Background
Article 26a(2) of the Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation (the “EU Securitisation Regulation”) provides that the EBA (in close cooperation with ESMA and EIOPA), may adopt, guidelines and recommendations on the harmonised interpretation and application of the requirements for simple, transparent and standardised (“STS”) on-balance-sheet securitisations. On 27 May 2024, EBA issued a final report (the “Final Report”) containing such guidelines (the “On-Balance Sheet STS Guidelines”).
The EBA had previously issued guidelines and recommendations on the harmonised interpretation and application of the STS requirements for both:
non-asset-backed commercial paper (ABCP) (pursuant to Article 19(2) of the EU Securitisation Regulation (EBA/GL/09); and
ABCP securitisation (pursuant to Article 23(3) of the EU Securitisation Regulation (EBA/GL/2018/08) (the “ABCP and non-ABCP STS Guidelines”).
Compliance with STS criteria is one of the prerequisites for the application of a more risk-sensitive regulatory treatment of exposures to securitisations under the EU securitisation framework for originator institutions (updated by the Capital Markets Recovery Package in 2021).
Purpose and Content of the Final Report
The purpose of the On-Balance Sheet STS Guidelines is to promote a uniform interpretation and application of the criteria on simplicity, standardisation, transparency and of specific requirements concerning the credit protection agreement, the third-party verification agent and the synthetic excess spread applicable to STS on-balance-sheet securitisation. As is the same for the ABCP and non-ABCP STS Guidelines, they are intended to facilitate a common understanding of the criteria by originators, original lenders, securitisation special purpose entities (SSPEs), investors, competent authorities and third-party verification agents verifying STS compliance throughout the European Union.
The Final Report also includes targeted amendments to the ABCP and non-ABCP STS Guidelines, to ensure that the interpretation provided by the EBA is consistent across the three sets of guidelines.
As a whole, the On-Balance Sheet STS Guidelines and the amended the ABCP and non-ABCP STS Guidelines aim to ensure the proper implementation of the EU securitisation framework, thereby contributing to a safe and sound EU securitisation market.
Next Steps
The On-Balance Sheet STS Guidelines are currently being translated into the official languages of all the Member States. They will apply 2 months after the last translation.
Consolidated versions of the ABCP and non-ABCP STS Guidelines will also be published in due course; they will enter into force two months following this publication.
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