RBA Securitisations Industry Forum

Communication of RBA decisions to reject repo eligibility applications

The Reserve Bank of Australia (RBA) has published information in its eligibility criteria on communicating decisions to reject repo eligibility applications or revoke repo eligibility.

When the RBA rejects an application for repo eligibility, the RBA will send a rejection letter to the applicant at the same time that the RBA publishes the rejection decision in the Outstanding applications and ineligible securities file (see the ‘Schedule of releases’ on the eligibility criteria webpage).

Should the RBA revoke repo eligibility (for example, because new information is received, existing information is reinterpreted or the RBA’s eligibility criteria is revised), the RBA will promptly send a rejection letter to the applicant and the List of eligible securities file and the Outstanding applications and ineligible securities file will each be updated accordingly the next time they are released (see the ‘Schedule of releases’ on the eligibility criteria webpage). However, a rejection letter will ordinarily not be sent where a previously eligible security changes in a way that means it no longer meets the RBA’s eligibility criteria (for example, a call notice is issued or a security’s credit rating is downgraded and no longer meets the RBA’s minimum requirements) and a rejection letter might not be sent if the RBA revokes repo eligibility due to a revision to the RBA’s eligibility criteria which has otherwise been communicated by the RBA (for example, by publication on the eligibility criteria webpage).

An applicant may appeal the RBA’s decision to reject an application for repo eligibility, or revoke repo eligibility, by emailing eligible_securities@rba.gov.au with supporting information.

Self-securitisations – remit to the collections account at least weekly

The RBA has updated Condition 16(a) in its eligibility criteria to make it clear that principal and interest collections must be required to be remitted to the issuer’s collections account at least weekly.

As previously communicated:

1. this requirement applies to any self-securitisation that the Reserve Bank first approves for repo eligibility after 31 March 2025; and
2. existing self-securitisations (i.e. self-securitisations first approved by the Reserve Bank for repo eligibility on or before 31 March 2025) that do not meet this criteria after 31 March 2025 will incur a higher margin ratio (see Margin Ratios).

Consequences of Late Securitisation Reporting and Late Notifications to the RBA

The RBA has updated its eligibility criteria and asset-backed securities maintenance requirements to make clear the potential consequences for late securitisation reporting and late notifications.

Where entities are at risk of missing the RBA’s securitisation reporting and notification deadlines, the RBA should be contacted promptly. Extensions can be requested but will generally only be granted under exceptional circumstances. Any penalties imposed, such as penalty haircuts or revocation of repo eligibility, are at the RBA’s discretion.

Late securitisation reporting

Under Condition 15(e) in the RBA’s eligibility criteria, the RBA now differentiates between late reporting marketed asset-backed securities (ABS) and late reporting self-securitisations.

• Marketed asset-backed securities will cease to be eligible if they do not report on time. Securities will remain ineligible for at least one month, until all outstanding submissions and the next month’s submission have been made.
• Self-securitisations will incur a 15 per cent penalty haircut (in the form of an ‘Additional Discount’, see Margin Ratios) if they do not report on time. The penalty haircut will remain in place until all outstanding submissions and the next month’s submission have been made. However, repo eligibility may also be revoked, including in the event of repeated or extended late submissions. The RBA will notify the Australian Prudential Regulation Authority (APRA) of any late reporting self-securitisations.

Late notifications to the RBA

The RBA has certain notification requirements relating to changes to asset-backed securities (ABS), as well as additional requirements for notifications relating to self-securitisations.

1. Marketed ABS and self-securitisations must meet certain maintenance requirements, including for legal document changes, ISIN changes, large balance changes and ratings affirmations and insurability attestations for ABS with revolving pools. Failure to meet these requirements may result in penalty haircuts or revocation of repo eligibility.
2. Condition 16(b) in the RBA’s eligibility criteria requires the ADI sponsor of a self-securitisation to submit an annual certificate to the RBA between 31 January and 31 March each year, starting in 2025. Late annual certificate submissions to the RBA may result in penalty haircuts being applied, or revocation of repo eligibility, including if the Annual Certificate is late for an extended period.
3. Condition 16(f) in the RBA’s eligibility criteria requires the ADI sponsor of a self-securitisation to notify the RBA of certain transaction changes with minimum notification periods. Failure to meet Condition 16(f) may result in penalty haircuts being applied or revocation of repo eligibility.
4. Condition 16(g) in the RBA’s eligibility criteria requires the ADI sponsor of a self-securitisation to ensure that certain information is provided to the RBA. Failure to meet Condition 16(g) may result in penalty haircuts being applied or revocation of repo eligibility.

