PRU 4.13.9

(1) An Authorised Person may recognise the effects of CRM of a guarantee only if it is provided by any of the following entities:
(a) central government or Central Bank;
(b) MDB referred to in Rule 4.12.8;
(c) International Organisations referred to in Rule 4.12.9;
(d) PSE;
(e) banks and Securities firms which qualify for inclusion in bank asset class; or
(f) any other entity that has a Credit Quality Grade "3" or above.
(2) An Authorised Person must not recognise the effects of CRM of a guarantee unless all of the following requirements are complied with:
(a) the guarantee is an explicitly documented obligation assumed by the guarantor;
(b) the guarantee represents a direct claim on the guarantor;
(c) the extent of the credit protection cover is clearly defined and incontrovertible;
(d) other than in the event of non-payment by the Authorised Person of Money due in respect of the guarantee if applicable, there is an irrevocable obligation on the part of the guarantor to pay out a pre-determined amount upon the occurrence of a credit event, as defined under the guarantee;
(e) the guarantee does not contain any clause, the fulfilment of which is outside the direct control of the Authorised Person, that:
(i) would allow the guarantor to cancel the guarantee unilaterally;
(ii) would increase the effective cost of the guarantee as a result of deteriorating credit quality of the underlying Exposure;
(iii) could prevent the guarantor from being obliged to pay out in a timely manner in the event that the underlying obligor fails to make any payment due; or
(iv) could allow the maturity of the guarantee agreed ex-ante to be reduced ex-post by the guarantor;
(f) the Authorised Person is able in a timely manner to pursue the guarantor for any monies outstanding under the documentation governing the transaction on the default of, or non-payment by, the underlying obligor without first having to take legal action to pursue the underlying obligor for payment; and
(g) the guarantee covers all types of payments that the underlying obligor is expected to make under the documentation governing the transaction, except in the case of accrued interest, accrued expenses or fees outstanding, where these are deemed immaterial.