BANKS ACT, 1990
DESIGNATION OF AN ACTIVITY NOT FALLING WITHIN THE MEANING OF "THE BUSINESS OF A BANK" (SECURITISATION SCHEMES) Under paragraph (cc) of the definition of "the business of a bank" in section 1 of the Banks Act, 1990 (Act No. 94 of 1990), I, Christo Floris Wiese, Registrar of Banks, hereby designate, with the approval of the Minister Finance, the activity set out in paragraph 2 of the Schedule, and which is performed in accordance with the conditions set out in paragraphs 3 to 13 of the Schedule, as an activity that does not fall within the meaning of "the business of a bank".C F WIESE,
Registrar of Banks.
SCHEDULE 1. In this Schedule, "the Act"means the Banks Act, 1990 (Act No. 94 of 1990), and any word or expression to which a meaning has been assigned in the Act shall bear such meaning and, unless the context otherwise dictates –
"associate" means an associate as defined in Accounting Statement AC. 110 issued by the South African Institute of Chartered Accountants;
"associated company", in relation to an institution other than a bank or an institution within a banking group that transfers assets to a special-purpose institution in terms of a securitisation scheme, means a subsidiary or fellow subsidiary of that institution and includes an associate; "commercial paper"means-(a)   any written acknowledgement of debt, irrespective of whether the maturity thereof is fixed or based on  a notice period, and irrespective of whether the rate at which interest is payable in respect of the debt in question is a fixed or a floating rate; 
(b) debentures or any interest-bearing written acknowledgement of debt issued for a fixed term in accordance with the provisions of  the Companies Act; and
(c)   preference shares when the special purpose institution is substantially funded therewith;but does not include bankers’ acceptances; "Commercial Paper Notice" means Government Notice No. 2172, published in Government Gazette No. 16167 on 14 December 1994; "Companies Act" means the Companies Act, 1973 (Act No. 61 of 1973); "credit-enhancement facility"means any facility or arrangement in terms of which the provider of such a facility or arrangement is obliged to absorb losses associated with the pool of assets transferred in terms of a securitisation scheme, including both first-loss credit-enhancement facilities and second-loss credit-enhancement facilities; "credit rating" means a domestic rating assigned by a credit-rating agency to commercial paper issued in respect of a securitisation scheme; "credit-rating agency" means a credit-rating agency approved by the Registrar in his/her sole discretion;"delayed payment on asset" means a delayed payment on assets that does not result from a default or potential default in respect of the underlying transactions; "domestic rating" means a local-currency domestic rating that is tiered against an assumed best possible rating, which is usually that of the national Government, and which rating does not incorporate the sovereign risks of South Africa and which gives an indication of the relative risks only within South Africa and is not comparable across different countries; "equity share capital" means equity share capital as defined in section 1 of the Companies Act; "Financial Services Board" means the board established by section 2 of the Financial Services Board Act; "Financial Services Board Act" means the Financial Services Board Act, 1990 (Act No. 97 of 1990); "first-loss credit-enhancement facility" means a credit-enhancement facility that represents the first level of credit enhancement to parties related to a securitisation scheme;"insolvency remote" means, in respect of a special-purpose institution, that the assets of such a special-purpose institution shall not be available to any institution transferring such assets to the special purpose institution in terms of a securitisation scheme, whether as a result of such transferring institution’s insolvency or otherwise; "institution"  includes a bank and any other institution within a banking group; "institutions within a banking group"  means the following institutions that may form part of a banking group:
 

(a) all banks in such group;
(b) all related entities, subsidiaries, joint ventures, or associates of such banks;
(c) the controlling company of such banks;
(d) all other subsidiaries, joint ventures and associates of such bank controlling companies; and
(e) all entities that may be directed by the Registrar, in writing;
"liquidity facility" means a facility provided in respect of a securitisation scheme in order to cover short-term deficiencies in cash flows within the securitisation scheme, resulting from, inter alia, time differences in the payment of interest and principal on the assets transferred in terms of a securitisation scheme, or market disruptions, which facility may not constitute a credit-enhancement facility; "national Government securities" means all loan stock issued by the national Government or instruments guaranteed by the national Government; "originator"  means an institution that transfers assets from its own balance sheet, including assets other than national Government securities or qualifying items, in terms of a securitisation scheme: Provided that a bank that transfers assets other than national Government securities or qualifying items, if these assets comprise 10 per cent or less of the total assets transferred in terms of a securitisation scheme, shall be regarded as-
 

