EBA欧洲银行-2014-03-17-BSG-Opinion-on-EBA-CP-2013-45_6页_170kb

EBA Consultation Paper Summary: Draft Guidelines on Significant Credit Risk Transfer

Core Content

The EBA Consultation Paper (EBA/CP/2013/45) outlines draft guidelines on Significant Credit Risk Transfer (SRT), focusing on the application of Article 243 and Article 244 of Regulation (EU) No 575/2013 (CRR). These guidelines aim to promote consistency in supervisory practices across the European Union, reduce systemic risk associated with securitizations, and ensure a level playing field for financial institutions.

Main Views and Key Points

1. General Comments and Background

• The BSG (Banking Stakeholder Group) supports the initiative to standardize the treatment of credit risk transfer in securitizations.
• The 2008 financial crisis highlighted that some financial entities in the US issued securitizations to third parties without real credit risk transfer, leading to systemic risk.
• Basel III introduced more stringent criteria for SRT, but allowed substantial regulatory discretion in its application.
• The guidelines aim to foster convergence in supervisory practices across the EU.
• The BSG acknowledges the administrative burden on originators, including increased information requirements, changes in governance, and new procedures.

2. Main Aspects of the Guidelines

The guidelines provide two main types of guidance for competent authorities:

1. Assessment of transactions where originator institutions technically meet the SRT rules but fail to achieve commensurate risk transfer to an independent third party (e.g., due to high credit protection costs).
2. Assessment of transactions where originator institutions do not technically meet the SRT criteria but can justify the risk transfer through alternative methods.

Additionally, the guidelines introduce new requirements for originator institutions:

• General requirements for all SRT transactions: to provide requested information and establish governance and policies around SRT assessments.
• Specific requirements for those using the alternative method: to demonstrate the justification for risk transfer.

3. Initial Assessment

• The BSG welcomes the guidelines as they contribute to harmonization and comparability of supervisory approaches.
• However, it emphasizes the additional costs for originators, including information provision and governance changes.
• The principle of proportionality should be carefully applied to avoid unnecessary burdens on institutions.

4. Discussion Points

• Scope of guidelines: The BSG questions whether the guidelines extend beyond the CRR mandate, particularly regarding governance and policies.
• External credit assessments: The guidelines require originators to assess reliance on external credit assessments. The BSG suggests exceptions for cases where there is no doubt about the quality of assessments (e.g., experienced ECAI) or where proportionality applies.
• Quantitative indicators: The BSG recommends the inclusion of quantitative indicators in the following areas to support supervisory decision-making and promote harmonization:
  • Thickness of securitization tranches (both mezzanine and first loss tranches).
  • High cost of credit risk transfer.
  • Deviation from expected performance of the underlying pool should not lead to reassessment of SRT.
• State guarantee schemes: The BSG suggests clarifying that the "no connection/no affiliation" test should not apply to existing transactions involving state guarantee schemes, where local governments may have held stakes in the relevant institutions.

Conclusion

The BSG supports the harmonization of SRT assessment under the CRR, recognizing the benefits of a consolidated securitisation market. However, it stresses the need for careful implementation to avoid unnecessary burdens on originators and to ensure practical and consistent application of the guidelines. The BSG also calls for quantitative guidance and clarity on specific cases, such as state-backed transactions, to prevent retroactive disqualification and uncertainty in risk-weighted asset calculations (RWAs).