adequacy Assessment Process (ICAAP) – which must be clearly defined in the transaction documentation.

82. The MNB expects that point (c) of Article 26e(7) of the Securitisation Regulation must be applied if the originator determines capital requirements for the entire set of underlying exposures using the IRB method.

83. The MNB expects that, in the application of point (a) of Article 26e(7) of the Securitisation Regulation, "payment period" means the period in which the synthetic securitisation premium was designated in accordance with the transaction documentation.

VI.7. Requirements for the provision of high-quality collateral 28

84. The MNB expects that, in the application of point (a) of the first subparagraph of Article 26e(10) of the Securitisation Regulation, collateral provided in the form of debt securities with a 0% risk weight must be considered as collateral provided in the form of debt securities to which a 0% risk weight has been assigned in accordance with Chapter 2, Title II, Part Three of the CRR.

85. The MNB expects that, in the application of point (i) of point (a) of the first subparagraph of Article 26e(10) of the Securitisation Regulation, debt securities may be considered which – regardless of their original maturity – have a remaining maturity of at most three months. If the period until the next payment date under the credit risk cover agreement is shorter than three months, the remaining maturity of the debt securities must not exceed this duration to avoid maturity mismatch between the repayment date of the debt securities and the next payment date under the credit risk cover agreement.

86. In the application of point (b) of the first subparagraph of Article 26e(10) of the Securitisation Regulation, the MNB expects that the requirement for collateral provided in the form of cash is considered fulfilled in the case of investments in credit risk-linked securities issued by the originator in accordance with Article 218 of the CRR.

VII. Final Provisions

87. The recommendation is a regulatory instrument issued without binding force for supervised financial organizations, in accordance with point (i) of paragraph (2) of Section 13 of Act CXXXIX of 2013 on the Magyar Nemzeti Bank. The content of the recommendation issued by the MNB expresses the requirements imposed by laws, principles and methods recommended for application based on the MNB's regulatory practice, as well as market standards and conventions.

88. Compliance with the recommendation is monitored and evaluated by the MNB among the financial organizations it supervises during its verification and monitoring activities, in line with general European supervisory practice.

89. The MNB draws attention to the fact that a financial organization may make the content of the recommendation part of its regulations. In this case, the financial organization is entitled to state that the provisions of its relevant regulations comply with the relevant recommendation issued by the MNB. If a financial organization wishes to include only certain parts of the recommendation in its regulations, it should avoid referencing the recommendation and apply it only with respect to the parts taken from the recommendation.

90. The MNB expects the affected financial organizations to apply this recommendation starting from September 1, 2026.

Varga Mihály signed
President of the Magyar Nemzeti Bank