A step closer to an EU STS framework for balance sheet synthetic securitisations – European Commission legislative proposals published
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At the end of July 2020, the European Commission published legislative proposals for a package of measures dubbed the “Capital Markets Recovery Package”. The proposals are aimed at supporting recovery from the economic shock caused by the COVID-19 pandemic through targeted amendments to existing financial legislation. Recognising that securitisation can foster economic recovery, and that risk transfer from banks to the non-banking sector is a key objective of the Capital Markets Union, the proposals include the introduction of a regulatory regime for simple, transparent and standardised (STS) synthetic securitisations via amendments to the EU Securitisation Regulation1 and Capital Requirements Regulation.2
The European Commission proposals, in line with the EBA recommendations, support the creation of a cross-sectoral STS framework for balance sheet synthetic securitisations and adopt, via amendments to Article 270 of the Capital Requirements Regulation, the differentiated prudential treatment for such transactions that was outlined (albeit not positively recommended) in the EBA report of May 20203.
This briefing provides an overview of the key points to note about the European Commission proposals and it includes three Appendices with extracts from the EBA report and the new legislative proposals, including comparison and mark-ups of the European Commission proposals against the EBA recommendations.
This publication is co-authored by Jo Goulbourne Ranero, a consultant in our London regulatory practice with over 18 years’ experience with the firm, advising on a wide range of financial services regulatory matters, with a particular focus on regulatory capital (structuring to optimise, and providing and advice and opinions in respect of, institutions’ capital, liquidity, leverage and large exposures positions - EU CRR, Basel, PRA/FCA & ECB requirements) and securitisation regulation.
Footnotes:
- See the text of the EU Securitisation Regulation proposals at: https://ec.europa.eu/finance/docs/law/200724-securitisation-review-proposal_en.pdf
- See the text of the Capital Requirements Regulation proposals at: https://ec.europa.eu/finance/docs/law/200724-crr-review-proposal_en.pdf
- See the text of the EBA report at: https://eba.europa.eu/eba-proposes-framework-sts-synthetic-securitisation