Featured Product

    EBA Publishes Report on STS Framework for Synthetic Securitization

    May 06, 2020

    EBA published a report that contains proposals for developing a simple, transparent, and standardized (STS) framework for synthetic securitization under the Securitization Regulation (2017/2402). The proposal includes a list of criteria to be considered when labeling the synthetic securitization as STS and provides the pros and cons of a potential differentiated capital treatment for this type of securitization. The proposal is limited to balance-sheet securitization.

    The report contains an extensive analysis of the market developments and trends related to synthetic securitization in EU; this includes data on the historical default and loss performance of the synthetic transactions, both before and after the financial crisis (up until the end of 2018). The report examines rationale behind the STS synthetic product and assesses the positive and negative implications of its possible introduction. Based on the analysis conducted, EBA recommends the following:

    • One recommendation is to establish a cross-sectoral framework for STS synthetic securitization that is limited to balance-sheet securitization.
    • To be eligible for STS status, a synthetic securitization must comply with the proposed criteria on simplicity, standardization, and transparency.
    • EC should consider the pros and cons related to a potentially differentiated capital treatment for STS balance-sheet synthetic securitization; any potential future proposal for STS synthetic securitization should be accompanied by a mandate to EBA to monitor the functioning of the STS synthetic market.

    The report sets out a list of STS criteria for synthetic securitization. Among the proposed STS criteria are requirements on simplicity, standardization, and transparency—similar to those applied to traditional securitization. In addition, the report includes other relevant criteria for synthetic transactions, such as those for mitigating counterparty credit risk or for addressing various structural features of synthetic securitization. 

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Synthetic Securitization, Counterparty Credit Risk, Securitization Regulation, STS Securitization, EBA

    Related Articles
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory News
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    MAS Revises Guidelines on Technology Risk Management

    MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6462