Featured Product

    EBA Proposes to Create STS Framework for Synthetic Securitization

    September 25, 2019

    EBA published a discussion paper on the simple, transparent, and standardized (STS) framework for synthetic securitization. The discussion paper proposes a list of criteria to be considered when labeling the synthetic securitization as "STS." Stakeholders are invited to comment on the possibility of introduction of an STS framework for synthetics as well as on the regulatory treatment and potential market impact of the proposals laid out in the discussion paper. The consultation period ends on November 25, 2019.

    The discussion paper examines the rationale of the STS synthetic product and assesses positive and negative implications of its possible creation and labeling as "STS." The proposed STS criteria for balance-sheet synthetic securitizations include requirements on simplicity, standardization, and transparency similar to those applied to traditional securitization. The criteria must meet a number of synthetic-specific requirements, such as those on:

    • Mitigating counterparty credit risk, including eligible protection contracts, counterparties, and collateral
    • Addressing various structural features of the securitization transaction
    • Ensuring that the framework only targets balance-sheet synthetic securitization

    Finally, the discussion paper provides a balanced analysis of the possible introduction of a limited and clearly defined differentiated regulatory treatment of the STS synthetic securitization. The introduction of a limited and clearly defined differentiated regulatory treatment would match the historical performance of the synthetic securitization that outperforms the traditional securitization; it would also be in line with the characteristics and developments in the synthetic securtizations market since the financial crisis. However, one of the main deficiencies is that the preferential regulatory treatment would not be Basel-compliant and very limited experience exists with the STS traditional framework so far. Overall, the EBA work on synthetic securitizations unveils new data and insights into post-crisis market developments and trends, including data on historical default and loss performance.

    The discussion paper has been developed in response to the mandate assigned to EBA in the Securitization Regulation (2017/2402). The mandate requires EBA, in close cooperation with ESMA and EIOPA, to develop a report on the feasibility of a framework for STS synthetic securitization, limited to balance-sheet securitization. Following this consultation, EBA will aim to publish a final report. Based on the final report, EBA shall submit a report to the European Parliament and the Council, along with a legislative proposal, if appropriate. 

     

    Related Links

    Comment Due Date: November 25, 2019

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

    Related Articles
    News

    FSB Report Examines Implementation and Impact of G20 Financial Reforms

    FSB published fifth annual report on the implementation and effects of the G20 financial regulatory reforms.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Launches Consultation on Comprehensive Pillar 3 Disclosures

    EBA proposed the new comprehensive implementing technical standard (ITS) for public disclosures by financial institutions.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Consults on Revised Technical Standards on Supervisory Reporting

    EBA launched a consultation on the revised implementing technical standards, or ITS, on supervisory reporting.

    October 16, 2019 WebPage Regulatory News
    News

    APRA Proposes Measures to Strengthen Capital for Bank Depositors

    APRA proposed changes to APS 111, which is the prudential standard on measuring capital adequacy and establishes the criteria for regulatory capital requirements of authorized deposit-taking institutions.

    October 15, 2019 WebPage Regulatory News
    News

    FSB Report Examines Implementation of OTC Derivative Reforms

    FSB published annual progress report on implementation of the agreed G20 reforms for over-the-counter (OTC) derivatives markets.

    October 15, 2019 WebPage Regulatory News
    News

    FSB Publishes Update on Its Market Fragmentation Work

    FSB published an update on its work to address the issue of market fragmentation.

    October 14, 2019 WebPage Regulatory News
    News

    FCA Releases Feedback to Online Survey on New Data Collection Platform

    FCA published results of the survey requesting feedback for the new data collection platform that will replace GABRIEL.

    October 14, 2019 WebPage Regulatory News
    News

    HKMA Reduces Countercyclical Capital Buffer in Hong Kong to 2.0%

    HKMA announced that the countercyclical capital buffer (CCyB) for banks in Hong Kong has been reduced from 2.5% to 2.0%, with immediate effect, in accordance with the Banking (Capital) Rules.

    October 14, 2019 WebPage Regulatory News
    News

    EC Consults on Implementation of Final Basel III Reforms in EU

    EC launched a public consultation on the implementation of Basel III standards in EU.

    October 11, 2019 WebPage Regulatory News
    News

    MAS Amends Regulation on Clearing of Derivatives Contracts

    MAS amended regulation for the mandatory centralized clearing of certain derivative contracts.

    October 11, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3971