EBA consults on its proposals to create a STS framework for synthetic securitisation

25 September 2019

The European Banking Authority (EBA) launched today a 2-month public consultation on its proposals for a simple, transparent and standardised (STS) framework for synthetic securitisation. This ground-breaking work on synthetic securitisation unveils new data and insights into post-crisis market developments and trends, including data on historical default and loss performance. It also proposes a list of criteria to be considered when labelling the synthetic securitisation as ‘STS'. While the Discussion Paper does not provide any recommendations on any potential differentiated regulatory treatment, it does seek stakeholders' input about the possibility, its potential impact and other considerations. The consultation runs until 25 November 2019.

The proposed STS criteria for balance sheet synthetic include requirements on simplicity, standardisation and transparency similar to those applied to traditional securitisation. In addition, the criteria need to meet a number of synthetic-specific requirements, such as those on mitigating counterparty credit risk, including on eligible protection contracts, counterparties and collateral; those addressing various structural features of the securitisation transaction; and those ensuring that the framework only targets balance sheet synthetic securitisation.

The paper also examines the rationale of the STS synthetic product and assesses positive and negative implications of its possible creation and label as "STS".

Finally, the discussion paper provides a balanced analysis of possible introduction of a limited and clearly defined differentiated regulatory treatment of the STS synthetic securitisation.

Stakeholders are invited to comment on the possibility of introduction of an STS framework for synthetics as well as on the regulatory treatment and potential market impact of the proposals laid out in the discussion paper.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 25 November 2019.

 A public hearing will take place at the EBA premises on 9 October 2019 from 14.00 to 16.00.

All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis

The Discussion Paper has been developed in response to a mandate assigned to the EBA in the Article 45 of the Securitisation Regulation (Regulation (EU) 2017/2402), which requires the EBA, in close cooperation with ESMA and EIOPA, to publish a report on the feasibility of a specific framework for simple, transparent and standardised (STS) synthetic securitisation, limited to balance sheet securitisation.

Adam Farkas steps down as EBA Executive Director

17 September 2019

Adam Farkas has announced his resignation from his post as Executive Director of the European Banking Authority (EBA), which will be effective on 31 January 2020.

The EBA's Board of Supervisors (BoS) has conducted an assessment of the potential conflict of interest arising from Adam Farkas' proposed future employment at the Association for Financial Markets in Europe (AFME). In compliance with the EBA staff regulations and ethics rules, the BoS has decided that Adam Farkas will no longer participate in the EBA's policy and supervisory work and will focus exclusively on operational matters until 31 October 2019. For the remainder of his notice period, his duties will be reallocated until 31 January 2020.

The BoS has also decided to apply conditions on his future employment. Adam Farkas cannot engage in lobbying or advocacy of the EBA, or have professional contacts with EBA staff, for 24 months after leaving the Authority. Mr Farkas cannot advise his new organisation's members or otherwise contribute to the activities of his new organisation on topics directly linked to the work he carried out during his last three years of service for 18 months after leaving the EBA.

José Manuel Campa, EBA Chairperson praised the contribution Adam Farkas has made in building up the EBA from its creation in 2011, ensuring its smooth and sound operation as it grew, and throughout its move in June 2019 from London, UK to its new seat in Paris, France.

The EBA will soon start the recruitment process of a new Executive Director.

Background

Adam Farkas was appointed as first Executive Director of the EBA in 2011 and his mandate was renewed in 2015 for another five-year term.

EBA issues revised list of validation rules

10 September 2019

The European Banking Authority (EBA) issued today a revised list of validation rules in its Implementing Technical Standards (ITS) on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems. Competent Authorities throughout the EU are informed that data submitted in accordance with these ITS should not be formally validated against the set of deactivated rules.

EBA adds the Securitisation Regulation to its online Interactive Single Rulebook and Q&A tools

04 September 2019

The European Banking Authority (EBA) has updated its online Interactive Single Rulebook and Q&A tool with the inclusion of the "simple, transparent and standardised" (STS) Securitisation Regulation, (EU) 2017/2402.

