Decision (EU) 2015/5 of the European Central Bank of 19 November 2014 on the implementation of the asset-backed securities purchase programme (ECB/2014/45)

Article 1

Establishment and scope of the ABSPP

The ABSPP, under which the ECB shall purchase eligible ABS within the meaning of Article 2 and in accordance with the provisions of this Decision, is hereby established. Under the ABSPP, the ECB may instruct its agents to purchase eligible ABS on its behalf in the primary and secondary markets from eligible counterparties within the meaning of Article 4.

Article 2

Eligibility criteria for the outright purchase of ABS

ABS shall be eligible for outright purchase under the ABSPP provided that they satisfy the following eligibility criteria:

• (1) The ABS have a credit quality assessment in compliance with, at a minimum, credit quality step 3 in the Eurosystem's harmonised rating scale ([^E0001]), expressed in the form of at least two public credit ratings provided by any two External Credit Assessment Institutions (ECAIs) accepted within the Eurosystem Credit Assessment Framework (ECAF).

• (2) Other than as provided in point 1 above and point 9 below, the ABS fulfil the eligibility criteria applicable to ABS submitted as collateral for Eurosystem monetary policy operations as laid down in Guideline ECB/2014/60 ([^E0002]).

• (3) Where the ABS do not have a credit quality assessment in compliance with at least credit quality step 2 in the Eurosystem's harmonised rating scale, expressed in the form of at least two public credit ratings provided by any two ECAIs accepted within the ECAF, the ABS must, in addition to fulfilling the requirements of point 2, fulfil the eligibility criteria applicable to ABS submitted as collateral for Eurosystem monetary policy operations pursuant to Article 3 of Guideline ECB/2014/31 ([^E0003]).

• (4) No less than 90 % of the obligors of the cash-flow generating assets backing the ABS are classified as private sector non-financial corporations ([^E0004]) or natural persons, measured by reference to the outstanding principal amount of the cash-flow generating assets attributable to such obligors.

• (5) No less than 95 % of:
• (a) the outstanding principal amount of the cash-flow generating assets backing the ABS issue is denominated in euro;
• (b) any properties securing the cash-flow generating assets backing an ABS issue of residential mortgage-backed securities (RMBS) or commercial mortgage-backed securities (CMBS) are located in the euro area, measured by reference to the outstanding principal amount of the cash-flow generating assets attributable to such properties; and
• (c) the obligors of the cash-flow generating assets backing the ABS issue (other than ABS issues of RMBS and CMBS described under point (b)), measured by reference to the outstanding principal amount of the cash-flow generating assets attributable to such obligors, are incorporated or resident, as applicable, in the euro area.

• (6) The issuer of the ABS is established in the euro area.

• (7) A tranche of ABS (with the same or fungible International Securities Identification Number (ISIN)) which, at the time assessed by the ECB for potential purchase in accordance with Article 3, was retained in full by the originator or entities with which it has close links ([^E0005]) will be eligible for purchase under the ABSPP if an external investor without a close link to the originator (with the exception of a Eurosystem central bank acting outside the framework of the ABSPP) also purchases part of that tranche of ABS (with the same or fungible ISIN).

• (8) Where the obligors of the cash-flow generating assets backing an ABS issue are incorporated or resident in Greece or Cyprus, the minimum rating level set out in point 1 shall not apply to those ABS provided that they are subject to the purchase limit specified in Article 5(2) and satisfy all other applicable eligibility criteria for purchase under the ABSPP and all of the following additional requirements:
• (a) the Eurosystem's minimum credit quality threshold used in determining the eligibility as collateral of marketable debt instruments issued or guaranteed by the Greek or Cypriot governments is not applied pursuant to Article 8(2) of Guideline ECB/2014/31;
• (b) the ABS have two public credit ratings from any two ECAIs accepted within the ECAF at the maximum achievable rating level for ABS issues in the relevant Member State;
• (c) the structure of the ABS issue incorporates current credit enhancement (such as the credit enhancement provided by all tranches of the ABS issue which are subordinated to the ABS tranche eligible for purchase) equal to a minimum of 25 % of the current principal amount outstanding of all tranches of the ABS issue;
• (d) investor reports are available and the ABS can be modelled using standard third party ABS cash-flow modelling tools, as assessed by the ECB;
• (e) the best available credit quality assessment of each of the following counterparties in the ABS issue (if relevant), with the exception of the servicer, complies with a minimum of credit quality step 3 in the Eurosystem's harmonised rating scale, expressed in the form of at least one public credit rating from any single ECAI accepted within the ECAF:
• (i) any issuer account bank;
• (ii) any issuer account bank guarantor;
• (iii) any liquidity facility provider;
• (iv) any hedge counterparty;
• (v) the principal paying agent; and
• (vi) any guaranteed investment contract provider;
• (f) a back-up servicer for the ABS issue has been appointed.

