EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013). One of these is the Regulation 2021/557, which amends the Securitization Regulation that provides a general framework for securitization of instruments and creates a specific framework for simple, transparent, and standardized (STS) securitizations. The other one is the Regulation 2021/558, which amends CRR with respect to certain adjustments (in Regulation 2021/557) to the securitization framework. Both the newly published regulations shall enter into force on the third day after their publication in the Official Journal of the European Union.
The key amendments to CRR relate to the treatment of non-performing exposure securitizations, senior positions in STS on-balance sheet securitizations, grandfathering of senior securitization positions, and Collective Investment Undertakings with an underlying portfolio of euro area sovereign bonds. Additionally, the key amendments to the Securitization Regulation relate to the following:
- STS on-balance-sheet securitizations, including the transitional provisions for this
- Requirements on simplicity, standardization, and transparency
- Requirements for the credit protection agreement, the third-party verification agent, and the synthetic excess spread
- Macro-prudential oversight of the securitization market
- Development of a sustainable securitization framework
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Effective Date: April 09, 2021
Keywords: Europe, EU, Banking, COVID-19, CRR, Basel, Securitization, Securitization Regulation, STS Securitization, Credit Risk, NPLs, European Parliament, European Council
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