Featured Product

    EC Amends and Supplements MMFR Regarding STS Securitizations and ABCPs

    July 13, 2018

    EC published the Commission Delegated Regulation (EU) 2018/990 on simple, transparent, and standardized (STS) securitization and asset-backed commercial paper (ABCP) requirements for assets received as part of the reverse repurchase agreements and the credit quality assessment methodologies. This Regulation amends and supplements the Money Market Funds Regulation or MMFR (EU Regulation 2017/1131). Regulation (EU) 2018/990 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. It shall apply from July 21, 2018, with the exception of Article 1, which shall apply from January 01, 2019.

    Article 11(1) of MMFR allows MMFs to invest in securitizations or ABCPs. A specific incentive is in place to invest in STS securitizations or ABCPs. Since Regulation (EU) 2017/2402 already contains requirements for STS securitizations and ABCPs, MMFR needs to be amended to cross-refer to the provisions of Regulation (EU) 2017/2402, which contains these requirements. Point (c) in Article 11(1) of MMFR, has been replaced. The Regulation requires that the counterparty to a reverse repurchase agreement be creditworthy and that the assets received as collateral be of sufficient liquidity and quality to enable MMFs to achieve their objectives and fulfill their obligations, should such assets need to be liquidated. To ensure that the collateral provided under reverse repurchase agreements is of high quality, managers of MMFs shall apply additional requirements when the counterparty to an agreement is not regulated under the Union law or is not recognized as equivalent.

    As per the Regulation, the credit quality assessment methodologies should be prudent enough to ensure that all qualitative and quantitative criteria supporting credit quality assessments are reliable and appropriate for properly assessing the credit quality of instruments eligible for investment. Managers of MMF should clearly establish, as part of the credit quality methodology, the criteria for a favorable assessment of instruments eligible for MMF investment, before performing the actual credit quality assessment. The methodology and criteria used for credit quality assessments should be consistent, except where there is an objective reason for diverging from the methodology or the criteria. The criteria and the methodology should be developed for recurrent use, not solely for a particular case. The consistent use of the criteria and of the methodology should make it easier to monitor the credit quality assessment. Managers of MMFs may override the output of an internal credit quality assessment methodology only in exceptional circumstances, including stressed market conditions, and where there is an objective reason for doing so.

    As the quality of instruments may vary over time, the credit quality assessment should not be a once-off assessment, rather it should be carried out continually. In addition, it should be revised, in particular, when there is a material change, as referred to in Article 19(4)(d) of Regulation (EU) 2017/1131, in the macroeconomic or microeconomic environment that could have an impact on the existing credit quality assessment of the instrument. There is no reason to differentiate between the assessments that managers of MMFs carry out when investing directly in eligible assets and the assessment they carry out when they receive an asset as collateral; the credit quality assessment should be based on the same criteria in both cases.

     

    Related Links 

    Effective Date: August 02, 2018

    Keywords: Europe, EU, Banking, Securities, MMF Regulation, STS Securitization, ABCP, MMF, Reverse Repurchase Agreement, Credit Quality Assessment, EC

    Related Articles
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    News

    HKMA Revises Implementation Schedule for Initial Margin Rules

    HKMA intends to adopt a revised implementation schedule for the margin requirements for non-centrally cleared derivatives.

    August 16, 2019 WebPage Regulatory News
    News

    HKMA Revises Guideline on Application of Banking Disclosure Rules

    HKMA issued a revised version of the Supervisory Policy Manual module CA-D-1 on guideline on the application of the Banking (Disclosure) Rules (BDR).

    August 16, 2019 WebPage Regulatory News
    News

    ECB Decision on Recognizing Reporting Member States Under AnaCredit

    ECB has finalized the Decision 2019/1348 (ECB/2019/20) that establishes procedure for recognizing non-euro area member states as reporting member states under the AnaCredit Regulation (EU 2016/867).

    August 16, 2019 WebPage Regulatory News
    News

    FASB Proposes to Extend CECL Standard Deadline for Certain Entities

    FASB proposed an Accounting Standards Update that would grant private companies, not-for-profit organizations, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging.

    August 15, 2019 WebPage Regulatory News
    News

    IASB Adds Phase Two of IBOR Reform to Its Work Plan

    IASB (or the Board) has added the second phase of its project focused on potential financial reporting implications linked to the interest rate benchmark reform—interbank offer rate (IBOR) reform—to its work plan.

    August 15, 2019 WebPage Regulatory News
    News

    FED Updates Draft Instructions for Proposed FR Y-14 Reporting Forms

    FED updated draft instructions for the monthly, quarterly, and annual capital assessments and stress testing reports, also known as forms FR Y-14M, FR Y-14Q, FR Y-14A, respectively.

    August 15, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 326, 815, and 842

    FASB is proposing taxonomy improvements for the proposed Accounting Standards Update on clarifying the interactions among topic 321 on investments in equity securities), topic 323 on investments under equity method and joint ventures), and topic 815 on derivatives and hedging.

    August 15, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3665