EBA consults on significant credit risk transfer for securitisation transactions

17 December 2013

The European Banking Authority (EBA) launched today a public consultation on draft Guidelines providing guidance to both originator institutions and competent authorities when assessing significant risk transfer (SRT) for securitisation transactions. These Guidelines will be part of the EU Single Rulebook in the banking sector and will ensure harmonised assessment and treatment of significant risk transfer across all EU Member States. The public consultation runs until 17 March 2014.

The EBA recognises that securitisation can be used as an effective credit risk transfer tool and for risk management purposes. If certain criteria are met, including the SRT requirements, originator institutions of a securitisation may consider the credit risk transfer in the calculation of own funds requirements. However, to avoid regulatory capital arbitrage, it is important that competent authorities and originator institutions consider a range of factors when assessing whether effective credit risk transfer has occurred and SRT requirements have been met in a given transaction when transferring the credit risk to an independent third party.

In this respect, the proposed Guidelines include (i) requirements for originator institutions when engaging in securitisation transactions for SRT; (ii) requirements for competent authorities to assess transactions that claim SRT; (iii) requirements for competent authorities when assessing whether commensurate credit risk has been transferred to independent third parties.

Consultation process

Comments can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 17.03.2014.

All contributions received will be published following the close of the consultation, unless requested otherwise.

A public hearing will take place at the EBA premises on 28 January 2014 from 14:00-16:00 UK time.

Background

The proposed draft Guidelines have been developed on the basis of Regulation 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms which mandates the EBA to issue guidelines and to monitor the range of practices in relation to the assessment and treatment of significant risk transfer.