(a) a repackager; or
(b) if such bank also acts as a sponsor in respect of the same securitisation scheme, as a sponsor;
 "parties related to a securitisation scheme" means a special-purpose institution, investors in such a special-purpose institution or any providers of liquidity or other facilities to such special-purpose institution;"preference shares" means, when issued by a special-purpose institution when such special-purpose institution is a company, such preference shares not forming part of the equity share capital of the special-purpose institution; "primary role" means the participation, by an institution, in a securitisation scheme as an originator, remote originator, sponsor or repackager;"qualifying items" means all loan stock listed on the Bond Exchange of South Africa, or any other loan stock listed on a financial exchange approved by the Financial Services Board;"Registrar" means the Registrar of Banks designated in terms of section 4 of the Act; "remote originator" means an institution that, whether directly or indirectly, lends money to a special-purpose institution in order for the special-purpose-institution to provide credit, other than customary credit, to a borrower;"repackager" means an institution that transfers the assets of third parties that are national Government securities or qualifying items via its balance sheet in terms of a securitisation scheme;"revolving assets" means loan facilities and other underlying transactions in terms of which debtors under such underlying transactions are permitted to vary, within an agreed limit, the amount utilised in terms of the underlying transaction, or the debtor may repay amounts in terms of the underlying transaction at its own discretion, subject, in certain circumstances, to a minimum amount per payment period or in accordance with a fixed repayment schedule; "secondary role" means the participation by an institution in a securitisation scheme as a provider of a credit-enhancement facility, a provider of a liquidity facility, an underwriter, a purchaser of senior commercial paper, a servicing agent, or a counterparty to a transaction included in the trading book of a bank; "second-loss credit-enhancement facility" means a credit-enhancement facility that represents the second and further levels of credit-enhancement to parties related to a securitisation scheme:

Provided that –

(a) such facility does not provide credit-enhancement for a disproportionate share of the risk inherent in the securitisation scheme;

(b) such facility benefits from a substantial first-loss credit-enhancement facility, that is, when the first-loss credit-enhancement facility covers some multiple of historical losses or worst-case losses estimated by way of simulation or other technique;
(c) such facility may be drawn only after the first-loss credit-enhancement facility has been exhausted;
and when there as not been compliance with the above conditions, the facility concerned shall be regarded as a first-loss credit-enhancement facility for purposes of this Schedule; "securitisation scheme" means a scheme whereby a special-purpose institution issues commercial paper and where the payments by the special purpose institution in respect of the commercial paper so issued are made from the cash flows arising from or proceeds related to the assets as consist of claims sounding in money, transferred to such special-purpose institution by an originator, a remote originator or repackager; "servicing agent" means an institution that acts as servicing agent in respect of the assets transferred to a special-purpose institution in terms of a securitisation scheme; "senior commercial paper" means commercial paper issued in terms of a securitisation scheme, the purchase of which commercial paper does not constitute providing a first-loss or second-loss credit-enhancement facility; "special-purpose institution" means a company incorporated or a trust created, insolvency remote from the institution transferring the assets in terms of a securitisation scheme, and solely for the purpose of the implementation and operation of a securitisation scheme; "sponsor" means an institution that facilitates the transfer of assets directly, that is, not from the institution’s balance sheet, into a special-purpose institution in terms of a securitisation scheme; "trading book of a bank" includes-
(a) proprietary positions in financial instruments that are held for resale or that are taken by the bank with the intention of benefiting, in the short term, from actual or expected differences between the buying and selling prices of the financial instruments, or from other price or interest-rate variations, or positions in financial instruments arising from matched principal broking, or positions taken in order to hedge other elements of the trading book;(b) exposures that are due to unsettled transactions, free deliveries and over-the-counter derivative instruments, including exposure resulting from-

(i) repurchase agreements and securities lending based on securities included in the trading book, as contemplated in paragraph (a);

(ii) resale agreements and securities-borrowing transactions;

and subject to at least the following conditions-

(i) exposures are marked to market on a daily basis;

