---
kind: "section"
citation: "12 C.F.R. § 324.141"
title: "12"
number: "324.141"
heading: "Operational criteria for recognizing the transfer of risk."
url: "https://uscodex.org/cfr/12/324.141"
---

# §324.141. Operational criteria for recognizing the transfer of risk.

- (a) **Operational criteria for traditional securitizations.** An FDIC-supervised institution that transfers exposures it has originated or purchased to a securitization SPE or other third party in connection with a traditional securitization may exclude the exposures from the calculation of its risk-weighted assets only if each of the conditions in this [paragraph (a)](#a) is satisfied. An FDIC-supervised institution that meets these conditions must hold risk-based capital against any securitization exposures it retains in connection with the securitization. An FDIC-supervised institution that fails to meet these conditions must hold risk-based capital against the transferred exposures as if they had not been securitized and must deduct from common equity tier 1 capital any after-tax gain-on-sale resulting from the transaction. The conditions are:
  - (1) The exposures are not reported on the FDIC-supervised institution's consolidated balance sheet under GAAP;
  - (2) The FDIC-supervised institution has transferred to one or more third parties credit risk associated with the underlying exposures;
  - (3) Any clean-up calls relating to the securitization are eligible clean-up calls; and
  - (4) **The securitization does not—**
    - (i) Include one or more underlying exposures in which the borrower is permitted to vary the drawn amount within an agreed limit under a line of credit; and
    - (ii) **Contain an early amortization provision.**
- (b) **Operational criteria for synthetic securitizations.** For synthetic securitizations, an FDIC-supervised institution may recognize for risk-based capital purposes under this subpart the use of a credit risk mitigant to hedge underlying exposures only if each of the conditions in this [paragraph (b)](#b) is satisfied. An FDIC-supervised institution that meets these conditions must hold risk-based capital against any credit risk of the exposures it retains in connection with the synthetic securitization. An FDIC-supervised institution that fails to meet these conditions or chooses not to recognize the credit risk mitigant for purposes of this section must hold risk-based capital under this subpart against the underlying exposures as if they had not been synthetically securitized. The conditions are:
  - (1) **The credit risk mitigant is—**
    - (i) Financial collateral; or
    - (ii) A guarantee that meets all of the requirements of an eligible guarantee in [§ 324.2](/cfr/12/324.2.md) except for [paragraph (3)](#b-3) of the definition; or
    - (iii) A credit derivative that meets all of the requirements of an eligible credit derivative except for [paragraph (3)](#b-3) of the definition of eligible guarantee in [§ 324.2](/cfr/12/324.2.md).
  - (2) The FDIC-supervised institution transfers credit risk associated with the underlying exposures to third parties, and the terms and conditions in the credit risk mitigants employed do not include provisions that:
    - (i) Allow for the termination of the credit protection due to deterioration in the credit quality of the underlying exposures;
    - (ii) Require the FDIC-supervised institution to alter or replace the underlying exposures to improve the credit quality of the underlying exposures;
    - (iii) Increase the FDIC-supervised institution's cost of credit protection in response to deterioration in the credit quality of the underlying exposures;
    - (iv) Increase the yield payable to parties other than the FDIC-supervised institution in response to a deterioration in the credit quality of the underlying exposures; or
    - (v) Provide for increases in a retained first loss position or credit enhancement provided by the FDIC-supervised institution after the inception of the securitization;
  - (3) The FDIC-supervised institution obtains a well-reasoned opinion from legal counsel that confirms the enforceability of the credit risk mitigant in all relevant jurisdictions; and
  - (4) **Any clean-up calls relating to the securitization are eligible clean-up calls.**
- (c) **Due diligence requirements for securitization exposures.**
  - (1) Except for exposures that are deducted from common equity tier 1 capital and exposures subject to [§ 324.142(k)](/cfr/12/324.142.md?p=k), if an FDIC-supervised institution is unable to demonstrate to the satisfaction of the FDIC a comprehensive understanding of the features of a securitization exposure that would materially affect the performance of the exposure, the FDIC-supervised institution must assign a 1,250 percent risk weight to the securitization exposure. The FDIC-supervised institution's analysis must be commensurate with the complexity of the securitization exposure and the materiality of the position in relation to regulatory capital according to this part.
  - (2) An FDIC-supervised institution must demonstrate its comprehensive understanding of a securitization exposure under [paragraph (c)(1)](#c-1) of this section, for each securitization exposure by:
    - (i) Conducting an analysis of the risk characteristics of a securitization exposure prior to acquiring the exposure and document such analysis within three business days after acquiring the exposure, considering:
      - (A) Structural features of the securitization that would materially impact the performance of the exposure, for example, the contractual cash flow waterfall, waterfall-related triggers, credit enhancements, liquidity enhancements, fair value triggers, the performance of organizations that service the position, and deal-specific definitions of default;
      - (B) Relevant information regarding the performance of the underlying credit exposure(s), for example, the percentage of loans 30, 60, and 90 days past due; default rates; prepayment rates; loans in foreclosure; property types; occupancy; average credit score or other measures of creditworthiness; average loan-to-value ratio; and industry and geographic diversification data on the underlying exposure(s);
      - (C) Relevant market data of the securitization, for example, bid-ask spreads, most recent sales price and historical price volatility, trading volume, implied market rating, and size, depth and concentration level of the market for the securitization; and
      - (D) For resecuritization exposures, performance information on the underlying securitization exposures, for example, the issuer name and credit quality, and the characteristics and performance of the exposures underlying the securitization exposures; and
    - (ii) On an on-going basis (no less frequently than quarterly), evaluating, reviewing, and updating as appropriate the analysis required under this section for each securitization exposure.

## Notes

### Authority

Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233, 105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note), Pub. L. 115-174; section 4014 § 201, Pub. L. 116-136, 134 Stat. 281 (15 U.S.C. 9052).

### Source

Source: 78 FR 55471, Sept. 10, 2013, unless otherwise noted.