The RBA will also notify APRA if the RBA becomes aware of any late notifications relating to a self-securitisation.

For further information please contact the Eligible Securities Team at eligible_securities@rba.gov.au.

Risk & Compliance Department
Reserve Bank of Australia
14 August 2024

Please be advised of the following scheduled maintenance on the Securitisation portals.

Production & Industry - 30 May 2024 at 9am

We do not expect any disruptions to the portals. However, should you experience any issues during this time, please contact us on ssc@rba.gov.au.

The Reserve Bank of Australia (RBA) has made changes to its Eligibility Criteria for self-securitisations.

New criteria for self-securitisations

Following two rounds of consultation with industry, the RBA has published new criteria for self-securitisations. These changes will require, among other things, any transaction document changes needed to meet the additional criteria to be completed by 31 March 2025 and ADI sponsors to complete and submit their first annual certificate to the RBA by 31 March 2025. From 1 April 2025, applications for securities issued from new self-securitisation trusts to become repo eligible will also require completion of a certificate.

Other new criteria for self-securitisations

In addition, the RBA is making two further changes to its criteria for self-securitisations.

• Remit to the collections account at least weekly
  Principal and interest collections must be remitted to the issuer’s collections account at least weekly. This requirement applies to any self-securitisation that the RBA first approves for repo eligibility after 31 March 2025. Existing self-securitisations (i.e. self-securitisations first approved by the RBA for repo eligibility on or before 31 March 2025) that do not meet this criteria after 31 March 2025 will incur a higher margin ratio (see Margin Ratios).
• BBSW fallback language
  From 1 April 2025, all self-securitisations, regardless of the date of issue, will be required to include at least one robust and reasonable and fair fallback in order to be eligible.

If any self-securitisation transaction document changes are required to meet these new requirements, please adhere to the RBA’s ABS Maintenance Requirements (including the minimum notice period of 20 day business days).

For further information please contact the Eligible Securities Team at eligible_securities@rba.gov.au.

Risk & Compliance Department
Reserve Bank of Australia
28 March 2024

Please be advised of the following scheduled maintenance on the Securitisation portals. The portals will be unavailable during these times.

Industry - 29 February from 8am to 12pm

Production - 1 March from 8am to 12pm

If you have any concerns contact us on ssc@rba.gov.au.

The Reserve Bank has made two amendments to its eligibility criteria for securities accepted for use in its domestic market operations.

Exemption from BBSW Fallback language requirement for ‘Refinancing Notes’

‘Refinancing notes’ issued on or after 1 December 2022 are now exempt from the BBSW fallback language requirement in the RBA’s eligibility criteria, if the refinancing notes are used to repay existing notes first issued before 1 December 2022 from marketed closed-pool asset-backed security (ABS) trusts.

This exemption has been granted in recognition that refinancing notes without BBSW fallback language that meet the RBA’s relevant eligibility criterion are a relatively small and diminishing share of the market, no new assets are being financed by refinancing notes, and an exemption for refinancing notes is in line with our treatment of other grandfathered securities. The exemption also recognises that some issuers could incur material costs to insert compliant BBSW fallback language into the transaction documents of marketed ABS that were first issued before 1 December 2022.

Nevertheless, as a matter of prudent risk management, the RBA strongly encourages the insertion of BBSW fallback language that complies with the RBA’s relevant eligibility criterion into transaction documents for refinancing notes that would qualify for this exemption.

Extension of minimum notice period for asset-backed security legal document changes to 20 business days (up from 10 business days)

The minimum notice period for events that include amendments to asset-backed security legal documents has been extended to 20 business days (up from 10 business days).

This minimum notice period applies to transaction document changes requiring RBA consent, RBA non-objection, and no action from the RBA.

Applications are not considered complete until all relevant documents have been submitted to the RBA. Failure to meet this notification requirement may delay the intended execution date of proposed changes and can affect repo eligibility.

For further information please contact the Eligible Securities Team at eligible_securities@rba.gov.au.

Risk & Compliance Department
Reserve Bank of Australia
5 July 2023

The Reserve Bank has updated the operational notes for domestic market operations pertaining to eligible securities, and amended the criteria for asset-backed securities (ABS) with revolving asset pools.

Eligible Securities Criteria

The eligible securities policy has been updated to be easier for market participants to navigate. There are no substantive changes to the policy, other than to ABS with revolving pools (see below). All securities that are currently eligible for repo will remain eligible.

