Requirements common to guarantees and credit derivatives
Subject to Article 214(1), credit protection deriving from a guarantee or credit derivative shall qualify as eligible unfunded credit protection where all the following conditions are met:
the credit protection is direct;
the extent of the credit protection is clearly defined and incontrovertible;
the credit protection contract does not contain any clause, the fulfilment of which is outside the direct control of the lender, that:
would allow the protection provider to cancel the protection unilaterally;
would increase the effective cost of protection as a result of a deterioration in the credit quality of the protected exposure;
could prevent the protection provider from being obliged to pay out in a timely manner in the event that the original obligor fails to make any payments due, or when the leasing contract has expired for the purposes of recognising guaranteed residual value under Articles 134(7) and 166(4);
could allow the maturity of the credit protection to be reduced by the protection provider;
the credit protection contract is legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement.
An institution shall have conducted sufficient legal review confirming the enforceability of the unfunded credit protection in all relevant jurisdictions. It shall repeat such review as necessary to ensure continuing enforceability.