SECN 8 Criteria for credit granting

Originators, sponsors and original lenders shall apply to exposures to be securitised (unless they are trade receivables not originated in the form of a loan) the same sound and well-defined criteria for credit-granting which they apply to non-securitised exposures. To that end, the same clearly established processes for approving and (where relevant) amending, renewing and refinancing credits shall be applied.

Originators, sponsors and original lenders shall have effective systems in place to apply those criteria and processes in order to ensure credit-granting is based on a thorough assessment of the obligor’s creditworthiness taking appropriate account of factors relevant to verifying the prospect of the obligor meeting the obligor’s obligations under the credit agreement.

Where the underlying exposures of securitisations are residential loans made on or after 20 March 2014, the pool of those loans shall not include any loan that is marketed and underwritten on the premise that the loan applicant or, where applicable, intermediaries were made aware that the information provided by the loan applicant might not be verified by the lender.

Where an originator purchases a third party’s exposures for its own account and then securitises them, that originator shall verify that the entity which was, directly or indirectly, involved in the original agreement which created the obligations or potential obligations to be securitised fulfils the requirements referred to in SECN 8.3.1R (or equivalent PRA rules).

SECN 8.3.2R does not apply if:

1. (1)

   the original agreement, which created the obligations or potential obligations of the debtor or potential debtor, was entered into before 20 March 2014; and

2. (2)

   the originator that purchases a third party’s exposures for its own account and then securitises them meets the obligations that originator institutions were required to meet under Article 21(2) of Commission Delegated Regulation (EU) No 625/2014 before 1 January 2019.