The Reserve Bank has implemented a new form that must be completed to apply for repo eligibility. The spreadsheet form will no longer be accepted.

ABS issuers also no longer need to complete the Deal Data Registration and Amendment Form for new ABS. After the eligible securities application form is submitted, the Securitisation Support Centre (SSC) will contact the nominated Information Provider with deal setup instructions.

ABS Maintenance

The Reserve Bank has amended the requirements for issuers to maintain eligibility for ABS with revolving asset pools. These requirements are outlined in the operational notes. Issuers must submit an ABS maintenance form to the Reserve Bank at least 10 business days before one or more of the following events:

• the assets in the pool change by more than 10 per cent in any monthly reporting period;
• the transaction documents are amended; or
• a security is reissued under a new ISIN that must be made repo-eligible on the issue date.

Issuers must also provide a ratings affirmation and insurability attestation (where applicable) to the Reserve Bank annually.

Where the assets in the pool change by less than 10 per cent in any monthly reporting period, no application is required. The Reserve Bank reserves the right to request a ratings affirmation at any time.

These requirements apply to all self-securitisations and marketed ABS with revolving asset pools.

Relevant links

• Eligible securities criteria
• Eligible securities application form
• ABS maintenance
• ABS maintenance application form

Please address any questions to the eligible securities team at eligible_securities@rba.gov.au.

Risk & Compliance Department
Reserve Bank of Australia
8 November 2021

The Reserve Bank has amended the eligibility criteria for securities accepted in domestic market operations. See Robust Fallbacks Required for BBSW Securities for a summary.

All floating rate notes (FRNs) and marketed asset-backed securities issued on or after 1 December 2022, where BBSW is the relevant interest rate for the purposes of calculating coupons, must meet the following criteria in order to be eligible for purchase by the Reserve Bank under repo:

• Include at least one ‘robust’ and ‘reasonable and fair’ fallback for BBSW in the event that it permanently ceases to exist.
• A ‘robust’ fallback is one that clearly specifies the method for the calculation of interest that would apply for the purposes of calculating coupon payments. The fallback must also specify a clear and unambiguous trigger event after which the fallback would apply. Acceptable fallbacks would include those that reference AONIA (including AONIA plus or minus a fixed spread). Fallbacks that reference another benchmark interest rate may also be accepted at the Reserve Bank's discretion. A fallback waterfall may additionally include a fallback to a reference rate that might exist in the future, for example forward-looking term AONIA, subject to it being declared a significant financial benchmark by ASIC at the time the fallback is triggered.
• A ‘reasonable and fair’ fallback is one that reasonably mitigates the impact on the economic value of the security in the event the fallback is invoked. A fixed-rate fallback would not be considered reasonable and fair for the purposes of these criteria.
• The robust and reasonable and fair fallback(s) must sit above any other fallbacks that rely on collecting dealer quotes, or on discretion – whether by the issuer, the calculation agent, or any other related or third party – in the fallback waterfall.
• Include a fallback to apply in the case that BBSW is not available, in the case where it has not permanently ceased. This fallback must: clearly specify the method for determining the interest that would apply for the purposes of calculating coupon payments; and specify a clear and unambiguous trigger event after which the fallback would apply. An example of an acceptable fallback structure is that provided for the ‘No Index Cessation Effective Date with respect to BBSW’ circumstance in the 2020 ISDA IBOR Fallbacks Supplement. A fallback relying on collecting dealer quotes, or on discretion by the issuer, the calculation agent, or any other party related to the security must not sit at the top of the fallback waterfall.

All self-securitisations, regardless of the date of issue, will also be required to include at least one robust and reasonable and fair fallback in order to be eligible. The Reserve Bank will engage with self-securitisation issuers and give at least 12 months' notice before enforcing this requirement.

FRNs and marketed asset-backed securities issued before 1 December 2022 will not be subject to this requirement for eligibility. Nevertheless, the inclusion of robust and reasonable and fair fallbacks for such securities, depending on their length of time to maturity, is recommended as a matter of prudent risk management.

For further information please contact the Eligible Securities Team at eligible_securities@rba.gov.au.

Risk & Compliance Department
Reserve Bank of Australia
13 September 2021

The RBA has amended the margin arrangements for asset-backed securities (ABS) where RBA counterparties are ‘related’ to securities provided as collateral. The amendment is to the additional discount (i.e. haircut) applied to ABS when the counterparty provides an interest rate swap to the ABS trust.

