EBA consults on the homogeneity of underlying exposures in securitisation

The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) specifying a set of criteria for the underlying exposures in securitisation to be deemed homogeneous, as part of the requirements under the new EU securitisation framework. The homogeneity requirement aims to facilitate the assessment of underlying risks by investors and to enable them to perform robust due diligence. Its application is, therefore, one of prerequisites for a more risk sensitive regulatory treatment of the securitisation. The RTS are applicable to both asset-backed commercial paper (ABCP) and non-ABCP securitisations. The consultation runs until 15 March 2018.

 

Homogeneity of the underlying exposures is one of the requirements for simple, transparent and standardised (STS) securitisation, which is eligible for more risk-sensitive risk weights, under the new EU securitisation framework. 

 

These RTS define a set of criteria according to which the underlying exposures are deemed homogeneous. These include: (i) the need to be underwritten according to similar underwriting standards, methods and criteria; (ii) the need to be serviced according to uniform servicing procedures; (iii) the need to fall within the same asset category and (iv) to be further differentiated by the application of relevant risk factors. 

 

In order to provide more clarity and facilitate the assessment of the homogeneity, the RTS provide a non-exhaustive list of asset categories, as well as lists of the risk factors to be generally considered for each of these asset categories. The RTS require that only those risk factor(s) which are relevant for determining the homogeneity of a specific pool of the underlying exposures, should be effectively applied to that particular pool. 

 

The RTS also include an alternative option to determine homogeneity, according to which the risk factors should be reflected in the underwriting standards, with a view to gather a comprehensive feedback on the most appropriate approach for the interpretation of the homogeneity requirement. 

Responses 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 15 March 2018.

A public hearing will take place at the EBA premises on 19 February 2018 from 14:00 to 16:00 UK time. 

The RTS have been developed according to Articles 20(14) and 24(21) of the STS Securitisation Regulation. Article 20(14), which is applicable to non-ABCP securitisation, mandates the EBA, in close cooperation with ESMA and EIOPA, to develop the RTS further specifying which underlying exposures are deemed to be homogeneous. Art. 24(21), which is applicable to ABCP securitisation, establishes a corresponding mandate for ABCP securitisations.