EC welcomed the agreement between the European Parliament and European Council on targeted changes to the securitization framework and the Capital Requirements Regulation (CRR) in EU. These changes will apply immediately after their publication in the Official Journal of the European Union. The European Parliament and Council also agreed to solve an issue arising from a six-month time gap between the transposition deadlines of the Investment Firms Directive (IFD) and the investment firm rules contained in the Capital Requirements Directive (CRD5). Both these developments are part of the EU initiatives for making capital markets work for European recovery in response to the ongoing COVID-19 crisis.
The amendments to securitization requirements create a specific framework for simple, transparent, and standardized on-balance sheet securitization that would benefit from prudential treatment reflecting the real risk of these instruments. In addition, these changes remove regulatory obstacles to securitizing non-performing exposures. These targeted changes were part of the capital markets stimulus package presented by EC in July 2020 and they encourage a wider use of securitization in the European recovery to free up bank capital and allow banks to continue lending, especially households and small and medium-size enterprises (SME). These amendments would be useful to allow banks to transfer certain risks to the markets so that they can continue to lend. The changes can also help banks deal with a possible increase in the non-performing exposures due to COVID crisis.
Keywords: Europe, EU, Banking, Securities, Securitization, CRR, STS Securitization, COVID-19, Basel, IFD, Investment Firms, CRD, Regulatory Capital, EC
Previous ArticleECB Extends Pandemic Emergency Longer-Term Refinancing Operations
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.