ECB issued an opinion on the draft law on securitization framework in Cyprus. The opinion focuses on specific aspects of the newly established securitization framework and on the new tasks conferred on the Central Bank of Cyprus (CBC) in the context of the prohibition of monetary financing.
The purpose of the draft law is to establish a framework for securitizations in Cyprus to facilitate the secondary market for loans, which may in turn support the reduction of the high level of nonperforming loans (NPLs) of Cypriot banks. The draft law vests in CBC the power to regulate and supervise securitizations to safeguard the proper functioning of the securitization market in Cyprus. The draft law also establishes the procedure that an originator would need to follow to notify CBC that it intends to carry out a securitization. The draft law provides that a securitization special purpose entity (SSPE) set up by an originator may not commence its activities as a securitization vehicle, unless the originator has notified CBC in writing of its intention to carry out one or more securitization transactions and has furnished CBC with the necessary information required under the draft law.
ECB, in its opinion, welcomed the establishment of the framework for securitization in Cyprus, as it may enable the efficient transfer of NPLs off the balance sheet of credit institutions. In addition, by granting the regulatory and supervisory authority to CBC over the securitization activity of originators, servicers, and SSPEs, the draft law intends to ensure that this activity is properly carried out and, more generally, to safeguard the proper functioning of the securitization market in Cyprus. ECB also asked for certain clarifications and modifications to be incorporated into the draft law. For instance, ECB noted the provisions of the draft law requiring originators to notify securitizations to CBC. ECB states that it would be worth clarifying whether the notification obligation would be equally applicable in cases where the SSPE has been set up by a person other than the originator, which intends to carry out securitization.
ECB, on January 03, 2018, had received a request from the Ministry of Finance of Cyprus for an opinion on a draft securitization law. On February 22, 2018, the Ministry of Finance submitted a new request for an opinion on a revised version of the draft law. The competence of ECB to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the EU and the third and sixth indents of Article 2(1) of Council Decision 98/415/EC1 , as the draft law relates to the CBC and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the ECB, the Governing Council has adopted this opinion.
Related Link: ECB Opinion (PDF)
Previous ArticleOSFI Consults on Draft Guideline for TLAC Disclosure Requirements
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.