(ii) collateral is adjusted in order to take account of material changes in the value of the underlying securities involved in the agreement or transactions in question; and

(iii) an agreement exists allowing the claims of the bank to be offset automatically and immediately against the claims of its counterparty in the event of default;

(c) exposures, in the form of fees, commission, interest, dividends and margin on exchange-traded derivatives, that are directly related to the items included in paragraph (a) or (b) above;but does not include a transaction provided for elsewhere in this Schedule; "transfer" means the sale and transfer of assets in terms of a securitisation scheme, or another method of transfer authorised by the Registrar in writing and subject to such conditions or exemptions from this Schedule as the Registrar may determine in such written authorisation; "underlying transaction" means the transaction in which an asset transferred by an institution in terms of a securitisation scheme had its origin.2. The acceptance, by a special-purpose institution, of money from the general public against the issue, by such a special-purpose institution, of commercial paper in respect of a securitisation scheme: Provided that –

(a) when an institution within a banking group acts in a primary role and/or secondary role in respect of the securitisation scheme, there shall be compliance by such an institution within a banking group with the relevant conditions set out in paragraphs 3 to 13 of this Schedule;

(b) when an institution other than an institution within a banking group acts in a primary and/or secondary role in respect of securitisation scheme, there shall be compliance with the relevant conditions set out in paragraphs 3, 12 and 13 of this Schedule;

(c) no transactions other than transactions directly relating to the securitisation scheme shall be entered into by, or on behalf of, the special-purpose institution.

3.        Conditions relating to limiting of association with assets

(a) The transfer of assets shall totally divest the transferring institution and all its associated companies and, when the transferring institution is a bank, divest any other institution within the banking group of which such a bank is a member of all rights and obligations originating from the underlying transactions and all risks and rewards in connection with the assets transferred.

(b) The special-purpose institution shall have no right of recourse against an institution acting in a primary role or any of its associated companies and, when such an institution is a bank, any other institution within the banking group of which such a bank is a member in respect of losses incurred in connection with any of the assets after the transfer thereof in terms of the securitisation scheme.

(c) An asset may not be transferred if the transfer will result in a breach of the terms of such underlying transactions.

(d) The agreement between the institution transferring assets in terms of a securitisation scheme and the special-purpose institution shall be such that, in the event of the terms of an underlying transaction being amended, the special-purpose institution, and not the transferring institution, or any of the transferring institution’s associated companies, or, when such a transferring institution is a bank, any other institution within the banking group of which such a bank is a member, will be subject to the terms so amended.

(e) A bank or another institution within a banking group of which such a bank is a member acting in a primary role may replace, at its own discretion, any asset transferred in terms of a securitisation scheme, excluding a non-performing asset, with an asset of equivalent credit quality.

(f) A bank or another institution within a banking group of which such a bank is a member acting in a primary role may repurchase assets from a special-purpose institution: Provided that –

(i) the repurchase of assets is conducted on market-related terms and conditions;

(ii) such a bank or other institution within a banking group of which such a bank is a member has no prior obligation to repurchase assets from the special-purpose institution;

(iii) when the institution acting in a primary role is a bank, the total value of assets purchased from a special-purpose institution (other than in the bank’s normal course of trading in Government securities and qualifying items), and held on the books of the bank at any point in time, does not exceed 10 per cent of the maximum value of the pool of assets held by the special-purpose institution: Provided that the Registrar may in his/her discretion allow a bank to purchase assets in excess of this limitation;

(iv) when such a bank or other institution within a banking group of which such a bank is a member repurchases non-performing assets, such a bank or other institution’s external auditors have to certify that the assets have been acquired at fair market value, which value reflects the non-performing status of the asset; and

(v) to the extent that such repurchase of assets amount to such a bank or another institution within a banking group of which such a bank is a member providing a liquidity facility, the provision in this Schedule relating to liquidity facilities shall apply in addition to the provisions of paragraph (3)(f) hereof.

(g) After a securitisation scheme has been effected, the transfer, by a bank acting in a primary role, of further assets in terms of that scheme shall be permissible only for purposes of maintaining the capital value of the portfolio of assets included in the scheme: Provided that-

(i) such a transfer of further assets may not amount to the provision of a credit-enhancement facility; and

(ii) the Registrar may in his/her own discretion allow such a bank to transfer further assets in excess of this limitation.

