UK banks are large issuers of asset backed securities backed by credit card receivables that are subject to certain early amortisation provisions. These provisions result in residual risks to banks undertaking such transactions.

The EU Capital Requirements Directive (CRD) recognises these risks and places added capital requirements on firms to cover this risk. However, the CRD does not cover the full range of early amortisation provisions available in credit card securitisations and recognises this fact by allowing competent authorities to apply their own regulatory treatments for early amortisation provisions.

There are several (commonly included) early amortisation provisions in European credit card securitisations that are not contemplated within the CRD, the most important being:

  1. Minimum Originators Interest
  2. Minimum Pool Amount
  3. Seller or Servicer Event of Default.

There are no triggers for items (1)-(3) above within the current BIPRU rules: the only trigger is for Excess Spread.

To allow firms with credit card securitisations to receive regulatory capital relief, we are offering a modification by consent of the rules in BIPRU 9.13 to include the extra triggers or credit conversion factors (CCF) set out in the direction below.

Direction [PDF]

If you want to take advantage of this modification, you should read the direction above and contact the Central Waivers Team, The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS. Please e-mail centralwaiversteam@fsa.gov.uk with your request for the modification. We will write to you to confirm whether we have granted your request and we will publish the approved modifications on our website.

To offer this waiver we have had to consult other member states of the European Union. We will publish the results of this consultation towards the end of 2008.