Securitisation and Regulation News

Position paper on EBA consultation STS for synthetic securitisations

In a joint position paper on the EBA consultation, the associations of the German banking industry and TSI have taken a stand on how STS can be applied for synthetic securitisations. The publication of the EBA on 25.09.2019 is remarkable for two reasons: First, it contains a comprehensive analysis of the positive development and strong performance of the European synthetic securitisation market, which has played an important role in banks' capital management since the beginning of the financial crisis. Second, the EBA has presented a detailed and well thought-out proposal for the analogue application of STS criteria for synthetic securitisations.

SME finance and securitisations

In particular, the European SME sector, which is largely financed through credit, should benefit from all types of credit programmes that can be financed through securitisation markets rather than being excluded. Synthetic securitisations are an essential part of securitisation markets and an important instrument of credit risk transfer. They should therefore be included in a framework for simple, transparent and standardised (STS) securitisations.

Position of the German banking industry and TSI

In view of the very positive acceptance of the STS label in traditional securitisations by market participants, we recommend building on this development. Further fragmentation and complexity of the rules should be avoided. For this reason, the existing STS framework should be applied as far as possible to synthetic securitisations. This concerns both the STS criteria themselves and the regulatory benefits associated with the STS label, such as reduced capital risk weights. In general, a securitisable exposure portfolio should be treated consistently and regardless of whether a true sale securitisation is carried out (regardless of whether exclusively for financing purposes or with risk transfer) or whether a synthetic securitisation is chosen (focus on risk transfer). However, certain adjustments to the STS criteria are necessary to take account of the special features of synthetic transactions. In addition, the required level of transparency should be carefully analysed. The high STS standard with regard to transparency vis-à-vis the parties involved must not lead to broad disclosure obligations vis-à-vis uninvolved third parties.

Position Paper TSI and the German Credit Industry (DK)
To the EBA Discussion Paper of 24 September 2019