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    EC Regulation on Homogeneity of Underlying Exposures in Securitization

    November 06, 2019

    EC published the Delegated Regulation 2019/1851 regarding the regulatory technical standards on the homogeneity of the underlying exposures in securitization. Regulation 2019/1851 supplements the Securitization Regulation (2017/2402) and its provisions deal with homogeneity for asset-backed commercial paper (ABCP) as well as non-ABCP securitizations. The Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

    To achieve robust due diligence by investors and to facilitate the assessment of underlying risks in accordance with the aims of the Securitization Regulation, the underlying exposures of a securitization should share similar risk profiles. Thus, Regulation 2019/1851 lays down uniform criteria to determine the homogeneity of a given pool of underlying exposures. For the purposes of Articles 20(8) and 24(15) of the Securitization Regulation, underlying exposures shall be deemed to be homogeneous where all of the following conditions are met:

    • They correspond to one of the asset types mentioned in Point (a) of Article 1 of Regulation 2019/1851.
    • They are underwritten in accordance with standards that apply similar approaches for assessing associated credit risk.
    • They are serviced in accordance with similar procedures for monitoring, collecting, and administering cash receivables on the asset side of the securitization special purpose entity.
    • One or more of the homogeneity factors are applied in accordance with Article 2 of Regulation 2019/1851.

     

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    Effective Date: November 26, 2019

    Keywords: Europe, EU, Banking, Securities, STS Regulation, Securitization, Securitization Regulation, Homogeneity, Credit Risk, Regulation 2019/1851, ABCP Securitization, Non ABCP Securitization, EC

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