Agreement on EU regime for STS securitisation

Agreement has been reached by the 24 states of the European Union on a new regulatory regime for Simple, Transparent and Standardised (STS) securitisation.  We expect legislation will be presented and passed by the European Parliament in the final quarter of 2017.  The new regime will commence in January 2019.  

The new regime will allow European banks who invest in STS securitisation to use a lower regulatory capital weighting  for the exposure compared to non-STS securitisation exposures.  

The law will require that to be eligible for STS designation the originator, sponsor and SPV must be located within the EU. The European law does not provide for any recognition of STS regimes in “third countries” which will mean that Australian, US and UK securitisations will not be eligible for the lower capital weighting should European banks invest in those transaction after 2019.  

The ASF views the exclusion of a mutual recognition option under the European legislation to be disappointing given G20 and global regulators rhetoric to harmonise post crisis regulatory reform of global securitisation markets. 

For more details please contact Chris Dalton.

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