EBA欧洲银行-BSG-Response-to-EBA-Discussion-Paper-2017-03-Significant_Risk_Transfer-in-Securitisations_19-December-2017_10页_258kb

EBA Banking Stakeholder Group (BSG) Summary on SRT Assessment in Securitisation

Core Content

The EBA Banking Stakeholder Group (BSG) has provided detailed feedback on the European Banking Authority (EBA)’s proposals regarding the assessment of Significant Risk Transfer (SRT) in securitisation transactions. The BSG supports the standardisation of the SRT assessment process but emphasizes the need for flexibility and simplification to avoid unnecessary market distortions.

Main Views and Key Information

1. Overview of Market and Supervisory Practices

• The BSG agrees that the EBA data on synthetic and traditional SRT securitisation transactions is broadly accurate.
• They highlight the importance of timely regulatory feedback to reduce market uncertainty.
• The BSG supports the development of a standardised SRT notification template, with separate templates for traditional and synthetic securitisation to avoid confusion.

2. Assessment of SRT and EBA Proposals

• The BSG appreciates the EBA's efforts to standardise the SRT assessment process but notes that the current proposals may be too prescriptive.
• They propose a simplified approach based on minimal vertical risk retention (e.g., 5%) and minimal capital retention to ensure alignment of interests between banks and investors.
• The BSG recommends the following timeline for the SRT assessment process:
  • Originator must notify the competent authority no later than 45 days before the expected closing date.
  • Competent authority must provide feedback at least 14 days before the closing date.
  • A non-response from the competent authority should be treated as a non-objection.
• They suggest incorporating SRT monitoring reporting into the COREP framework to avoid operational risks from ad hoc reporting.

3. Safeguards and Risk Transfer Metrics

• The BSG opposes the prohibition of time calls in traditional securitisation, arguing that they are not inherently problematic and should not lead to automatic rejection of SRT.
• They support the treatment of excess spread in traditional securitisation as a sound risk management tool and not subject to Pillar 1 own funds requirements.
• For synthetic securitisation, the BSG does not agree with the proposed 1250% risk weight or capital deduction for excess spread, as it leads to excessive capital requirements and penalises sound risk management.
• They also question the preference for the 'trap' mechanism over the 'use-it-or-lose-it' mechanism, arguing that the former results in less risk transfer.

4. Minimum Thickness of Protection Tranches

• The BSG agrees that a test for the minimum thickness of first loss tranches is appropriate.
• However, they object to the current tests, as they may inadvertently discard valid SRT transactions.
• They suggest applying the minimum thickness test before the closing of the transaction and clarify that the mezzanine tranche constraints should not override the first loss test.

5. Capital Approaches and SRT Tests

• The BSG does not support differentiation based on asset classes but suggests that tests should vary depending on the capital approach (e.g., SEC-ERBA, SEC-SA).
• They argue that the 50% threshold in Option 2 is not necessary and may lead to the rejection of otherwise viable SRT transactions.

6. Impact of New CRR Framework on SRT

• The BSG warns that the new CRR framework may discourage banks from entering SRT transactions, due to the increased capital requirements for senior tranches.
• They highlight that the incremental cost of selling additional tranches could make SRT transactions uneconomic for banks.

7. Regulatory Treatment of NPL Securitisation

• The BSG agrees with the EBA’s assessment of market practice regarding non-performing loan (NPL) securitisation.
• They point out that NPLs are no longer on the originator’s balance sheet, which reduces the NPL rate.
• The servicing role of the originator is a key factor in the structuring of NPL securitisation transactions.
• The BSG does not see special features in NPL securitisation that would require modifications to the SRT tests or alternative risk transfer mechanisms.

Conclusion

The BSG advocates for simplification and flexibility in the SRT assessment process to ensure that it supports economically efficient risk transfer without imposing undue regulatory burdens. They emphasize the importance of prudential alignment between banks and investors and warn against the potential for market distortion due to overly strict or prescriptive rules.