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December 15, 2017

EBA launched a public consultation on the draft regulatory technical standards specifying the requirements for originators, sponsors, and original lenders related to risk retention—as laid down in the new EU securitization framework (namely, Simple, Transparent and Standardized, or STS, Regulation). The consultation runs until March 15, 2018.

The new securitization regulation sets out, among other matters, requirements on the retention of material net economic interest in relation to exposures to securitizations, which will replace the requirements currently set out in the Capital Requirements Regulation (CRR). As a consequence, these draft regulatory technical standards will replace the current Commission Delegated Regulation on risk retention. However, given the cross-sectoral nature of its application, the new STS Regulation contains transitional provisions regarding the application of the existing Delegated Regulation to those securitizations whose securities were issued before its application date.

In addition, due to the narrower mandate under the STS Regulation, as opposed to that which was set out in the CRR for the current Delegated Regulation, certain provisions from the existing Delegated Regulation were not included in these draft regulatory technical standards, in particular those relating to due diligence requirements and policies for credit granting and disclosure of materially relevant data. Furthermore, various new provisions were added, in particular related to when an entity shall be deemed not to have been established or to operate for the sole purpose of securitizing exposures, transfers, or hedging of the retained interest.

 

Related Link: Press Release

Comment Due Date: March 15, 2018

Keywords: Europe, EU, Banking, Regulatory Technical Standards, Securitization Framework, STS Securitization, CRR, EBA

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