Operational criteria for recognizing the transfer of risk.

CFR · 2024-01-01 · US · Title 12

(a) (1) The exposures are not reported on the FDIC-supervised institution's consolidated balance sheet under GAAP; (2) The FDIC-supervised institution has transferred to one or more third parties credit risk associated with the underlying exposures; (3) Any clean-up calls relating to the securitization are eligible clean-up calls; and (4) The securitization does not: (i) Include one or more underlying exposures in which the borrower is permitted to vary the drawn amount within an agreed limit under a line of credit; and (ii) Contain an early amortization provision. (b) (1) The credit risk mitigant is: (i) Financial collateral; or (ii) A guarantee that meets all of the requirements of an eligible guarantee in § 324.2 except for paragraph (3) of the definition; or (iii) A credit derivative that meets all of the requirements of an eligible credit derivative except for paragraph (3) of the definition of eligible guarantee in § 324.2. (2) The FDIC-supervised institution transfers credit risk associated with the underlying exposures to third parties, and the terms and conditions in the credit risk mitigants employed do not include provisions that: (i) Allow for the termination of the credit protection due to deterioration in the credit quality of the underlying exposures; (ii) Require the FDIC-supervised institution to alter or replace the underlying exposures to improve the credit quality of the underlying exposures; (iii) Increase the FDIC-supervised institution's cost of credit

official document · source cfr-2024 · id 12:§ 324.141