Minimum requirements

1. To be recognised as eligible CRM, a guarantee must:
   1. represent a direct claim on an eligible guarantor;
   2. be an explicitly documented obligation assumed by the guarantor;
   3. be explicitly referenced to specific exposures or a pool of exposures, so that the extent of the cover is clearly defined and incontrovertible;
   4. be irrevocable, except in the case of non-payment by a protection purchaser of money due in respect of the credit protection contract. The guarantee must not contain any clauses that would allow the guarantor to unilaterally cancel the cover of the guarantee, or that would increase the effective cost of cover as a result of deteriorating credit quality in the guaranteed exposure;[32]
   5. be unconditional. The guarantee must not include any clauses that are outside the direct control of the ADI, or that could prevent the guarantor from being obliged to pay out in a timely manner in the event that the underlying counterparty fails to make the payment(s) due;
   6. on the default or non-payment of the counterparty, allow the ADI to pursue, in a timely manner, the guarantor for any monies outstanding under the documentation governing the transaction. The ADI must have the right to receive payment from the guarantor without first having to take legal action in order to pursue the counterparty for payment; and
   7. cover all types of payments the underlying borrower is expected to make under the documentation governing the transaction. Where a guarantee covers payment of principal only, interest and other amounts not covered by the guarantee must be treated as uncovered.