Glossary

Italicised words and phrases refer to other defined terms.

 

ABS	Asset backed securities. These are a type of bond or note based on a pool of assets, or collateralised on the cash flow on a specified pool of underlying assets.
ADI	Australian authorised deposit taking institution
APRA	Australian Prudential Regulatory Authority
APS	APRA Prudential Standard
Asset Backed Commercial Paper or ABCP	Asset Backed Securities issued in the form of short-dated securities, where all principal and interest is repaid in a single payment.
Bankruptcy-remote	See insolvency-remote
Basic servicing-fee	the fee paid to the servicer to compensate for the actual costs for administering the securitised assets.
Basis swap	a contract whereby the provider exchanges the floating rate interest calculated on one rate reset basis in exchange for the floating rate interest calculated on another rate reset basis (eg 30 day BBSW and 90 day BBSW).
Beneficiary	the party for whose benefit a trust is established and administered.
Charge	a claim over assets which secures the timely performance of a specified obligation.
Class	a designation of securities which share the same priority in the allocation of losses.
Credit enhancement	a category of facilities intended to protect investors from losses or shortfalls with respect to securitised cash flows.
Cross currency swap	a contract whereby the provider exchanges a stream of principal and interest payments denominated in one currency for a stream of principal and interest payments denominated in another currency.
Debt	a specified sum of money due at a specified time and bearing interest at a specified rate.
Excess servicing fee	the fee paid to the originator based on the spread of interest earned on securitised assets in excess of the basic servicing fee.
External credit enhancement	credit enhancement provided by a third party, in the form of a limited guarantee, letter of credit, or surety.
Guaranteed investment contract or GIC	a contract whereby a special –purpose vehicle deposits cash with the provider, on which the provider pays interest at a specified rate.
IFRS	International Financial Reporting Standard
Insolvency-remote	a characteristic of a special purpose vehicle whereby the vehicle's assets are immune to claims of the originator's or servicer's cerditors and the vehicle itself is unlikely to become insolvent
Insolvency-proof	a characteristic of a special–purpose vehicle  whereby  the vehicle’s assets are immune to claims of the originator’s or servicer’s creditors.
Interest-rate floor	a contract whereby the provider supplements, to a specified level, any interest earned by a special–purpose vehicle on its cash balances.
Interest-rate swap	a contract whereby the provider exchanges interest at a specified fixed rate for interest at a specified floating rate, or vice versa, calculated with respect to a specified notional amount.
Investment grade	the top four rating categories for long-term securities.
Letter of credit	a form of credit enhancement  whereby a bank issues an instrument which can be drawn up to a specified amount under specified circumstances.
Limited guarantee	a form of credit enhancement  whereby an originator indemnifies the special –purpose vehicle for losses, up to a specified amount, on securitised assets.
Liquidity facility	a contract whereby the provider lends cash to a special –purpose vehicle to compensate for any timing mismatches between the securitised assets and the associated securities.
Lenders mortgage insurance of LMI	An insurance policy on an individual mortgage loan, to protect the lender from any shortfall in the event of default.
MBS	Mortgage backed securities
Monoline insurer	An insurance company that carries out the sole business of insuring financial obligations.
Off-balance sheet treatment	An accounting treatment whereby an originator is entitled to remove securitised assets from its own balance sheet.
Originator	a party who creates a securitisable asset.
Overcollateralisation	a form of credit enhancement whereby an originator transfers more assets to a special-purpose vehicle than the face amount of the securities that the vehicle issues.
Pass-through	commonly, a structure whereby principal payments on securities are made on the basis of principal collections on the underlying assets.
Pay-through	technically, debt  with respect to which the issuer makes payments on the basis of collections on securitised assets.
Program manager	a party which administers a securitisation program and which either administers the securitised assets or oversees their administration by others.
Purchase facility	a contract whereby the provider purchases securitised assets at a specified time, the process of which are applied to redeem securities; also called a takeout facility.
Rating agency</fo>	a party which makes an assessment on the likelihood that securities will be repaid in a timely fashion.
Securitisation	the process of converting cash flows into securities.
Security trust	a trust established to hold, for the benefit of investors and others, a charge granted over securitised assets.
Security trustee	the trustee of a security trust.
Servicer	a party with the duty of administering securitised assets.
Special-purpose corporation	a corporation created solely for the purpose of issuing debt.
Special-purpose vehicle	either a trust or special-purpose corporation created solely to issue securities supported by securitised cash flows.
Surety	a form of credit enhancement whereby the provider pays principal and interest on a security if the issuing special-purpose vehicle is unable to do so; also called a wrap-around guarantee.
Takeout facility	see Purchase facility.
Term assets	assets which feature periodic payments e.g. residential mortgage loans.
Term structure	a transaction where the securities issued by the special-purpose vehicle have periodic payments
Trust	an arrangement whereby assets are transferred to a trustee  with the intention that they be administered for the benefit of a beneficiary.
Trust deed	the document that governs the establishment and administration of a trust.
Trustee	a party who takes legal title to specified assets under the terms of a trust deed.
Wrap-around guarantee	see Surety.