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.
Keywords: Europe, EU, UK, Banking, Insurance, Securities, Brexit Transition, STS Securitization, Securitization Framework, ABCP Securitization, ESAs
Previous ArticleEBA Revises List of Deactivated Validation Rules for Bank Reporting
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The Hong Kong Monetary Authority (HKMA) announced that the Green and Sustainable Finance (GSF) Cross-Agency Steering Group has launched the information and data repositories and outlined the progress made in advancing the development of green and sustainable finance in Hong Kong.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
The Network for Greening the Financial System (NGFS) published a report that explores the feasibility of integrating the G-Cubed general equilibrium model into the NGFS suite of models.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.