Featured Product

    EBA Publishes Regulatory Standards Related to the STS Regulation in EU

    July 31, 2018

    EBA published the final draft regulatory technical standards defining the homogeneity of the underlying exposures in securitization, along with the standards on risk retention for securitization transactions. Both sets of regulatory technical standards have been developed according to the simple, transparent, and standardized (STS) Regulation. These regulations shall enter into force on the twentieth day following that of their publication in the Official Journal of the European Union.

    Standards defining homogeneity of the underlying exposures in securitization. The regulatory technical standards set out conditions for securitization to be deemed homogeneous. Homogeneity is one of the crucial requirements for a securitization transaction to be assessed as STS and to be eligible for more risk-sensitive risk-weights under the new EU securitization framework. These standards are part of 28 mandates assigned to EBA within its important role in implementation of the new securitization framework. According to the conditions specified in the standards, homogeneous exposures need to be underwritten according to similar underwriting standards and serviced according to similar servicing procedures. They need to fall within the same asset category. To facilitate the assessment of homogeneity, the standrds specify a non-exhaustive list of the most common asset categories, reflecting the market practice. Finally, for the majority of these asset categories, the underlying exposures need to be homogeneous with reference to at least one of the homogeneity factors, such as type of obligor, ranking of security rights, jurisdiction, or type of immovable property. The standards are applicable to both asset-backed commercial paper (ABCP) and non-ABCP securitizations. 

    Standards on risk retention for securitization transactions. The regulatory technical standards specify the requirements for originators, sponsors, and original lenders related to risk retention, as laid down in the new EU securitization framework (STS Regulation). These standards include various new provisions, in particular relating to when an entity shall be deemed not to have been established or to operate for the sole purpose of securitizing exposures, transfers, or hedging of the retained interest, circumstances under which the retainer should be changed and adverse selection of assets. However, due to the narrower mandate on risk retention under the STS Regulation, as opposed to the previous mandate, certain provisions from the existing Delegated Regulation were not included in these final standards, in particular those relating to due diligence requirements, policies for credit granting, and disclosure of materially relevant data.  Finally, given the cross-sectoral nature of its application, the new STS Regulation contains transitional provisions regarding the application of the existing Delegated Regulation to those securitizations whose securities were issued before its application date. From the date of entry into force of this regulation, the Commission Delegated Regulation (EU) No 625/2014 shall be repealed.

     

    Related Links

    Effective Date: OJ + 20 Days

    Keywords: Europe, EU, Banking, STS Regulation, Risk Retention, Homogeneity, Securitization, Regulatory Technical Standards, EBA

    Related Articles
    News

    EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    News

    EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway

    The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.

    February 25, 2021 WebPage Regulatory News
    News

    PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks

    In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.

    February 25, 2021 WebPage Regulatory News
    News

    FSB Sets Out Work Priorities for 2021

    In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.

    February 25, 2021 WebPage Regulatory News
    News

    EU Publishes Corrigendum to Revised Capital Requirements Regulation

    EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).

    February 25, 2021 WebPage Regulatory News
    News

    ESAs Issue Statement on Application of Sustainability Disclosures Rule

    ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).

    February 25, 2021 WebPage Regulatory News
    News

    EC Consults on Crisis Management and Deposit Insurance Frameworks

    EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.

    February 25, 2021 WebPage Regulatory News
    News

    HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs

    HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.

    February 24, 2021 WebPage Regulatory News
    News

    EBA Proposes Standards for Supervisory Cooperation Under IFD

    EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.

    February 24, 2021 WebPage Regulatory News
    News

    BoE Addresses Banks in Scope of First Resolvability Assessment

    BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.

    February 24, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6629