Users will now be able to review on the EBA website all the EBA's final Technical Standards and Guidelines associated with the Securitisation Regulation by navigating through this text on an article-by-article basis. The inclusion of the Securitisation Regulation into the Q&A tool will also allow users to submit any questions they may have on the application of this Regulation and the EBA's work related to it.

The purpose of the Q&A tool is to support the consistent and effective application of the EU regulatory framework for the banking sector, the Single Rulebook. The Q&A tool also contributes to the completion of the legislative framework by ensuring any remaining regulatory loopholes are addressed. The process is based on close and on-going interaction with the European Commission so that responses in the Q&A tool are fully consistent with EU legislative texts.

 

EBA publishes phase 2 of its technical package on reporting framework 2.9

21 August 2019

The European Banking Authority (EBA) published today a new release of the reporting framework 2.9, which includes the validation rules, the DPM data dictionary and XBRL taxonomies. The update reflects the amendments to the Implementing Technical Standards (ITS) on supervisory reporting related to FINREP and those to the ITS on benchmarking of internal approaches, both published on 16 of July 2019.

EBA publishes clarifications to the fifth set of issues raised by its Working Group on APIs under PSD2

14 August 2019

The European Banking Authority (EBA) published today clarifications to a fifth set of issues that had been raised by participants of its Working Group (WG) on APIs under PSD2. The clarifications respond to issues raised on the measurement of response times of the dedicated interface, the machine-readability of the EBA register, reliance on eIDAS certificates and various issues related to the contingency measures, including the identification of third party providers through ‘guest books', the data that can be accessed and documentation.

Background and next steps

In January 2019, the EBA established a Working Group (WG) on APIs under PSD2, consisting of 30 individuals representing account servicing payment service providers (ASPSPs), third party providers (TPPs), API initiatives, and others market participants. The aim of the group is to facilitate industry preparedness for the Regulatory Technical Standard (RTS) on Strong Customer Authentication and Common and Secure Communication and to support the development of high-performing and customer-focused APIs under PSD2.

The group is tasked with identifying issues and challenges that market participants face during the testing and use of API interfaces in the period leading up to the application date of the RTS on 14 September 2019. The group is also asked to propose solutions on how the identified issues could be addressed, which the EBA and national authorities will then consider when providing clarifications in response to the issues raised.

On 11 March, 1 April, 26 April, and 26 July 2019, the EBA published clarifications to the first four sets of issues that had been raised by the working group. Today's publication is the response to the fifth set of issues. In the weeks to come, the EBA will add further clarifications.

EBA updates its Single Rulebook Q&A tool to reflect publication in the OJEU of the revised CRD / CRR / BRRD texts

02 August 2019

Following the recent publication of the CRD5 / CRR2 / BRRD2 in the Official Journal of the EU, the EBA has now updated its Single Rulebook Q&A tool to reflect these texts therein and thus allow for related questions to be submitted. The Interactive Single Rulebook (ISRB) will be updated in due course.

EBA responds to the Commission on the Estonian Central Bank's proposed measures to address macroprudential risk

31 July 2019

The European Banking Authority (EBA) published today a response to a letter received from the European Commission (EC) regarding an EBA Opinion on the intention by Eesti Pank, the Estonian Central Bank, to introduce stricter national measures for credit institutions in Estonia using the Internal Ratings Based (IRB) approach, in accordance with Article 458 of the Capital Requirements Regulation (CRR). In its Opinion, the EBA had concluded that the evidence presented by Eesti Pank was not sufficient to support the suitability and appropriateness of the suggested measure. In the letter received by the Commission, the EBA was asked to either revise or confirm its Opinion following the submission of additional information by Eesti Pank. In its reply, the EBA assessed that there were not sufficient grounds to change its initial Opinion.

