PRA Amends Policy on Significant Risk Transfer for Securitizations
PRA published the policy statement PS17/20, which updates the supervisory statement SS9/13 on the significant risk transfer for securitization transactions. PS17/20 will take effect on its publication. Chapter 8 of the occasional consultation paper CP3/20, which was published in March 2020, covered proposal for the update of SS9/13; the proposal in this chapter had set out to clarify that non-sequential amortization features constitute complex features in the significant risk transfer transactions. PRA received no responses to this chapter of CP3/20 and has, therefore, not amended the draft policy. PS17/20 is relevant to the Capital Requirements Regulation firms.
SS9/13 supplements the rules in the Benchmarking of Internal Approaches and Credit Risk Part of the PRA Rulebook. According to the updated supervisory statement, PRA does not operate a pre-approval process for securitization transactions. Nevertheless, it expects a firm to discuss with its supervisor, at an early stage, the securitization transactions that are material or have complex features, including any non-sequential amortization. Where a firm claims a regulatory capital reduction from securitization transactions in its disclosures to the market, PRA expects such disclosures to include caveats making clear the risk of full or partial re-characterization where this risk is material in the light of the stated policy of PRA.
PRA also announced that it will publish the feedback and the final policy for Chapters 2 to 7 of CP3/20 at a later date, as responses received to the consultation are still being considered. Furthermore, the policy set out in PS17/20 has been designed in the context of withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018.
Related Links
Effective Date: July 22, 2020
Keywords: Europe, UK, Banking, CRR, Securitization, CP3/20, Significant Risk Transfer, PS17/20, SS9/13, Basel, PRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
OCC Proposes Rule to Determine True Lender in Loan TransactionsRelated Articles
BIS Examines Use of Big Data and Machine Learning at Central Banks
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB Publishes Guide for Determining Penalties for Regulatory Breaches
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS Sets Out Good Practices to Manage Operational Risks Amid COVID
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR Announces New Data Collection Application for Banks and Insurers
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB Publishes Overview of Resolution Tools Available in Banking Union
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