(h) An institution acting in a primary role and the associated companies of such an institution, and when such an institution is a bank, any institution within a banking group of which such a bank is a member may not–

(i) in the case of a special-purpose institution that is a company, acquire or hold any shares in such a special-purpose institution;

(ii) in the case of a special-purpose institution that is a trust, directly or indirectly hold any beneficial interest or be a beneficiary of such a special-purpose institution;

(iii) in the case of special-purpose institution that is a company or a trust directly or indirectly, exercise control over such a special-purpose institution.

(i) The board of directors or body of trustees, as the case may be, of a special-purpose institution shall be independent of the institution acting in a primary role and, whenever such an institution is a bank, of any other institution within a banking group of which such a bank is a member: Provided that an institution acting in a primary role may appoint one director to the board of directors, which board of directors should consist of not less than three members.

(j) The name of the special-purpose institution shall not include the name of the bank acting in a primary role, or imply any association with such a bank.

4.        Conditions relating to credit-enhancement facilities

(a) A bank or another institution within a banking group of which such a bank is a member may provide, notwithstanding the fact that such a bank or other institution is also acting in a primary role, a credit-enhancement facility in respect of a securitisation scheme: Provided that-

(i) there is no recourse to the bank or such other institution within a banking group beyond the fixed contractual obligations provided for in the facility;

(ii) subject to reasonable qualifying conditions, parties related to a securitisation scheme or a person on behalf of these parties has the unequivocal right to select an alternative party to provide a credit-enhancement facility;

(iii) the credit-enhancement facility is documented in a manner that separates such a facility from any other facility provided by the bank or other institution within the banking group concerned;

(iv) the details of the credit-enhancement are disclosed in the prospectus issued in respect of the securitisation scheme.

(b) A first-loss credit-enhancement facility for purposes of the calculation of a bank’s prescribed capital requirement shall be treated as an impairment of the bank’s primary capital.

(c) A second-loss credit-enhancement facility for purposes of calculation of a bank’s prescribed capital requirement shall be treated as a direct credit substitute, the face amount of the facility attracting a credit-conversion factor of 100 per cent and a risk-weighting of 100 per cent.

(d) The amount of capital held by a bank in terms of paragraphs 4(b) and 4(c) above shall be limited to the amount of capital that the bank would have been required to hold in respect of all the assets transferred had it not been for the securitisation scheme.

(e) A bank may provide a first-loss credit-enhancement facility, together with a second-loss credit-enhancement facility: Provided that –

(i) the first- and second-loss credit-enhancement facilities are separately documented;

(ii) the bank can demonstrate that the separate first-loss credit-enhancement facility provides substantial protection to a second-loss credit-enhancement facility.

When there is not compliance with the above conditions, the first-loss credit-enhancement facility, together with the second-loss credit-enhancement facility, shall be treated as a first-loss credit-enhancement facility for capital-adequacy purposes.

(f) A bank or an institution within a banking group of which such a bank is a member acting in a primary role may provide credit enhancements in terms the provisions of paragraph 4 only at the commencement of the securitisation scheme.

5.        Conditions relating to liquidity facilities

(a) A bank or another institution within a banking group of which such a bank is a member acting in a primary role as repackager or sponsor (excluding such a bank or other institution acting as an originator or a remote originator) may provide a liquidity facility (other than a short-term liquidity facility) in respect of such a securitisation scheme: Provided that-

(i) there is no recourse to the bank or such other institution within a banking group beyond the fixed contractual obligations provided for in the facility;

(ii) subject to reasonable qualifying conditions, parties related to a securitisation scheme or a person on behalf of these parties has the unequivocal right to select an alternative party to provide a liquidity facility;

(iii) the liquidity facility is documented in a manner that clearly distinguishes such a facility from any other facility provided by the bank or such other institution within the banking group concerned;

(iv) the liquidity facility may be reduced or terminated at the instance of the bank or such other institution within the banking group concerned should a specified event relating to a deterioration of asset quality occur;

(v) the liquidity facility includes either a reasonable asset-quality test to ensure that the utilisation of such a facility would not cover deteriorated or defaulted assets or a term requiring the termination or reduction of the facility for a specified decline in asset quality;

