1.Credit risk of underlying exposures
 

At the date of acquisition of the assets, the underlying exposures must meet the conditions to be assigned a risk weight equal to or smaller than:

1. 6.40% on a value-weighted average exposure basis for the portfolio where the exposures are loans secured by residential mortgages or fully guaranteed residential loans;
2. 7.50% on an individual exposure basis where the exposure is a loan secured by a commercial mortgage;
3. 8.75% on an individual exposure basis where the exposure is a retail exposure; or
4. 9.100% on an individual exposure basis for any other exposure.

These risk weights should be after taking into account any eligible credit risk mitigation. The thresholds as set are based on the current Standardized Approach to credit risk, and may be revisited if the Standardized Approach for credit risk is subsequently revised.

2.Granularity of the pool
 

At the date of acquisition of any assets securitized by one of the conduits’ transactions, the aggregated value of all exposures to a single obligor at that date shall not exceed 2% of the aggregated outstanding exposure value of all exposures in the program. In the case of trade receivables where the credit risk of those trade receivables is fully covered by credit protection, provided that the protection provider is a financial institution, only the portion of the trade receivables remaining after taking into account the effective of any purchase price discount and overcollateralization shall be included in the determination of whether the 2% limit is breached.