EU Technical Standards On Homogeneity Conditions For STS Securitizations

Regulatory Technical Standards under the EU Securitization Regulation on the conditions for a securitization to be considered "homogenous" have been published in the Official Journal of the European Union. Homogeneity is one of the requirements for a securitization to be classed as a simple, transparent and standardized securitization or STS securitization. Exposures related to STS securitizations will attract lower risk weightings for firms subject to the Capital Requirements Regulation. The RTS will apply directly across the EU from November 26, 2019.

The RTS establish four conditions for the underlying exposures to be considered homogeneous: (i) they have been underwritten according to similar underwriting standards; (ii) they are serviced according to similar servicing procedures; (iii) they fall within the same asset category; and (iv) for a majority of asset categories, they are homogeneous with reference to at least one homogeneity factor. The adopted RTS then set out the list of homogeneity factors, which include type of obligor, ranking of security rights, jurisdiction or type of immovable property. The RTS are not substantively different from the RTS adopted by the European Commission in May this year.

There are numerous other technical standards, delegated regulations and guidelines that are due to be finalized under the Securitization Regulation, which will bring much needed clarity to the requirements. The Securitization Regulation is directly applicable across the EU to securities issued under securitizations on or after January 1, 2019. Securitizations issued before that date may be referred to as STS securitizations provided that they meet certain conditions. The amendments to the CRR have applied from January 1, 2019 as well but, for securitizations issued before January 1, 2019, the existing CRR provisions will apply until December 31, 2019.

View the RTS on the homogenous conditions for a securitization (Commission Delegated Regulation (EU) 2019/1851).

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