(vi) the liquidity facility clearly identifies and limits the conditions for utilisation and, in particular, states that the facility may not be utilised as permanent revolving facility, in order to provide credit enhancement or cover losses sustained in respect of the securitisation scheme;

(vii) the utilisation of the liquidity facility is effected by the special-purpose institution, and not directly by the investors;

(viii) utilisation of the liquidity facility may not be subordinated to the interest of investors in the securitisation scheme: Provided that the utilisation of the liquidity facility may be subordinated to the utilisation of other liquidity facilities whenever a tiered liquidity facility is applied to a securitisation scheme;

(ix) payment of any fee or other income in respect of the liquidity facility may not be further subordinated or, subject to deferral or waiver, beyond what is explicitly provided for in the order of priority of the payment-entitlement provisions of the securitisation scheme;

(x) the salient features of the liquidity facility have to be disclosed in the prospectus issued in respect of the securitisation scheme;

(xi) the prospectus issued in respect of the securitisation scheme contains a clear and unequivocal statement that-

(aa) the obligations of the bank or such other institution within the banking group concerned in respect of a liquidity facility do not extend beyond the salient features disclosed in accordance with paragraph 5(a)(xi) above; and

(bb) the bank or other such other institution within the banking group concerned will not support the securitisation scheme beyond the obligations in paragraph 5(a)(xii)(aa) above.

(b) If a bank or another institution within a banking group of which such a bank is a member acting as a servicing agent, repackager or sponsor in respect of a securitisation scheme that provides a liquidity facility in respect of such a securitisation scheme complies with the conditions contained in paragraphs 5(a) above, the standard treatment of liquidity facilities in the Regulations relating to Banks will apply.

(c) A bank or another institution within a banking group of which such a bank is a member acting in a primary role or as a servicing agent in respect of a securitisation scheme may provide a short-term liquidity facility in respect of such a securitisation scheme: Provided that there is compliance with the provisions of paragraph 5(a) above.

(d) If a bank that provides liquidity facilities in respect of a securitisation scheme does not comply with the conditions set out in this paragraph, the liquidity facility concerned shall be deemed, for purposes of this Schedule, to be a first-loss credit-enhancement facility on the balance sheet of the bank concerned.

6.        Conditions relating to underwriting

(a) A bank acting as an originator or a remote originator in respect of a securitisation scheme may act as underwriter in respect of such scheme: Provided that-

(i) the assets securitised shall not be regarded as being transferred from the bank’s balance sheet until at least 90 per cent of the total debt raised by the special-purpose institution, other than debt that is regarded as credit-enhancement facilities in terms of this Schedule, has been issued to third parties;

(ii) once the assets are regarded as having been transferred from the bank’s balance sheet in accordance with paragraph 6(a)(i) above, any securities held in excess of 90 per cent of the total debt raised shall be regarded as a second-loss credit-enhancement facility for purposes of this Schedule.

(b) A bank acting as a sponsor or a repackager in respect of a securitisation scheme may act as underwriter in respect of such scheme: Provided that, at the end of the underwriting concession period-

(i) any holdings of senior commercial paper to which a credit-rating agency has assigned a credit rating of worse than BBB or the equivalent thereof shall be regarded as a second-loss credit-enhancement facility for purposes of this Schedule;

(ii) any holdings of senior commercial paper to which a credit-rating agency has assigned a credit rating of BBB or better or the equivalent thereof shall not be regarded as a second-loss credit-enhancement facility and shall be treated in accordance with paragraph 7 of this Schedule;

(iii) any holdings of senior commercial paper to which a credit-rating agency has not assigned a credit rating shall be regarded as a second-loss credit-enhancement facility for purposes of this Schedule.

7. Conditions relating to the purchase of senior commercial paper

(a) Notwithstanding anything to the contrary contained in the Regulations relating to Banks, the purchase, by a bank, notwithstanding the fact that such a bank is also acting in a primary role, of senior commercial paper to which a credit-rating agency has assigned a credit rating shall attract the following risk weightings when purchased by a bank:

(i) senior commercial paper rated AAA to AA- or the equivalent thereof shall attract a risk weighting of 20 per cent;

(ii) senior commercial paper rated A+ to A- or the equivalent thereof shall attract a risk weighting of 50 per cent;

(iii) senior commercial paper rated BBB+ to BBB- or the equivalent thereof shall attract a risk weighting of 100 per cent;

(iv) senior commercial paper rated BB+ to BB- or the equivalent thereof shall attract a risk weighting of 150 per cent;

(v) senior commercial paper rated B+ or below, or the equivalent thereof, shall be regarded as a credit-enhancement facility for purposes of this Schedule.

