European Savings and Retail Banking Group (ESBG)

ESBG generally agrees. However, legal Opinions are private documents and therefore should be disclosed by request or to a close list of parties involved in the transaction instead of public release. Making it public could also increase the cost of Legal Opinions due to reputational reasons.
ESBG agrees.
In ESBG’s opinion, no additional guidance on the application of Article 20(2) is needed
ESBG believes the transaction documentation should further specify the credit quality thresholds for transfer triggers. The trigger “insolvency of the seller” should also be clarified and be more specific about the level of deterioration of the credit quality of the Seller.
ESBG generally agrees. However, in ESBG’s opinion, the Original Lender should not be obliged to take responsibility of the representations and warranties, the Seller should have this possibility as well.

There are transactions where Seller and Original lender are different entities and the Seller wants to take responsibility of the representations as part of the commercial agreement between them. The most important thing is that an entity with enough credit quality takes responsibility of the representations and warranties. ESBG supports this if the Seller is a solvent and strong entity.
ESBG agrees.
ESBG agrees.
ESBG strongly advocates that only (i) similar underwriting, (ii) uniform servicing and (iii) the same asset category are considered as criteria for homogeneous pools. If in addition the proposed risk factors are applied, available pools for securitization are significantly decreased. Due to the risk factors lower available volumes especially for medium and smaller banks will in combination with the newly proposed intensive disclosure and STS notification requirements, it would result in the STS label not being used by most originators and will not lead in the intended revival of the European securitization market.

Existing European securitization transactions such as mixed amortising/bullet or collateralized/uncollateralized consumer or SME pools as well as retail/commercial auto leases have shown very strong performance even during the financial crisis years. Investors have been used to and able to analyse and perform robust due diligence of these pools for many years. In light of this, ESBG believes that further unnecessary differentiation based on risk factors will lead to concentration in smaller portfolios and prevent especially medium and smaller banks to compile an appropriate portfolio size and exclude them from securitization.

In addition, Article 20(8), sub paragraph 2 indicates that “The underlying exposures shall not include transferable securities, as defined in point (44) of Article 4(1) of Directive 2014/65/EU, other than corporate bonds that are not listed on a trading venue.” EBA should into consideration that under some national legislations, in particular the Spanish regulation, mortgage loans are transferred through securities by law (law 2/1981 and Royal Decree 716/2009).
No, there should be no further requirements in addition to the requirements specified in Consultation Paper about Homogeneity.

It is worth mentioning that there needs to be a bit more of flexibility on the interpretation of homogeneity. For instance, in SME’s securitization it should be always possible to mix mortgage loans and loans.
ESBG generally agrees. With regards to paragraph 29, it should not be necessary to explain the purpose of every change. Investor will request clarifications if necessary.
ESBG generally agrees.

With regards to paragraphs 37, 38.b) and 39, there should be a waiver for financial entities which are supervised by EBA. It should also be specified that this requirement should be done only at issuance and it is not necessary to update it during the life of the transaction.

With regards to paragraphs paragraph 38 a), b) and paragraph 39 it should be specified in which document the compliance of those requirements should be published.
ESBG generally agrees. However, exposures that were originated at the time of the securitized expo-sures should be used, but not selected because of prepayment. This might allow a wider concept of similar exposures.
In paragraph 49, the concept “comparable exposures” is still confusing. However, trying to detail the characteristics can make it so detailed that it will be difficult to find portions of exposures that are comparable. On the other hand, the regulator should interpret this concept in the widest possible sense.

For Art. 20(11) (c), ESBG would appreciate a definition of “significantly higher” in terms of credit assessment or credit score. Allowed deviation to homogenize transactions should be set. It should be specified where this information should be provided to the investor, in the Prospectus or in other document.
ESBG agrees.
The concepts of restructuring and refinancing are very wide. In the case of exposure originated by financial entities regulated by the EBA, the “restructuring” term should comply with the criteria of binding accounting circulars. Refinancing criteria between securitization and financial entity reporting should be consistent.
ESBG agrees.
With regards to paragraph 53(c.) it should be clear that granularity is not related to the capacity of payment of the debtor. Granularity makes reference to concentration risk more than origination policy risk.
ESBG strongly recommend to increase the 30% residual values hurdle in order to not exclude granular and in the past strongly performing European auto lease transactions with residual values from STS eligibility. A hurdle of 30% will ban most of these transactions.

In addition, with regards to paragraph 53(a.), the analysis of the solvency capacity of the debtor indicated in the origination policy risk detailed in the Prospectus should be enough.

When a loan has collateral, the risk profile is always taken into consideration but it does not mean that the payment capacity of the debtor has not been taken into account. Article 20(11) mitigates this risk because the PD takes into consideration the payment capacity of a debtor.

On the other hand, there can be contradictions between LTV policy and the residual value for predominant dependence on the sale of the asset.
ESBG generally agrees. However it should be specified in the paragraph 59 at what frequency the update should be done.
ESBG generally agrees.

With regards to paragraph 62(a), official interest rate index or benchmarks used in every jurisdiction should be allowed, such as VPO, ICO, etc.
ESBG agrees.
With regards to paragraph 71, using just one of the three proposed triggers should be enough to measure the deterioration of the quality of the portfolio.

Regarding point a), the entity which provides the internal rating should calculate the EL. These triggers are based on internal models from the originator entity. SSPE should just monitor the breaching of the trigger according to the EL provided by the seller.

Regarding point b), ESBG understands that this point refers to triggers based on a percentage of loans in arrears more than 90 days (not written off) upon the outstanding principal balance of Notes.

Also, ESBG would appreciate a proposed level for the “certain percentage” terms given in 71 a and b.
With regards to Article 21(6), further clarification should be made:
- a): Please, specify if credit quality means internal PD.
- c): The term value of the underlying exposure is very uncertain. Please specify how this value should be calculated.
- d): There should be more flexibility regarding the number of replenishment dates without full replenishment (at least two consecutive).
ESBG generally agrees. However, with regards to Article 21(7)(b), setting a backup servicer facilitator with a specific timeframe at the closing to look for a backup servicer if a trigger is breached should be enough to preserve the continuation of the servicer.
ESBG generally agrees. However, the requirements indicated in the section 8.2.7 make only sense when the Servicer has not expertise in Securitization or it is not a Financial Entity regulated by EBA. Also, it is not clear where this requested information should be specified.
ESBG agrees.
ESBG generally agrees. However usually securitised assets are serviced under the same procedures as if they were not securitised. Unless this criterion is different in any particular transaction, the Method of origination or creation of the Assets should be descriptive enough.
ESBG agrees.
ESBG generally agrees. However, further clarifications should be made, and specifically:
- It should mention static or dynamic. Depending on the product type, some information might be more useful than other, as the Rating Agencies indicate in their methodology. For example, Rating Agency prefers dynamic for Credit Cards.
- It may be possible that some kind of assets have less than five years of historical information. However, this kind of assets have been approved for the Supervisor, particularly when the assets have been granted by a Financial Entity.
ESBG agrees. It should be clarified that the sample determination is done at a prior stage than closing, therefore, the sample is based in a provisional portfolio. The final securitized portfolio will be selected from that provisional one.
ESBG generally agrees. However, current cash-flow model that appears currently in the prospectus should be enough to satisfy this requirement.
ESBG generally agrees. However it should always be an option but never an obligation. If the investor requests this specific information, it will be part of the terms of the deal negotiated between the issuer and the investor.
ESBG agrees.
ESBG agrees.
ESBG agrees.
ESBG response.pdf
European Savings and Retail Banking Group (ESBG)