ICICI Bank 2013 Annual Report Download - page 190

F112
• Underwriter: allowing un-subscribed portions of securitised debt issuances, if any to devolve on the
Bank, with the intent of selling at a later stage.
• Investor/trader/market-maker: acquiring investment grade securitised debt instruments backed by
financial assets originated by third parties for purposes of investment/trading/market-making with the
aim of developing an active secondary market in securitised debt.
• Structurer: structuring appropriately in a form and manner suitably tailored to meet investor requirements,
while being compliant with extant regulations.
• Provider of liquidity facilities: addressing temporary mismatches on account of the timing differences
between the receipt of cash flows from the underlying performing assets and the fulfillment of obligations
to the beneficiaries.
• Provider of credit enhancement facilities: addressing delinquencies associated with the underlying
assets, i.e. bridging the gaps arising out of credit considerations between cash flows received/collected
from the underlying assets and the fulfillment of repayment obligations to the beneficiaries.
• Provider of collection and processing services: collecting and/or managing receivables from underlying
obligors, contribution from the investors to securitisation transactions, making payments to counterparties/
appropriate beneficiaries, reporting the collection efficiency and other performance parameters and
providing other services relating to collections and payments as may be required for the purpose of the
transactions.
Risks in securitisation
The major risks inherent in the securitised transactions are:
• Credit risk: Risk arising on account of payment delinquencies from underlying obligors/borrowers in the
assigned pool.
• Market risk:
i) Liquidity risk: Risk arising on account of lack of secondary market to provide ready exit options to the
investors/participants.
ii) Interest rate risk: Mark to market risks arising on account of interest rate fluctuations.
• Operational risk:
i) Co-mingling risk: Risk arising on account of co-mingling of funds belonging to investor(s) with that
of the originator and/or collection and processing servicer, when there exists a time lag between
collecting amounts due from the obligors and payment made to the investors.
ii) Performance risk: Risk arising on account of the inability of a Collection and Processing Agent to
collect monies from the underlying obligors as well as operational difficulties in processing the
payments.
iii) Regulatory and legal risk: Risk arising on account of
• non-compliance of the transaction structures with the extant applicable laws which may result in
the transaction(s) being rendered invalid;
• conflict between the provisions of the transaction documents with those of the underlying
financial facility agreements; and
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2013