(b) The purchase, by a bank, notwithstanding the fact that such a bank is also acting in a primary role, of senior commercial paper to which a credit-rating agency has not assigned a credit rating shall attract the risk weighting applicable to the underlying asset securitised: Provided that, should the underlying asset securitised comprise assets that attract different risk weightings, the purchase of the unrated commercial paper shall attract the risk weighting accorded to the assets with the highest risk weighting.

8.        Conditions relating to servicing

(a) A bank or another institution within a banking group, notwithstanding the fact that a such bank or other institution is acting in a primary role, may undertake the role of servicing agent in respect of a securitisation scheme: Provided that –

(i) a formal servicing agreement is in place, which agreement has to specify the services to be provided and the standard for the performance of these services;

(ii) a confirmation is included in the prospectus that the servicing agent is under no obligation to fund payments owed in respect of a securitisation scheme, absorb losses incurred in respect of the assets, or otherwise recompense investors for losses incurred in respect of a securitisation scheme;

(iii) the servicing agent may withdraw, at its own discretion and subject to a reasonable period of notice, from its commitments as servicing agent;

(iv) services are provided in accordance with market-related terms and conditions (including remuneration).

(b) If payments due in terms of an underlying transaction are made by the agency of the bank that acted in a primary role, or of any other institution within the banking group of which such a bank is a member, the bank or such other institution may not transfer any funds to the special-purpose institution in respect of such payments unless such payments have actually been received from the debtor in terms of the underlying transaction: Provided that, should such funds be remitted prior to actual receipt thereof, such remittance shall be treated as a separate liquidity facility in terms of paragraph 6 of this Schedule.

(c) Paragraph (b) should not be construed as precluding the provision of a short-term advances by the servicing agent, at the sole discretion of the servicing agent, in order to cover an unexpected shortfall arising from delayed payments on assets.

(d) Payment of any fee or other income in respect of a bank or other institution within a banking group acting as a servicing agent may not be further subordinated, or be subject to deferral or waiver, beyond what is explicitly provided for in the order of priority of the payment-entitlement provisions of the securitisation scheme.

9.        Conditions relating transactions included in the trading book of a bank

(a) A bank, including a bank acting in a primary role, may enter into transactions included in the trading book of a bank with a special-purpose institution: Provided that-

(i) there is no recourse to the bank beyond the fixed contractual obligations provided for in the transaction included in the trading book of a bank;

(ii) there is no obligation on the bank to enter into a transaction included in the trading book of a bank with the special-purpose institution;

(iii) the transactions included in the trading book of a bank are entered into in accordance with market-related terms and conditions;

(iv) the transactions included in the trading book of a bank do not involve the acquisition of commercial paper issued by the special-purpose institution, or assets, or beneficial interest in assets, held by the special-purpose institution in relation to a securitisation scheme, except as otherwise provided for in this Schedule.

(b) If a bank that enters into transactions included in the trading book of a bank with a special-purpose institution in respect of a securitisation scheme complies with the conditions contained in paragraphs 10(a) above, the standard treatment of such transactions in the Regulations relating to Capital-adequacy Requirements ("CAR") for Banks’ Trading Activities in Financial Instruments shall apply.

(c) If a bank that enters into a transaction included in the trading book of a bank with a special-purpose institution in respect of a securitisation scheme does not comply with the conditions set out in this paragraph, the transaction concerned shall be deemed, for purposes of this Schedule, to be a first-loss credit-enhancement facility.

10.       Conditions relating to the pool of assets transferred

(a) The assets transferred in terms of a securitisation scheme may consist of assets that are not of a homogeneous nature: Provided that a predetermined ratio between the different classes of asset comprising such a portfolio shall be maintained throughout the existence of the securitisation scheme in question.

(b) The Registrar may authorise, subject to such conditions as he/she may determine, that a predetermined ratio between the different classes of asset comprising the portfolio not to be maintained throughout the existence of the securitisation scheme in question.

