Eligible guarantors

1. An ADI must only recognise guarantees provided by the following entities when they have a lower risk weight than the counterparty:
   1. sovereigns;
   2. banks;
   3. other entities that are externally rated, where credit protection is provided to a non-securitisation exposure. This includes guarantees provided by parent, subsidiary and affiliate companies where they have a lower risk weight than the borrower; and
   4. where credit protection is provided to a securitisation exposure, other entities with a credit rating grade of three or better and that were externally rated two or better at the time the credit protection was provided. This also includes guarantees provided by parent, subsidiary and affiliated companies where they have a lower risk weight than the borrower.
2. A claim that is indirectly guaranteed by the Australian Government (i.e. the Commonwealth’s guarantee of the entity that provides the guarantee) may be treated as guaranteed by the Australian Government provided that:
   1. the indirect guarantee covers all credit risk elements of the claim;
   2. both the original guarantee and the indirect guarantee meet all the requirements detailed in paragraph 2 of this Attachment, except that the indirect guarantee need not be direct and explicit to the original claim; and
   3. the ADI is satisfied that the cover of the indirect guarantee is robust and there is no historical evidence to suggest that the coverage of the indirect guarantee is not equivalent to that of a direct guarantee of the Australian Government.
3. Letters of comfort do not qualify as eligible guarantees for CRM purposes.