On 12 December, the rapporteur of the European Parliament (EP), Ralf Seekatz, published his draft report on the Securitisation Regulation and the Capital Requirements Regulation (CRR). With this, he lays the foundation for the Parliament’s position on the proposals presented by the European Commission last summer to revise the securitisation framework (see TSIkompakt of 17 June). Encouragingly, the EP rapporteur goes beyond the European Commission’s proposals and seizes the opportunity to significantly improve securitisation regulation. Owing to procedural requirements, the amendment proposals are presented in a highly technical manner, which makes it difficult to gain a quick overview.
Key Points of the European Parliament
Below we summarise, from our perspective, the most important amendment proposals of the EP:
CRR:
- Withdrawal of the inappropriate definition of senior positions proposed by the Commission.
- The new resilience criterion should – as originally envisaged by the EBA – apply only to synthetic securitisations; traditional securitisations should always be classified as resilient.
- Determination of the resilience criterion only at the time of origination.
- The distinction between originators or sponsors and investors with regard to risk weights should be abolished.
- Risk weights are sensibly reduced (p-factors and risk-weight floors for SEC-SA and SEC-IRBA, as well as the fixed risk weights in SEC-ERBA).
Securitisation Regulation:
- The proposed amendment to the definition of public securitisations is rightly withdrawn.
- Traditional securitisations no longer have to be structured through an SPV in order to meet the STS criteria, an important point particularly for smaller transactions.
- The criteria for insurers as STS-compliant guarantee providers for synthetic securitisations are relaxed; further adjustments may still be required.
- Several STS criteria are designed in a more practical, market-oriented manner.
However, it should also be noted that the proposals regarding the Securitisation Regulation require further improvement in the following areas:
- According to the EP, mandatory reporting of private transactions to a securitisation repository should not be included. In our view, this contradicts the objective of increasing transparency in the private market.
- The additional sanctions for investors should be retained.
- No due diligence relief is envisaged for EU investors in third-country transactions.
Overall, however, particularly with regard to risk weights for securitisations, the EP rapporteur’s proposal remains a highly welcome and constructive contribution.
Next Steps
Members of the European Parliament now have time until 27 January to submit amendments. Subsequently, Parliament will begin work on agreeing a position capable of securing a majority, which is expected to be completed by May 2026. The trilogue negotiations will then commence. The rapporteur’s draft report is therefore only a first – but necessary – step in the right direction, offering an opportunity to strengthen the European securitisation market.
Rapporteur’s reports: