Shearman & Sterling LLP | FinReg | European Banking Authority Launches Consultation on Synthetic Securitizations Framework
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  • European Banking Authority Launches Consultation on Synthetic Securitizations Framework
    09/25/2019
    The European Banking Authority has launched a consultation on its proposed simple, transparent and standardized framework for synthetic securitization. The paper also seeks feedback from stakeholders on a proposed list of criteria that should be considered when labeling a synthetic securitization an STS and on the introduction of different regulatory treatments for STS synthetic securitizations. The EBA will hold a public hearing on October 9, 2019 and responses to the consultation should be provided by November 25, 2019.

    The consultation was launched under the EU Securitization Regulation, which requires that the EBA publishes a report on the feasibility of an STS framework for synthetic securitization, limited to balance sheet securitization. The Capital Requirements Regulation affords synthetic securitizations a limited preferential regulatory treatment, meaning that they can benefit from lower risk weights, provided that certain conditions are met. The EBA’s proposals would establish preferential treatment for securitizations that are deemed simpler, more standardized and more transparent than other types of synthetic securitization. The paper includes a detailed set of criteria for determining the simplicity, standardization and transparency of qualifying securitizations and outlines the rationale for applying a different regulatory treatment to them.

    View the EBA's Discussion Paper on Synthetic Securitization.

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    TOPIC: Derivatives