Previously, a flat 3 per cent additional discount applied where the notional principal of the interest rate swap was less than or equal to 25 per cent of the value of the collateral pool. Where the share was greater than 25 per cent, no value was attributed to the proportion of the interest rate swap greater than 25 per cent.

Effective from 27 April, the additional discount will increase linearly, from 0 to 6 per cent, up to a share of 50 per cent of the value of the collateral pool. Where the share is greater than 50 per cent, no value will be attributed to the proportion of the interest rate swap greater than 50 per cent.

Table 1: Additional Discounts to the Market Value of ABS
for Interest Rate Swap Counterparties

Notional swap principal as a share of the value of the collateral pool	Percentage points
Previous policy
$$\text{≤25 per cent}$$	$$\text{3}$$
$$\text{>25 per cent}$$	$$3+\left(\frac{Notionalswapprincipal}{Collateralpool}\right)\times 100-25$$
New policy
$$\text{≤50 per cent}$$	$$\frac{6}{50}\times \left(\frac{Notionalswapprincipal}{Collateralpool}\right)\times 100$$
$$\text{>50 per cent}$$	$$6+\left(\frac{Notionalswapprincipal}{Collateralpool}\right)\times 100-50$$

Table 2: Effect of Policy Change

Interest Rate Swap Notional Value Share of Pool per cent	Additional Discount Previous Policy per cent	Additional Discount New Policy per cent	Change on Implementation percentage points
10	3	1.2	−1.8
15	3	1.8	−1.2
20	3	2.4	−0.6
25	3	3.0	0.0
30	8	3.6	−4.4
40	18	4.8	−13.2
50	28	6.0	−22.0
75	53	31.0	−22.0
100	78	56.0	−22.0

For more details, please see https://www.rba.gov.au/mkt-operations/resources/tech-notes/margin-ratios.html, or contact the Eligible Securities Team: eligible_securities@rba.gov.au.

Risk & Compliance Department
Reserve Bank of Australia
24 April 2020

Some securitised loans may have been granted repayment deferrals relating to the COVID-19 pandemic. For reporting loan-level data to the Securitisation System, issuers should follow the Australian Prudential Regulation Authority's (APRA's) approach to COVID-19 support. That is, issuers need not treat repayment holidays or deferrals as arrears or restructuring in this case.

This is consistent with the Bank's existing guidance on loan-level reporting, which provides that a loan should be flagged as performing where it is on or ahead of schedule according to the lender’s internal methodology. Beyond this, there is no requirement for loans with COVID-19 payment deferrals to be flagged in any special way in the Securitisation System.

For further information please contact the Eligible Securities Team at eligible_securities@rba.gov.au.

Risk & Compliance Department
Reserve Bank of Australia
9 April 2020

The RBA has amended the margin band that applies to new repo-eligible other asset-backed securities (ABS). The margin band is now 15 – 40 per cent (previously 15 – 20 per cent) for all residual maturities. The margin on existing eligible securities are not affected by this change. There is no change to the repo eligibility criteria for ABS.

The margin applied within this band depends on the seniority and structure of the security. Unsubordinated tranches from less structured securities will generally receive the lowest margin within the margin band. Subordinated tranches will receive higher margins. Securities that are more structured will also receive higher margins. The actual margin applied is available on request.

Other ABS includes securities backed by assets other than residential mortgages as well as securities backed by residential mortgages where less than 90 per cent of the value of the collateral pool held by the issuing trust comprises domestic, full-doc, insurable residential mortgages.

The amended margin band is available on the RBA's Margin Ratios page. For further information please contact the Eligible Securities Team at eligible_securities@rba.gov.au.

Risk & Compliance Department
Reserve Bank of Australia
23 March 2020

The RBA has amended the Ending Balance reporting guidance for RMBS, CMBS and OABS effective immediately, in light of feedback from information providers. The resubmission deadline for updating the Ending Balance where the forecast falls outside of the acceptable range has been extended from the Report Date to within five business days of the Report Date.

Hence, a trust may submit ahead of the Report Date with a forecast for the collection account Ending Balance. However, if on the Report Date this forecast falls outside the acceptable range, the trust must resubmit within five business days.

There is no change to the requirement that a valid securitisation submission be made by the Report Date. Eligibility will be revoked where no submission has been received for an eligible trust by the Report Date.

The amended reporting guidance is available on Data to be Reported.

For further information please contact the Securitisation Support Centre at Securitisation Support Centre or call 1800 919 211.