Response to consultation on draft RTS on performance-related triggers in STS on-balance -sheet securitisations
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It should be possible to switch back; as long as the triggers themselves are simple and standardised, the mere switching back would not affect the simplicity or standardisation. A 4 quarter delay is very conservative and makes the option to reverse almost useless, so we would suggest to delete this requirement.
Q1. Do you agree with the specification made in Article 2?
We do agree but would appreciate if you could clarify (in the RTS and if possible also in future SRT guidelines), that “at origination” refers to the origination of the securitisation transaction (so the closing date or the effective date of the risk transfer) and not to the dates of origination of the underlying exposures.Q2. Do you agree with the aim of Article 3 with regard to ensuring that the credit enhancement of the senior tranche does not fall below a certain threshold because of the non-sequential amortisation?
We do agree with the aim of Article 3, but would like to add to it that the trigger should be aligned with the SRT trigger and should be reversible.Q3. Do you agree with the trigger set out in the Article or would you prefer the alternative option in order to meet the aim of this additional backward-looking trigger? Please justify your answer, providing, if possible, evidence of the outcome of both triggers based upon your past experience.
We prefer the first alternative. The second alternative will provide varying results depending on the capital structure, which would be especially troublesome if the trigger level would be predetermined (see Question 4).Q4. Which level of the trigger would you consider more appropriate and why?
We are not supporting a fixed trigger level. It could lead to STS triggers that are inefficient from an SRT perspective, This could especially become a problem with the upcoming revised Basel III standard, where economic efficiency and SRT will not be aligned.Q5. Do you agree with the specification of the forward-looking trigger in Article 4? In your view, will the possibility of switching back to non-sequential, as set out in paragraph 6, be detrimental for the simplicity of the specific transaction and the objective of standardisation of STS on-balance-sheet securitisations?
We would appreciate if this trigger could be aligned with the comparable, but slightly differently worded, SRT trigger. And again, we would like to ask you to clarify “at origination” (see Question 1)It should be possible to switch back; as long as the triggers themselves are simple and standardised, the mere switching back would not affect the simplicity or standardisation. A 4 quarter delay is very conservative and makes the option to reverse almost useless, so we would suggest to delete this requirement.