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    ESAs Clarify Impact on Status of STS Securitizations Post Brexit

    December 07, 2020

    ESAs (EBA, EIOPA, and ESMA) issued a statement that highlights the impact in the change of status of simple, transparent, and standardized (STS) securitization transactions after the end of the Brexit transition period on December 31, 2020. For a securitization transaction to qualify as an STS securitization, the Securitization Regulation (2017/2402) requires that the originator, sponsor, and the securitization special purpose vehicle (SSPE) be established in EU. Therefore, the securitization transactions labeled as “STS securitizations” will lose the STS status in EU in case one or all the securitization parties (originator, sponsor, SSPE) are established in the UK after the end of the transition period for Brexit. This will apply to STS asset-backed commercial paper (ABCP) securitizations and STS non-ABCP securitizations.

    ESMA is working with national competent authorities to ensure that the STS securitization public register of ESMA is up to date on January 01, 2021. The loss of STS status implies that the preferential capital treatment available for investments in this type of securitizations will come to an end. This will affect the institutional investors in EU, such as credit institutions and insurance entities, that hold positions in STS securitizations where the originator, sponsor, and/or SSPE are established in the UK. ESAs, therefore, advise these investors to assess the impact of this change of status on their balance sheet and investments ahead of December 31, 2020.

     

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    Keywords: Europe, EU, UK, Banking, Insurance, Securities, Brexit Transition, STS Securitization, Securitization Framework, ABCP Securitization, ESAs

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