The European Commission (EC) launched a targeted consultation on the functioning of the securitization framework in EU. The consultation provides a questionnaire that is targeted to market participants, including data repositories and rating agencies, industry associations, and supervisors. While some questions are general, others are directed toward participants in the securitization market—that is, issuers or investors—or toward supervisors. The consultation period ends on September 17, 2021.
To deliver on the EC commitment in the Capital Markets Union action plan and to prepare the report mandated by Article 46 of the Securitization Regulation, this targeted consultation seeks stakeholder feedback on a broad range of issues. Article 46 of the Securitization Regulation requires EC to present a report to the European Parliament and the Council on the functioning of the EU Securitization Regulation, accompanied, if appropriate, by a legislative proposal by January 01, 2022. Thus, this consultation covers the following areas mandated by Article 46:
- Effects of the regulation
- Amendments to the Capital Requirements Regulation and interactions with Solvency II
- Private securitizations and due diligence
- Need for an equivalence regime in the area of simple, transparent, and standardized (STS) securitizations
- Disclosure of information on environmental performance and sustainability
- Need for establishing a system of limited licensed banks performing the functions of securitization special purpose entities or SSPEs
- Treatment of STS securitizations and asset-backed commercial paper (ABCP) securitizations for the liquidity coverage ratio
The EU securitization framework has been applicable since January 2019. The framework consists of the Securitization Regulation, which sets out a general framework for all securitizations in EU and a specific framework for STS securitizations as well as prudential requirements for securitization positions in the Capital Requirements Regulation and in Solvency II. The framework was complemented on April 06, 2021 in the context of the efforts to help the post-COVID-19 economic recovery by extending the scope of the STS label to on-balance-sheet synthetic securitizations and by addressing regulatory obstacles to securitizing non-performing exposures.
Comment Due Date: September 17, 2021
Keywords: Europe, EU, Banking, Securities, Securitization Framework, STS Securitization, Securitization Regulation, Capital Markets Union, CRR, Solvency II, Synthetic Securitization, NPLs, Credit Risk, Disclosures, ESG, Sustainable Finance, Climate Change Risk, ABCP Securitization, EC
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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