The Office of the Superintendent of Financial Institutions today issued a guideline setting out a revised regulatory framework for asset securitization transactions.

OSFI notes that the updated guideline takes into account industry comments. However, the regulator says changes have been kept to a minimum recognizing that further changes will be required prior to 2007 to align the guideline more closely with the new Basel II Framework requirements.

Significant changes include:

  • a revised definition of general market disruption;
  • elimination of the section on “suppliers of the assets”;
  • removal of the distinction between Liquidity Support and Liquidity Asset Purchase Agreement;
  • introduction of a 10% credit conversion factor charge for eligible liquidity facilities that are under one year or unconditionally cancellable; and
  • an increase in the repayment period for servicer advances to 31 business days.

The guideline applies to all federally regulated financial institutions on a consolidated basis, effective beginning of fiscal year 2005.