 

On 15 April 2019, Eesti Pank notified the EBA of its intention to introduce a credit institution-specific minimum level of 15% for the average risk weight on residential mortgage loans applicable to credit institutions that have adopted the IRB approach in Estonia. In its Opinion in response to the notification, the EBA concluded that the evidence received from Eesti Pank was not sufficient to support the suitability and appropriateness of the suggested measure. The EBA raised several concerns on the choice to deploy Article 458 of the CRR to address Eesti Pank's concerns.

The EBA's Opinion was approved by the EBA Board of Supervisors and submitted to the EC on 15 May 2019. Separately, the EC informed Eesti Pank that it considered the notification incomplete and that it did not provide all the information required to ascertain that the proposed measure complies with the requirements of Article 458 of the CRR.

The EC shared the additional information received from Eesti Pank with the EBA and invited it, in its letter of 27 June 2019, to either revise or confirm its original Opinion. The EBA assessed the additional information received and concluded that its Opinion of 15 May 2019 remains valid.

EBA issues Opinion on measures to address macroprudential risk following notification by Finnish FSA

30 July 2019

The European Banking Authority (EBA) published today an Opinion following the notification by the Finnish Financial Supervisory Authority (FIN-FSA) of its intention to extend a measure introduced in 2017 regarding the use of Article 458 of the Capital Requirements Regulation (CRR). The measure is primarily driven by persistent macroprudential risks in the Finnish economy related to residential mortgage loans and residential mortgage indebtedness. Based on the evidence submitted, the EBA does not object to the extension of the proposed measure, which will be applied from 1 January to 31 December 2020.

The measure consists of the extension of a credit institution-specific minimum level of 15% for the average risk weight on residential mortgage loans applicable to credit institutions that have adopted the internal ratings-based (IRB) approach.

In its Opinion, addressed to the Council, the European Commission and the Finnish authorities, the EBA, in line with the warning on the vulnerabilities of the residential real estate sector issued by the European Systemic Risk Board (ESRB), acknowledges that the systemic risks and vulnerabilities related to housing loans and household indebtedness in Finland could pose a threat to the financial stability of banks.

In light of this conclusion, the EBA does not object to the deployment, by the FIN-FSA, of the proposed macroprudential measures.

Background

Already in its Opinion issued on 27 July 2017, the EBA did not object to the adoption of this measure, taking into consideration its effect on increasing the resilience of the Finnish banking sector. For more information on this EBA Opinion, please see here.

EBA publishes clarifications to the fourth set of issues raised by its Working Group on APIs under PSD2

26 July 2019

The European Banking Authority (EBA) published today clarifications to a fourth set of issues that had been raised by participants of its Working Group (WG) on APIs under PSD2. The clarifications respond to issues raised on the confirmation of payment execution, biometrics and authentication on mobile apps, access to non-payment account information, stress testing, qualified eIDAS certificates for Account Servicing Payment Service Providers (ASPSPs), the 4 times per day access by Account Initiation Service Providers (AISPs), and the Sharing of payment account number with Payment Initiation Service Providers (PISPs).

Background and next steps

In January 2019, the EBA established a Working Group (WG) on APIs under PSD2, consisting of 30 individuals representing account servicing payment service providers (ASPSPs), third party providers (TPPs), API initiatives, and others market participants. The aim of the group is to facilitate industry preparedness for the Regulatory Technical Standard (RTS) on Strong Customer Authentication and Common and Secure Communication and to support the development of high-performing and customer-focused APIs under PSD2.

The group is tasked with identifying issues and challenges that market participants face during the testing and use of API interfaces in the period leading up to the application date of the RTS on 14 September 2019. The group is also asked to propose solutions on how the identified issues could be addressed, which the EBA and national authorities will then consider when providing clarifications in response to the issues raised.

On 11 March, 1 April and 26 April 2019, the EBA published clarifications to the first, second and third set of issues that had been raised by the working group. Today's publication is the response to the fourth set of issues. In the weeks to come, the EBA will add further clarifications.