• (9) The requirements set out in Article 77 of Guideline ECB/2014/60 shall not apply to ABS mezzanine tranches that are only eligible for purchase under the ABSPP if they:
• (a) are secured by a guarantee:
• (i) meeting the requirements for guarantees of marketable assets as set out in Articles 114, 115, 117 and 118 of Part Four, Title IV of Guideline (EU) 2015/510 (ECB/2014/60); and
• (ii) issued by a guarantor with a credit assessment in accordance with Article 83(c) of Guideline ECB/2014/60 and provided by at least one accepted ECAI system, expressed in the form of a public credit rating, in compliance with, as a minimum, credit quality step 3 in the Eurosystem's harmonised rating scale; and
• (b) satisfy all other applicable eligibility criteria for purchase under the ABSPP. For the purposes of this Decision, ‘mezzanine tranche’ means a tranche of an ABS issue that, in accordance with the post-enforcement priority of payments, and if applicable, the post-acceleration priority of payments as set out in the prospectus:
• (a) ranks below the non-subordinated tranche or sub-tranches of the same ABS issue as set out in Article 77 of Guideline ECB/2014/60; and
• (b) ranks above the most subordinated tranche or sub-tranches that are the first to bear losses incurred on the securitised exposures and which thereby provide protection to the second loss and, where relevant, higher ranking tranches or sub-tranches.

• (10) Purchases of nominal ABSs at a negative yield to maturity (or yield to worst) equal to or above the deposit facility rate are permitted. Purchases of nominal ABSs at a negative yield to maturity (or yield to worst) below the deposit facility rate are permitted to the extent necessary.

• (11) The entity which has originated or established the ABS is not an entity, whether publicly or privately owned, that: (a) has as its main purpose the gradual divestment of its assets and the cessation of its business; or (b) is an asset management or divestment entity established to support financial sector restructuring and/or resolution, including asset management vehicles resulting from a resolution action in the form of the application of an asset separation tool pursuant to Article 26 of Regulation (EU) No 806/2014 of the European Parliament and of the Council ([^E0006]) or national legislation implementing Article 42 of Directive 2014/59/EU of the European Parliament and of the Council ([^E0007]).

Article 3

Credit risk assessment and due diligence

Prior to the purchase of any ABS fulfilling the eligibility criteria under Article 2, the ECB shall conduct a credit risk assessment and due diligence in relation to such ABS.

Article 4

Eligible counterparties

The following shall be eligible counterparties for the ABSPP, both for outright transactions and for securities lending transactions involving ABS held in ABSPP portfolios: (a) counterparties participating in Eurosystem monetary policy operations as defined in Section 2.1 of Annex I to Guideline ECB/2011/14; (b) counterparties that are used by Eurosystem central banks for the investment of their euro-denominated investment portfolios; and (c) entities deemed to be eligible counterparties for outright transactions under the ABSPP by the Governing Council on the basis of a Eurosystem counterparty risk assessment by the ECB.

Article 5

Purchase limits

Article 6

Entry into force

This Decision shall enter into force on the day following its publication on the ECB's website.

[^E0001]: As published on the ECB's website.

[^E0002]: Guideline (EU) 2015/510 of the European Central Bank of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (ECB/2014/60) (OJ L 91, 2.4.2015, p. 3).

[^E0003]: Guideline ECB/2014/31 of 9 July 2014 on additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral and amending Guideline ECB/2007/9 (OJ L 240, 13.8.2014, p. 28).

[^E0004]: ‘Non-financial corporations’ has the meaning given to it in the European System of Accounts as referred to in Annex I to Guideline ECB/2011/14.

[^E0005]: ‘Close links’ has the meaning given to it in Section 6.2.3.2 of Annex I to Guideline ECB/2011/14.

[^E0006]: Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1).

[^E0007]: Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).