Article 5
Criteria for setting the level of the triggers referred to in Article 26c(5), third subparagraph, of Regulation (EU) 2017/2402
The parties to the credit protection agreement shall set the thresholds for the performance-related triggers referred to in Article 26c(5), third subparagraph, of Regulation (EU) 2017/2402 at a level which ensures that all of the following criteria are met:
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(a) |
the triggers are activated before the tranches providing credit protection have been amortised to an extent that those tranches cannot absorb significant losses occurring in the last part of the maturity of the transaction; |
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(b) |
in relation to backward-looking triggers, the effectiveness of those triggers has been tested in a back-loaded loss distribution scenario; |
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(c) |
where the originator applies Part Three, Title II, Chapter 5 of Regulation (EU) No 575/2013 to determine the own funds requirements for its exposure to the securitisation, both the calculation of the lifetime expected losses and the assumptions to be made under a back-loaded loss distribution scenario are consistent with those used for the significant and commensurate risk transfer assessment under Article 245 of that Regulation. |