Featured Product

    EBA Opinion on Regulatory Treatment of NPE Securitizations

    October 23, 2019

    EBA published an opinion on the regulatory treatment of securitizations of non-performing exposures (NPEs). Securitizations can play an instrumental role in reducing NPE stocks in the balance sheets of credit institutions but such a role may be hindered by certain provisions in the EU securitization framework. The opinion recommends various amendments to the Capital Requirements Regulation (CRR) and to the Securitization Regulation to remove the identified constraints. The opinion is addressed to EC and contributes to the objectives of the action plan of the European Council to tackle non-performing loans in Europe.

    The opinion explains that the regulatory framework imposes certain constraints on credit institutions using securitizations to dispose off NPE holdings. The constraints include: 

    • Very high capital requirements on investor credit institutions under CRR. The pre-eminent securitization capital methods (the SEC-IRBA and the SEC-SA) and the look-through approach lead to disproportionately high capital charges on NPE securitization positions when compared to the relevant benchmarks and, as a result, tend to overstate the actual risk embedded in the portfolio.
    • Compliance challenges for certain risk retention and due diligence requirements under the Securitization Regulation.

    The opinion, therefore, recommends that EC should consider a number of targeted amendments to CRR and the Securitization Regulation to remove these constraints while maintaining the integrity of the prudential framework. EBA also recommends EC to take action to clarify where the caps for securitizations laid down in Articles 267 and 268 of the CRR are applied to NPE securitizations. Furthermore, the potential amendments to CRR should be, to the extent possible, consistent with the comparable international standards. NPE securitizations are transactions backed by pools comprised exclusively, or almost exclusively, of NPEs at the time of inception. Though structurally similar to other securitizations, the underlying assets have distinctive features that set NPE securitizations apart from those from an economic substance perspective, namely due to the large discount on their nominal value and their specific underlying risks. 

     

    Related Links

    Keywords: Europe, EU, Banking, Securitization, Credit Risk, NPL, Opinion, CRR, Securitization Regulation, Non-Performing Exposures, EC, EBA

    Featured Experts
    Related Articles
    News

    EC Regulation Sets Out Standards for Reporting and Disclosure of MREL

    EC published the Implementing Regulation 2021/763 that lays down implementing technical standards for supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities (MREL).

    May 12, 2021 WebPage Regulatory News
    News

    EBA Report Notes Loan Origination Should Remain in Supervisory Focus

    EBA published a report that examines the convergence of prudential supervisory practices in 2020 and offers conclusions of the EBA college monitoring activity.

    May 12, 2021 WebPage Regulatory News
    News

    APRA Decides to Standardize Submission Date for Quarterly Reporting

    APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.

    May 11, 2021 WebPage Regulatory News
    News

    ECB Working Group Publishes Recommendations on EURIBOR Fallbacks

    The private sector working group of ECB on euro risk-free rates published the recommendations to address events that would trigger fallbacks in the Euro Interbank Offered Rate (EURIBOR)-related contracts, along with the €STR-based EURIBOR fallback rates (rates that could be used if a fallback is triggered).

    May 11, 2021 WebPage Regulatory News
    News

    Bundesbank Publishes Supporting Documentation for Reporting by Banks

    Bundesbank published a list of "EntryPoints" that are accepted in its reporting system; the list provides taxonomy version and name of the module against each EntryPoint.

    May 11, 2021 WebPage Regulatory News
    News

    EBA Publishes Phase 1 of Reporting Framework 3.1

    EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).

    May 10, 2021 WebPage Regulatory News
    News

    IOSCO Sees Support for Mandatory Sustainability Reporting

    The Sustainable Finance Taskforce of IOSCO held two roundtables, with global stakeholders, on the IOSCO priorities to enhance the reliability, comparability, and consistency of sustainability-related disclosures and to collect views on the practical implementation of a global system architecture for these disclosures.

    May 10, 2021 WebPage Regulatory News
    News

    APRA to Finalize Capital Adequacy Standard Revisions by January 2022

    Asia Pacific Australia Banking APS 111 Capital Adequacy Regulatory Capital Basel RBNZ APRA

    May 10, 2021 WebPage Regulatory News
    News

    ESMA Issues Guidelines on Outsourcing to Cloud Service Providers

    ESMA published the final guidelines on outsourcing to cloud service providers.

    May 10, 2021 WebPage Regulatory News
    News

    EBA Publishes Data on Deposit Guarantee Schemes

    EBA published annual data for two key concepts and indicators in the Deposit Guarantee Schemes (DGS) Directive—available financial means and covered deposits.

    May 10, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6967