Does an ABCP programme meet the definition under Article 242(11) of Regulation (EU) No 575/2013 (CRR) as amended by Regulation (EU) 2017/2401 in any case, whether or not the credit risk of the financial assets acquired by the conduit is tranched into different risk categories at the programme level?

The new regulation 2017/2402, which is referred to in Article 242 of the CRR as amended by Regulation (EU) 2017/2401:

(1) confirms in the definition of a securitisation (Article 2(1)) and of a tranche (Article 2(6)) that the fundamental characteristics of a securitisation include:

a. exposure to the credit risk of a pool of exposures and

b. distribution of the credit risk of the securitised exposures into different risk categories, or tranching of risk, “without taking account of credit protection provided by third parties directly to the holders of [securitisation] positions”; and

(2) in substance prohibits partially supported ABCP conduits in its Article 8 which impose a ban on resecuritisation (given that such conduits by nature establish a second layer of tranching at the programme level and therefore should be considered as resecuritisation); and finally,

(3) implies, in its Article 8 among others, that fully supported ABCP conduits, whose “credit enhancement does not establish a second layer of tranching at the programme level”, remain in the scope of the new securitisation framework, even if such an ABCP programme, based only on the definition of a securitisation and of a tranche, would not qualify as a securitisation given the absence of credit risk tranching at the programme level (if such an ABCP conduit was not considered to be a securitisation by the regulation there would be no need to clarify that it should not be considered as a re-securitisation).

Article 2(7) of Regulation 2017/2402, referred to in Article 242 CRR (as amended by Regulation (EU) 2017/2401) defines the ‘asset-backed commercial paper programme’ or ‘ABCP programme’ as a programme of securitisations the securities issued by which predominantly take the form of asset-backed commercial paper with an original maturity of one year or less.

Such provision implies that the presence of securitisations at transaction level is a necessary component of the ABCP programme.

If, in addition to the tranching that already occurs at transaction level, a further tranching was to occur at programme level, this would constitute a second layer of tranching, thus constituting a resecuritisation, which is not permitted by Article 8 of Regulation 2017/2402.