EBA consults on the performance-related triggers for non-sequential amortisation systems in simple, transparent and standardised on-balance-sheet securitisations

The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) specifying and, where relevant, calibrating the minimum performance-related triggers for simple, transparent and standardised (STS) on-balance-sheet securitisations that feature non-sequential amortisation.  The Capital Markets Recovery Package amended the Securitisation Regulation in several aspects, including creating a specific framework for STS on-balance-sheet securitisation to ensure that the Union securitisation framework provides for an additional tool to foster economic recovery in the aftermath of the COVID-19 crisis. These draft technical standards aim at providing technical clarification on these triggers. The consultation runs until 28 February 2022.

With the purpose of standardisation, the amended Securitisation Regulation sets out that sequential amortisation shall be applied to all tranches of STS on-balance-sheet securitisations. However, as a derogation, STS on-balance-sheet securitisation might feature non-sequential amortisation to avoid disproportionate costs of protection, as long as some minimum performance-related triggers determine the application of sequential amortisation. This will ensure that tranches providing credit protection have not already been amortised when significant losses occur at the end of the transaction.

The draft RTS further specify the minimum backwards- and forward-looking triggers, and set out that, for two of them, their level should be determined by the parties involved in securitisation transactions, as they are transaction specific and depend on the assessment made by the parties of the riskiness of the underlying exposures at inception. However, the RTS establish a level for the additional backwards-looking trigger to ensure for all STS on-balance-sheet securitisations featuring a non-sequential amortisation that under no circumstances the credit enhancement of the retained senior tranche falls below a certain threshold, in comparison with that at origination, as a result of the amortisation of the protected tranches.

Consultation process

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 28 February 2022.

A public hearing will take place via conference call on 26 January 2022 from 10:00 to 11:30 CET. 

Legal basis and background

The draft regulatory technical standards have been developed in accordance with Article 26c(5) of Regulation (EU) 2017/2402 (the Securitisation Regulation) as amended by the Regulation (EU) 2021/557 of 31 March 2021  (as part of the Capital Markets Recovery Package), which requests the EBA to develop regulatory technical standards i) to specify the minimum performance-related triggers for simple, transparent and standardised on-balance-sheet securitisations; and (ii) “where relevant”, to calibrate them.