September 19, 2017

EBA launched a public consultation on significant risk transfer in securitization. In response to the mandate on significant risk transfer laid down in the Capital Requirements Regulation (CRR), this paper puts forward for public discussion proposals to strengthen the regulation and supervision framework of significant risk transfer and to improve regulatory certainty and level playing field for institutions transferring risk through securitization. The proposals are based on the newly agreed European securitization legislation and the consultation runs until December 19, 2017.

This work builds on EBA's monitoring activity of supervisory practices in the area of significant risk transfer, which was started in 2014 with the publication of EBA guidelines on this topic. Based on the monitoring activity, EBA found that further regulatory specifications may be needed regarding the process of significant risk transfer assessment, its quantitative assessment by competent authorities, and the supervisory approach to core structural features of the securitization transaction, such as amortization structure, excess spread, cost of credit protection, and call options. The EBA analysis also covers the significant risk transfer in securitization of non-performing loans (NPLs), one of the key measures toward the NPL resolution.
 
The EBA discussion paper aims to seek stakeholder views on how to further harmonize the regulation and supervision of the risk transfer through securitization. Consulting stakeholders at this stage is particularly important as EBA's proposals are fully based on the newly agreed European securitization framework, which will enter into force in the coming months and will introduce simple transparent and standardized securitizations across the EU. Significant risk transfer will be a crucial aspect of such a reform.
 

Related Links

Consultative Report (PDF)

EBA Guidelines (PDF)

CRR (PDF)

Comment Due Date: December 19, 2017

Keywords: Europe, EU, Banking, Securities, STS Securitization, Significant Risk Transfer, CRR, EBA

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