Securitisation and Regulation News

TSI response on EBA Consultation of the RTS Homogeneity

The consultation of the European Banking Authority (EBA) of 28 July 2022 on the RTS Homogeneity expired last Friday. The topics are the adjustment of the homogeneity factors and the extension of the RTS to synthetic securitisations. For an overview of the contents, see the TSI Securitisation and Regulation News of August 2022. Together with its stakeholders, TSI has prepared a response on the individual consultation questions of the EBA. We present the most important points of view of the response below:

Main statements of the TSI response

  • The TSI considers the proposed adjustment regarding the homogeneity factor "type of obligor" for corporate loans to be inappropriate. The EBA provides for a general limit between SME and large corporates at EUR 500 million annual turnover. This limit is not compatible with common practice and runs counter to standard banking processes. It would primarily lead to smaller and less granular portfolios with a correspondingly lower risk diversification. In addition, there is still no possibility to securitise portfolios of SMEs and large corporates from different EU countries, which are particularly typical for synthetic securitisations, in an STS-eligible manner.
  • The Draft RTS only provides for a very limited grandfathering period (one year after the RTS enters into force) for synthetic securitisations. This would very likely lead to many existing transactions losing their STS status when the grandfathering period expires - the risk of a wave of regulatory calls would thus be very high and the ensuing turmoil in the market certainly unintentional. 

Next Steps 

From TSI's perspective the feedback from the market on the consultation was very clear and unanimous. The EBA will now consider the responses received to its consultation and subsequently publish a final draft. It is to be hoped that the quite substantial criticisms of the proposed RTS will be taken up and adequately considered in the final draft. 

To the TSI response to the EBA consultation on the RTS Homogeneity