EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple, transparent, and standardized (STS) on-balance-sheet securitizations that feature non-sequential amortization.
The published regulatory standards have been developed in accordance with Article 26c(5) of the amended Securitization Regulation (Regulation 2021/557). The amended Securitization Regulation sets out that sequential amortization shall be applied to all tranches of STS on-balance-sheet securitizations. However, as a derogation, STS on-balance-sheet securitization might feature non-sequential amortization to avoid disproportionate costs of protection, as long as some minimum performance-related triggers determine the application of sequential amortization. This will ensure that tranches providing credit protection have not already been amortized when significant losses occur at the end of the transaction. The draft regulatory technical standards specify the minimum backward and forward-looking triggers and establish criteria to be fulfilled by the parties involved in the securitization to set the level of the triggers.
In case of the minimum backward-looking triggers, the parties involved in the securitization shall test the effectiveness of the trigger in a back-loaded loss distribution scenario, taking into account the losses expected over the maturity of the transaction at inception. The draft regulatory technical standards also contain transitional provisions in respect of the STS on-balance-sheet securitizations, which include triggers related to the performance of the underlying exposures in accordance with Article 26c(5) of the Securitization Regulation. The final draft regulatory standards will be submitted to the European Commission for adoption. Following the submission, the standards will be subject to scrutiny by the European Parliament and the Council and the regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Related Links
Keywords: Europe, EU, Banking, STS Securitization, Securitization Regulation, Regulatory Technical Standards, Basel, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Next Article
ESAs Seek Clarifications on Interpretation of SFDRRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards