Report on STS Framework for Synthetic Securitisation under Article 45 of Regulation (EU) 2017/2402

Summary:

Report published by the European Banking Authority (EBA) on 6 May 2020, setting out a number of recommendations concerning the development of  a simple, transparent and standardised (STS) framework for synthetic securitisation.

Further information:

The Report examines the rationale behind the STS synthetic product and assesses the positive and negative implications of its possible introduction. Based on this assessment, the EBA recommends to establish a cross-sectoral framework for STS synthetic securitisation that is limited to balance-sheet securitisation.

Among the proposed STS criteria are requirements on simplicity, standardisation and transparency similar to those applied to traditional securitisation. In addition, the Report includes other relevant criteria for synthetic transactions, such as those for mitigating counterparty credit risk or for addressing various structural features of synthetic securitisation.

Finally, the Report provides conclusions on the prudential treatment of STS securitisation, and in particular, the pros and cons of a potentially differentiated capital treatment for this type of securitisation to inform the European Commission’s future legislative proposal for a STS synthetic securitisation.

Official

EU EBA: Press Release, 06/05/2020: EBA proposes framework for STS synthetic securitisation https://eba.europa.eu/eba-proposes-framework-sts-synthetic-securitisation

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