Shearman & Sterling LLP | Financial Regulatory Developments Focus | European Commission Adopts Technical Standards on Homogeneity Conditions for STS Securitizations
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  • European Commission Adopts Technical Standards on Homogeneity Conditions for STS Securitizations
    05/28/2019
    The European Commission has adopted draft Regulatory Technical Standards under the EU Securitization Regulation on the conditions for a securitization to be considered homogenous. 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 new EU securitization framework has applied across the EU since January 1, 2019.

    The adopted RTS are different from the final draft RTS submitted by the European Banking Authority. However, like the EBA's final draft RTS, the adopted 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 adopted RTS will apply directly across the EU 20 days after they have been published in the Official Journal of the European Union.

    View the adopted RTS.

    View details of the EBA's final draft RTS.

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