ServicingServicing

Servicing

7. A funds management or securitisation scheme may involve the participation of an entity acting as a “servicer” or “servicing agent”. An ADI may undertake the role of servicing a pool of assets held by a SPV provided:

(a) there is a formal written agreement in place which specifies the services to be provided and any required standards of performance. These standards should be reasonable and in accordance with normal market practice. There should be no recourse to the ADI beyond the fixed contractual obligations so specified. The agreement should not obligate an ADI to the provision of any other services (e.g. funding of payments to investors, recompense investors for losses, absorb losses on assets or purchase of securities, etc);

(b) that the ADI is able to demonstrate that the agreement is undertaken on an arm’s length basis, on market terms and conditions (including remuneration), and is subject to the ADI’s normal approval and review processes;

(c) the agreement is limited as to a specified time period (i.e. the earlier of the date on which all claims connected with the issue of securities are paid out or the ADI’s replacement as party to the agreement). A fixed termination date need not be specified provided the ADI is able, at its absolute discretion, to withdraw from its commitments at any time following a reasonable period of notice. Withdrawal must not be conditional upon the appointment of an alternative service provider. As a general rule, an ADI should be able to relinquish its role after giving 90 days notice;

(d) subject to reasonable qualifying conditions, the SPV and/or investors have the express right to select an alternative party to provide the facility;

(e) the agreement is documented in a fashion which clearly separates it from any other facility provided by the ADI. An ADI’s obligations under each facility should be stand‑alone; and

(f) the ADI’s operational systems are adequate to meet its obligations as a servicer.

8. An ADI acting as servicer should be under no obligation to remit funds to the SPV or investors until the funds are received from the underlying assets (unless otherwise provided for in terms of a separate liquidity facility). This may not preclude, subject to conditions set by APRA, the provision of very limited short‑term advances by a servicer, at its sole discretion, to cover unexpected cash shortfalls arising from delayed payments on assets.

9. A member of an ADI may receive a performance‑related payment (or benefit from any surplus income generated) for its role as servicer, in addition to its base fee, provided that the base fee is on market terms and conditions and any performance‑related payment does not commit the ADI to any additional obligations. Such payment should be recognised for profit and loss (and capital) purposes only after it has been irrevocably received.