As foreseen in the Securitisation Regulation, the European Banking Authority (EBA) has presented its consultation paper on „STS Framework for Synthetic Securitisations“ in Berlin at the TSI Congress 2019. It needs to be clarified whether and how synthetic securitisations can be included in the STS framework and subsequently provided with lower risk weights and other simplifications if necessary.
Next important step to complete securitisation regulation
The successful establishment of STS as a quality segment in true sale transactions, the very extensive market for synthetic transactions as described in the consultation paper, but also the further increasing demand in the banking sector for efficient and sustainable instruments for capital management in times of increasing capital demand clearly indicate that STS should also be established for synthetic transactions.
Christian Moor, Senior Policy Expert, EBA, positioned himself yesterday on a panel on this topic: „Our consultation paper also answers the question why we believe that synthetic securitisation is one important out of several tools for banks to manage capital and that STS can add value in terms of standardisation and transparency.“
Steve L. Gandy, Managing Director, Head of Private Debt Mobilisation, Notes and Structuring, Santander Global Banking & Markets confirms: „The proposal from EBA is very helpful and well thought through, but it would be incongruous to adopt STS criteria for synthetic securitisation without also providing the preferential capital treatment afforded to traditional securitisations.”