11.    Conditions relating to the securitisation of revolving assetsA bank (or institution within a banking group) acting as an originator or a remote originator in respect of a securitisation scheme involving the ongoing transfer of revolving assets shall-

(a) apply a credit-conversion factor of 10 per cent and the risk-weighting attributable to the revolving assets concerned, to the notional amount of the revolving assets transferred to the special-purpose institution; and

(b) the Registrar may approve, subject to such conditions as he/she may provide at his/her sole discretion, the application of a lower credit-conversion factor to the notional amount of the revolving assets transferred to the special-purpose institution.

12. Conditions relating to the issue of commercial paperNotwithstanding anything to the contrary contained in law, whether in statute or otherwise, a special-purpose institution may issue commercial paper for purposes of a securitisation scheme only subject to the following conditions:

(a) Commercial paper may-

(i) be issued or transferred only in minimum denominations equal to or greater than R1 million; unless the commercial paper is-

(aa) listed on a recognised financial exchange;

(bb) endorsed by a bank;

(cc) issued for a period of longer than five years; or

(dd) backed by an explicit national Government guarantee,

(ii) be issued only by a juristic person authorised by the Registrar, in writing, to issue commercial paper pursuant to a securitisation scheme in accordance with the provisions of this Schedule and subject to such other conditions as the Registrar may determine in such written authorisation.

(b) A special-purpose institution issuing commercial paper pursuant to a securitisation scheme shall, in a placing document or prospectus relating to such issue of commercial paper, disclose at least the following information:

(i) the name of the special-purpose institution;

(ii) the name of the auditor of the issuer;

(iii) the total amount of commercial paper to be issued by the special-purpose institution;

(iv) all other information that may reasonably be necessary to enable the lender to ascertain the nature of the financial and commercial risk of his/her investment;

(v) whether or not the particular issue is listed;

(vi) a description of the assets, the cash flows arising from which or proceeds related to which, are utilised for the payments by the special-purpose institution in respect of the commercial paper issued by the special purpose institution in respect of a securitisation scheme; and

(vii) confirmation by the auditor of the special-purpose institution that the issue of commercial paper pursuant to a securitisation scheme complies in all respects with the relevant provisions of this Schedule.

(c)     (i) A placing document or prospectus relating to the issue of commercial paper pursuant to a securitisation scheme shall-

(aa) in the case of the special-purpose institution being a company, be signed by two directors of such a company; or

(bb) in the case of the special purpose institution being a juristic person other than a company, be signed by two senior officials of such a juristic person.

(ii) When a placing document or prospectus has been signed by the persons provided in paragraph 12(c)(i) above, such signatories shall be deemed to have authorised the issue of such a placing document or prospectus.

(iii) Every signature to a placing document or prospectus shall be dated, and the latest of such dates shall be deemed to be the date of the placing document or prospectus.

(d) On every certificate issued in respect of commercial paper issued pursuant to a securitisation scheme shall be disclosed at least the information prescribed in paragraphs 12(b)(i) and 12(b)(vii) above.

13.     Conditions relating to disclosure

(a) The board of directors or the trustee, as the case may be, of the special-purpose institution shall appoint an auditor who, in addition to his/her normal duties as auditor, shall be required-

(i) to satisfy himself/herself that, on the basis of the information presented to him/her by the special-purpose institution, there will be compliance with the relevant provisions of this Schedule with regard to the conduct of the securitisation scheme; and

(ii) if such an auditor has so satisfied himself/herself, to furnish a statement to the effect, which statement shall be included in the prospectus that is to be issued with regard to the securitisation scheme.

(b) The Registrar may prescribe additional disclosure requirements in respect of securitisation schemes.

14.     Conditions relating to non-compliance

(a) If, in the execution of a securitisation scheme, there is not compliance, by a bank acting as an originator, remote originator or repackager, with any of the conditions set out in this Schedule, the assets transferred in terms of that scheme by such an institution, shall for purposes of the calculation of such a bank’s capital-adequacy requirement, be reflected as assets on the balance sheet of the bank concerned.

(b) Chapter VIII of the Banks Act shall apply when a special-purpose institution effects a securitisation scheme that is not in compliance with this Schedule.