EBA Consults on Homogeneity of Underlying Exposures in Securitization
EBA launched a public consultation on the draft regulatory technical standards specifying a set of criteria for the underlying exposures in securitization to be deemed homogeneous, as part of the requirements under the new EU securitization framework. The consultation runs until March 15, 2018.
These regulatory standards define a set of criteria, according to which the underlying exposures are deemed homogeneous. These include the need to be underwritten according to similar underwriting standards, methods, and criteria; the need to be serviced according to uniform servicing procedures; the need to fall within the same asset category; and to be further differentiated by the application of relevant risk factors. The regulatory technical standards are applicable to both asset-backed commercial paper (ABCP) and non-ABCP securitizations. To provide more clarity and facilitate the assessment of the homogeneity, the regulatory technical standards provide a non-exhaustive list of asset categories as well as lists of the risk factors to be generally considered for each of these asset categories. The regulatory technical standards require that only the risk factors that are relevant for determining the homogeneity of a specific pool of the underlying exposures, should be effectively applied to that particular pool.
The regulatory technical standards also include an alternative option to determine homogeneity, according to which the risk factors should be reflected in the underwriting standards, with a view to gather a comprehensive feedback on the most appropriate approach for the interpretation of the homogeneity requirement. The homogeneity requirement aims to facilitate the assessment of underlying risks by investors and to enable them to perform robust due diligence. Its application is, therefore, one of prerequisites for a more risk-sensitive regulatory treatment of the securitization. Homogeneity of the underlying exposures is one of the requirements for simple, transparent, and standardized (STS) securitization, which is eligible for more risk-sensitive risk weights, under the new EU securitization framework.
Related Link: Press Release and Consultation Paper
Comment Due Date: March 15, 2018
Keywords: Europe, EU, Banking, Securitization Framework, Regulatory Technical Standards, Homogeneity of Underlying Exposures, EBA
Previous Article
Gabriel Bernardino of EIOPA on Achievements and Challenges for EIOPARelated Articles
OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks
The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.