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1. The credit protection agreement shall at least cover the following credit events:

(a) where the transfer of risk is achieved by the use of guarantees, the credit events referred to in point (a) of Article 215(1) of Regulation (EU) No 575/2013;

(b) where the transfer of risk is achieved by the use of credit derivatives, the credit events referred to in point (a) of Article 216(1) of Regulation (EU) No 575/2013. All credit events shall be documented. Forbearance measures within the meaning of Article 47b of Regulation (EU) No 575/2013 that are applied to the underlying exposures shall not preclude the triggering of eligible credit events.

2. The credit protection payment following the occurrence of a credit event shall be calculated based on the actual realised loss suffered by the originator or the original lender, as worked out in accordance with their standard recovery policies and procedures for the relevant exposure types and recorded in their financial statements at the time the payment is made. The final credit protection payment shall be payable within a specified period of time after the debt workout for the relevant underlying exposure where the debt workout has been completed before the scheduled legal maturity or early termination of the credit protection agreement. An interim credit protection payment shall be made at the latest six months after the occurrence of a credit event as referred to in paragraph 1 in cases where the debt workout of the losses for the relevant underlying exposure has not been completed by the end of that six-month period. The interim credit protection payment shall be at least the higher of the following:

(a) the expected loss amount that is equivalent to the impairment recorded by the originator in its financial statements in accordance with the applicable accounting framework at the time the interim payment is made on the assumption that the credit protection agreement does not exist and does not cover any losses;

(b) where applicable, the expected loss amount as determined in accordance with Chapter 3 of Title II of Part Three of Regulation (EU) No 575/2013. Where an interim credit protection payment is made, the final credit protection payment referred to in the first subparagraph shall be made in order to adjust the interim settlement of losses to the actual realised loss. The method for the calculation of interim and final credit protection payments shall be specified in the credit protection agreement. The credit protection payment shall be proportional to the share of the outstanding nominal amount of the corresponding underlying exposure that is covered by the credit protection agreement.

The right of the originator to receive the credit protection payment shall be enforceable. The amounts payable by investors under the credit protection agreement shall be clearly set out in the credit protection agreement and limited. It shall be possible to calculate those amounts in all circumstances. The credit protection agreement shall clearly set out the circumstances under which investors shall be required to make payments. The third-party verification agent referred to in paragraph 4 shall assess whether such circumstances have occurred. The amount of the credit protection payment shall be calculated at the level of the individual underlying exposure for which a credit event has occurred.

3. The credit protection agreement shall specify the maximum extension period that shall apply for the debt workout for the underlying exposures in relation to which a credit event as referred to in paragraph 1 has occurred, but where the debt workout has not been completed upon the scheduled legal maturity or early termination of the credit protection agreement. Such an extension period shall not be longer than two years. The credit protection agreement shall provide that, by the end of that extension period, a final credit protection payment shall be made on the basis of the originator’s final loss estimate that would have to be recorded by the originator in its financial statements at that time on the assumption that the credit protection agreement does not exist and does not cover any losses. In the event that the credit protection agreement is terminated, the debt workout shall continue in respect of any outstanding credit events that occurred prior to that termination in the same way as that described in the first subparagraph.

The credit protection premiums to be paid under the credit protection agreement shall be structured as contingent on the outstanding nominal amount of the performing securitised exposures at the time of the payment and reflect the risk of the protected tranche. For those purposes, the credit protection agreement shall not stipulate guaranteed premiums, upfront premium payments, rebate mechanisms or other mechanisms that may avoid or reduce the actual allocation of losses to the investors or return part of the paid premiums to the originator after the maturity of the transaction. By way of derogation from the third subparagraph of this paragraph, upfront premium payments shall be allowed, provided State aid rules are complied with, where the guarantee scheme is specifically provided for in the national law of a Member State and benefits from a counter-guarantee of any of the entities listed in points (a) to (d) of Article 214(2) of Regulation (EU) No 575/2013. The transaction documentation shall describe how the credit protection premium and any note coupons, if any, are calculated in respect of each payment date over the entire life of the securitisation.

The rights of the investors to receive credit protection premiums shall be enforceable.

4. The originator shall appoint a third-party verification agent before the closing date of the transaction. For each of the underlying exposures for which a credit event notice is given, the third party verification agent shall verify, as a minimum, all of the following:

(a) that the credit event referred to in the credit event notice is a credit event as specified in the terms of the credit protection agreement;

(b) that the underlying exposure was included in the reference portfolio at the time of the occurrence of the credit event concerned;

(c) that the underlying exposure met the eligibility criteria at the time of its inclusion in the reference portfolio;

(d) where an underlying exposure has been added to the securitisation as a result of a replenishment, that such a replenishment complied with the replenishment conditions;

(e) that the final loss amount is consistent with the losses recorded by the originator in its profit and loss statement;

(f) that, at the time the final credit protection payment is made, the losses in relation to the underlying exposures have correctly been allocated to the investors.

The third-party verification agent shall be independent from the originator and investors, and, where applicable, from the SSPE and shall have accepted the appointment as third-party verification agent by the closing date of the transaction. The third-party verification agent may perform the verification on a sample basis instead of on the basis of each individual underlying exposure for which credit protection payment is sought. Investors may, however, request the verification of the eligibility of any particular underlying exposure where they are not satisfied with the sample-basis verification. The originator shall include a commitment in the transaction documentation to provide the third-party verification agent with all the information necessary to verify the requirements set out in the first subparagraph.

5. The originator may not terminate a transaction prior to its scheduled maturity for any other reason than any of the following events:

(a) the insolvency of the investor;

(b) the investor’s failures to pay any amounts due under the credit protection agreement or a breach by the investor of any material obligation laid down in the transaction documents;

(c) relevant regulatory events, including:

(i) relevant changes in Union or national law, relevant changes by competent authorities to officially published interpretations of such laws, where applicable, or relevant changes in the taxation or accounting treatment of the transaction that have a material adverse effect on the economic efficiency of a transaction, in each case compared with that anticipated at the time of entering into the transaction and which could not reasonably be expected at that time;

(ii) a determination by a competent authority that the originator or any affiliate of the originator is not or is no longer permitted to recognise significant credit risk transfer in accordance with Article 245(2) or (3) of Regulation (EU) No 575/2013 in respect of the securitisation;

(d) the exercise of an option to call the transaction at a given point in time (time call), when the time period measured from the closing date of the transaction is equal to or greater than the weighted average life of the initial reference portfolio at the closing date of the transaction;

(e) the exercise of a clean-up call option as defined in point (1) of Article 242 of Regulation (EU) No 575/2013;

(f) in the case of unfunded credit protection, the investor no longer qualifies as an eligible protection provider in accordance with the requirements set out in paragraph 8.