On Friday 15 December, the European Banking Authority (EBA) launched public consultations on two sets of draft Regulatory Technical Standards (RTS): one laying down requirements on risk retention, the other specifying criteria for homogeneity requirements for the underlying exposures, in the context of the new European securitisation framework.
Readers may recall that securitisation is a technique that allows banks to reconfigure the loans they grant (mortgages or consumer lending) into financial market securities in order to resell them on the markets. The new EU regulation, which was adopted at the end of November (see EUROPE 11908), sets out criteria to label securitised products as 'simple, transparent and standardised' (STS).
The first draft RTS put forward for consultation aims to clarify the requirements upon originators, sponsors and original lenders relating to risk retention, to align interests and reduce the risk of moral hazard.
A number of provisions of the Commission's existing delegated regulation on risk retention - which will be replaced by the RTS - have not been included in the draft, for instance those on the requirements of diligence, lending policy and the disclosure of significant data, the EBA explains in a press release.
However, new provisions have been added and will also cover risk retention conditions, a prohibition on covering or selling the asset retained and conditions for exemptions for operations based on a clear, transparent and accessible index.
The second draft RTS lists a set of criteria for the underlying exposures in securitisation to be deemed homogenous in line with the requirement brought in by the new framework, namely: - securitisation must be underwritten according to similar underwriting standards, methods and criteria; - it must be serviced according to uniform servicing procedures; - it must fall within the same asset category and be further differentiated by the application of relevant risk factors.
Interested parties are invited to submit their comments online by 15 March 2018. A public hearing on the two drafts is also scheduled to be held in the EBA's headquarters in London on 19 February. (Original version in French by Marion Fontana)