Securitisation and Regulation News

EBA publishes final report on Significant Risk Transfer (SRT)

Today, the European Banking Authority (EBA) published the long-awaited final report on the significant risk transfer SRT under the mandate of Articles 244(6) and 245(6) of the Capital Requirements Regulation (CRR). Taking into account the results of EBA's September 2017 discussion paper on the SRT and further analysis, this report contains a number of detailed recommendations to the European Commission on the harmonisation of the handling and assessment of the SRT.

The report focuses in particular on three areas: First, the so-called structural features such as pro-rata amortisation, call options and other call rights, excess spread, hedging costs and credit events are covered. Secondly, it recommends clarifications on the SRT tests under the CRR and thirdly, it proposes uniform application and documentation requirements. The aim is to ensure that the rules on the recognition of SRT transactions are applied uniformly throughout the EU, to improve the assessment of regulatory recognition and thus to enhance transaction security for all parties involved. 

Especially against the background of increasing capital requirements for European banks due to the finalisation of Basel III in 2021 and the negative effects of the corona pandemic with increasing credit defaults in the real economy, the finalisation of the EBA report is in principle to be welcomed. Most of the recommendations contained in the report can be implemented by the EU Commission within the framework of a delegated legal act, other recommendations would be achieved by an amending regulation to the CRR. The extent to which the EBA's final report, which is now available, will therefore also depend on the decision of the EU Commission.

Click here for the EBA report SRT