31 December 2010
The Committee of European Banking Supervisors (CEBS) has today published its final guidelines on the application of Article 122a of the Capital Requirements Directive (CRD).
Article 122a of the CRD provides new requirements to be fulfilled by credit institutions when acting in a particular capacity, such as originator or sponsor, and also when investing in securitisations. These include retention on an on-going basis of a material net economic interest of not less than 5% (so called "skin in the game"), due diligence and disclosure.
Following the amendments made to the CRD relating to securitisations, CEBS is required to issue guidelines ensuring convergence of supervisory practices with regard to the application of Article 122a. In particular, guidance is required on the implementation of the retention clause by the originator, the sponsor or original lender and on the due diligence and risk management practices credit institutions are asked to carry out when investing in securitisation positions.
Besides fostering a common understanding among the competent authorities across the EEA on the implementation and application of Article 122a, the current guidelines provide clarity as well as greater transparency for market participants in order to assist compliance by credit institutions with the relevant requirements of the Directive. In particular, CEBS provides an updated framework for competent authorities to apply an additional risk weight for infringements of the provisions of Article 122a.
In delivering its guidelines, CEBS has benefited from the views gathered from market participants through the responses to the public consultation (CP40) which ended on 1 October 2010, and through a public hearing held on 22 July 2010.
CEBS expects its Members to adopt the guidelines into their national supervisory framework and apply them from 1 January 2011, that is, when the new Directive provisions come into force.