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Amendment of section 27 of Principal Act.
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17.— Section 27 of the Principal Act is amended—
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(a) in subsection (1)—
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(i) by substituting the following for paragraph (a):
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“(a) providing mortgage credit, dealing in and holding mortgage credit assets and providing group mortgage trust services,”,
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(ii) in paragraph (f), by substituting “assets or activities permitted by this subsection” for “assets of a kind mentioned in paragraphs (a) to (e)”, and
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(iii) in paragraph (g), by inserting “and dealing in and holding pool hedge collateral” after “to (f)”,
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(b) in subsection (2)(b), by substituting “mortgage” for “asset”,
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(c) in subsection (3), in the definition of “credit transaction asset”, by substituting “any asset arising from the activities referred to in section 27(1)(c) or (f), mortgage” for “a mortgage”, and
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(d) by inserting the following after subsection (5):
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“(6) Where a designated mortgage credit institution holds mortgage security and, if applicable, collateral security subject to a trust as a consequence of the institution providing group mortgage trust services to one or more group entities—
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(a) the mortgage credit assets held by the institution shall not include any group entity assets,
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(b) for the purposes of section 81(4), only mortgage security and, if applicable, collateral security to the extent such security secures mortgage credit assets held by the institution shall be comprised in its cover assets pool and constitute cover assets, and
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(c) as regards recourse by the institution or such group entities to such security to satisfy its or their, as the case may be, respective claims under any mortgage credit assets held by the institution or any group entity assets held by one or more such group entities—
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(i) such claims held by the institution for its own benefit shall at all times until they are discharged in full rank in priority in all respects to such claims held by such group entities with respect to such recourse, and
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(ii) any terms of the trust or any agreement between the institution and one or more such group entities purporting to provide for a different priority as between such claims held by the institution and such claims held by such group entities shall be void.
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(7) In this section—
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‘ collateral security ’ means any security, guarantee, indemnity or insurance which secures, in addition to mortgage security, assets that comprise one or more mortgage credits;
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‘ group entity ’, in relation to a designated mortgage credit institution, means—
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(a) a parent entity of the institution,
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(b) a subsidiary of the institution, or
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(c) a subsidiary, other than the institution, of a parent entity of the institution;
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‘ group entity assets ’ means any assets that comprise of one or more mortgage credits held by one or more group entities where—
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(a) those assets are secured by mortgage security and, if applicable, collateral security, and
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(b) that security is comprised in a trust constituted for the purposes of group mortgage trust services;
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‘ group mortgage trust services ’ mean services provided by a designated mortgage credit institution to one or more group entities—
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(a) which involve the institution holding mortgage security and, if applicable, collateral security on trust for one or more such group entities, and
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(b) where, under that trust, the institution holds an interest in that security for one or more such group entities (whether as trustee or agent) and for its own behalf;
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‘ mortgage security ’ means a mortgage, charge or other security referred to in section 4(1) which secures assets that comprise one or more mortgage credits;
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‘subsidiary’ has the same meaning as is given by section 3(7).”.
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