Credit risk-sharing requirement.

CFR · 2024-01-01 · US · Title 12

(a) (1) Requires a participating financial institution to provide the credit enhancement necessary to enhance an eligible asset or pool to the credit quality specified by the terms and conditions of the AMA product, provided, however, that such credit enhancement results in the eligible asset or pool being at least AMA investment grade, as defined in § 1268.1; and (2) Meets the requirements of this section. (b) (2) A Bank shall document its basis for concluding that the contractual credit enhancement required from each participating financial institution with regard to a particular asset or pool will equal or exceed the credit enhancement level specified in the terms and conditions of the AMA product and determined in accordance with paragraph (b)(1) of this section. (c) (1) The participating financial institution that is providing the credit enhancement required under this paragraph (c) shall in all cases: (i) Bear the direct economic consequences of actual credit losses on the asset or pool: (A) From the first dollar of loss up to the amount of expected losses; or (B) Immediately following expected losses, but in an amount equal to or exceeding the amount of expected losses; and (ii) Fully secure its direct credit enhancement obligation in accordance with § 1266.7; and (2) The participating financial institution also may provide all or a portion of the credit enhancement, with the approval of the Bank, by: (i) Contracting with an insurance affiliate of that participating fi

official document · source cfr-2024 · id 12:§ 1268.5