On September 30, 2015, the European Commission published two proposed Regulations as part of its Capital Markets Union initiative which aim to revive the EU securitization markets. The proposed Regulation on common rules on securitization and creating a European framework for simple, transparent and standardized securitization (referred to as STS Securitization) sets out the eligibility criteria for STS securitizations such as risk retention rules, due diligence and disclosure requirements. The proposed Regulation also includes requirements for supervisory requirements, amendments to other EU legislation to ensure consistency, an exemption, subject to certain criteria being met, from the clearing obligation for OTC derivative contracts entered into by covered bond entities and securitization special purpose entities and rules on third country securitizations. The second proposed Regulation would amend the CRR to revise capital requirements for banks and investment firms originating, sponsoring or investing in securitizations. The objective of the proposals is to align the CRR provisions with the revised Basel framework of 2014 as was recommended by the EBA in its report on qualifying securitizations in July. The proposed revisions to the CRR seek to adopt a more risk-sensitive approach to STS Securitization which is currently in the early stages of development at international level. Both legislative proposals are subject to the European legislative process.
The proposed STS Securitization Regulation is available at: http://ec.europa.eu/finance/securities/docs/securitisation/com-2015-472_en.pdf.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.