EBA欧洲银行-EBA-work-on-qualifying-securitisation-EBA-Public-Hearing-Dec-2-2014_10页_1mb

EBA Discussion Paper on Simple, Standard, and Transparent Securitisations

Core Content

The European Banking Authority (EBA) published a discussion paper in 2014 on the development of a framework for Simple, Standard, and Transparent (SST) securitisations. The objective was to promote the recovery and stability of the EU securitisation market by identifying characteristics of 'high-quality' transactions and proposing regulatory capital treatment that reflects the varying risk levels of different securitisation products.

Mandate and Objectives

The EBA was mandated by the European Commission in January 2014 to:

• Identify characteristics that could define 'high-quality' securitisation transactions, focusing on:
  • Underlying assets
  • Structural features
  • Transparency features
• Assess the prudential appropriateness of granting preferential treatment to 'high-quality' transactions to support the EU securitisation market.

The timeline was aligned with the global agenda, with the EBA planning to submit final advice to the Commission in Q2 2015, following the expected Final Report from the BCBS/IOSCO Task Force on measures to revive securitisation.

Impediments in the Securitisation Market

Since the financial crisis, the EU securitisation market has faced several challenges:

• Post-crisis stigma due to defaults and lack of transparency.
• Macroeconomic environment limiting the availability of assets and loan demand.
• Alternative funding sources (e.g., central bank operations, covered bonds) reducing reliance on securitisation.
• Tightened credit rating agency policies.
• Reduced investor base.
• Regulatory uncertainty.

Risk-Sensitive Regulation

The EBA highlights that the securitisation market still suffers from a crisis stigma, especially from products like US sub-prime RMBS and CDOs. A one-size-fits-all regulatory approach is deemed inadequate as it fails to account for the different levels of complexity and risk.

To address this, the EBA proposes more risk-sensitive regulation that:

• Identifies mechanisms that contributed to the failure of certain securitisation processes.
• Calibrates capital charges based on the riskiness of the product.

Two-Stage Approach to Qualifying Securitisation

The EBA proposes a two-stage approach to qualifying securitisation, combining process criteria and underlying credit risk criteria:

[A] Process Criteria (SST Framework)

1. Simple: No excessive leverage, no active management, legal true sale, homogenous assets, full recourse, self-liquidation, no credit impaired borrowers, no transferable securities, at least one payment.
2. Standard: EU retention rules, appropriate hedging, no complex reference rates, early amortisation provisions, no acceleration triggers, counterparty replacement procedures, identified person, and servicing expertise.
3. Transparent: Prospectus Directive compliance, CRR disclosure, underlying documentation, documented delinquency management, mandatory external verification, historical default data, loan-by-loan data, and quarterly investor reporting.

[B] Underlying Credit Risk Criteria

• Underwriting standards.
• Granularity of the underlying portfolio.
• Minimum risk weights to ensure adequate capital coverage.

Capital Treatment for Qualifying Transactions

The EBA suggests differentiated regulatory capital treatment for qualifying securitisations, including:

1. Lower risk weights for qualifying positions compared to non-qualifying ones.
2. A flat risk weight floor of 15% for the most senior tranches at the CQS 1 level.

The calibration of capital requirements should:

• Reflect the new BCBS securitisation framework (to be published in December 2014).
• Address the allocation of capital among senior, mezzanine, and junior tranches.
• Consider the role of external ratings and rating agencies' policies in determining capital costs.

Stakeholder Consultation and Discussion

• The EBA consultation paper does not cover Asset-Backed Commercial Paper (ABCP) transactions.
• Stakeholders are invited to provide written feedback on criteria that could define simple, standard, and transparent ABCP products.
• The discussion at the EBA public hearing focused on:
  • Agreement with the identified impediments.
  • Support for the creation of a qualifying securitisation framework.
  • Evaluation of the two-stage approach and SST criteria.
  • Recommendations for capital requirement calibration.

This framework aims to restore confidence in securitisation by ensuring transparency, simplicity, and standardisation, while also addressing the prudential risks associated with the process and underlying assets.