Shearman & Sterling LLP | FinReg | EU Authorities Warn of Potential Loss of Preferential Capital Treatment for STS Securitizations
Financial Regulatory Developments Focus
This links to the home page
Blog
FILTERS
  • EU Authorities Warn of Potential Loss of Preferential Capital Treatment for STS Securitizations
    12/07/2020
    The European Supervisory Authorities have issued a press release warning of the change in the status of "simple, transparent and standardized" securitization transactions at the end of the Brexit transition period on December 31, 2020. The Securitization Regulation provides the criteria for identifying which securitizations will be designated as STS securitizations, a system to monitor the application of those criteria as well as common requirements on risk retention, due diligence and disclosure. Related amendments to the EU Capital Requirements Regulation set out the regulatory treatment of exposures to securitizations that are deemed to be STS securitizations. For a securitization to qualify as an STS securitization, the EU Securitization Regulation requires the originator, sponsor and securitization special purpose entity to be established in the EU. The ESA's announcement highlights that securitizations that currently meet the STS criteria may not do so from January 1, 2021, if one or more of the originator, sponsor or SSPE are established in the U.K. The loss of STS status will mean that the EU CRR preferential capital treatment is no longer available.

    The European Securities and Markets Authority will be working with EU national regulators to ensure that its database of STS securitizations is up to date as at January 1, 2021.

    View the ESA's press release.

    Return to main website.