EU Recommendations For STS Framework For Synthetic Securitization

The European Banking Authority has published a report on the feasibility of developing a framework for simple, transparent and standardized synthetic securitization that is limited to balance-sheet securitization under the EU Securitization Regulation.

The EBA is recommending:

• The establishment of a cross-sectoral framework for STS synthetic securitization that is limited to balance-sheet securitization;
• To be eligible for 'STS' status, a synthetic securitization must comply with the proposed STS criteria, including the criteria adapted appropriately for synthetic securitization;
• The European Commission should consider the potential for a differentiated capital treatment for STS balance-sheet synthetic securitization; and
• Any proposal for STS synthetic securitization should include a mandate to the EBA to monitor the functioning of the STS synthetic market.

The European Commission will consider the report and recommendations in preparing its own report and, if appropriate, legislative proposal.

View the EBA's report on a STS framework for synthetic securitization.

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