Response to consultation paper on draft RTS on the homogeneity of the underlying exposures in STS securitisation

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Q1: Do you agree with the proposed amendment to the asset category in Article 1 with respect to the addition of “credit facilities provided to enterprises, where the originator applies the same credit risk assessment approach as for individuals not covered under points (i), (ii) and (iv) to (viii)”? Please elaborate on the practical relevance.

Yes, we do agree.

Q2: Do you agree with the proposed amendment in Article 1 to the “type of obligor” for credit facilities, including loans and leases, provided to any type of enterprise or corporation?

We do not agree, since the EUR 500 mln threshold is rather artificial and most
banks use different thresholds in their different risk models.
We do appreciate that some consistency is needed in setting the thresholds,
so we would suggest a system where overlapping thresholds provide more
flexibility to individual originators, depending on how the individual Originator
handles and classifies the different sizes of corporates in terms of risk
modelling, underwriting and servicing in the institution, which also depends on
the size of the institution and the country it operates in. .
An example could be a combination of:
-SME is any entity with sales of EUR [500] mln or less
-Large Corporate is any entity with sales of EUR [100] mln or more

Q3: Do you agree with the proposed amendment in Article 1 to the “type of obligor” for auto loans and leases?

Our comments as provided for credit facilities provided to any type of
enterprise or corporate do also apply to auto loans and leases

Q4: Do you agree with the proposed amendment in Article 1 to the “type of obligor” for credit card receivables?

Given the nature of the asset class, the impact will be minimal. So against that
background we can agree.

Q5: Do you see the need for the grandfathering provisions in Article 2 for the outstanding STS ABCP and STS non-ABCP securitisations? If yes, please elaborate.

Yes, we see the need, although admittedly not so many corporate exposures
have been securitised through true sale structures, but the Art 270
transactions certainly need to be protected, A grandfathering which only lasts
for two years, and forces the Originators of the Art 270 transactions to
restructure their transactions is in no way possible, because (unlike for the
trigger RTS, where “only” triggers would have to be changed) a new pool
composition because of changed homogeneity criteria has a lot of
consequences, and forces Originators to do a completely new transaction,
with a pool selection, new audit, new selection and replenishment criteria etc.

Q6: Do you agree with the deferred application date in Article 2 for the outstanding STS on-balance-sheet securitisations?

No, we would need full grandfathering in line with true sale STS, and if that is
not legally possible, something equivalent.

Q7: Are there any aspects that should be considered with regard to the homogeneity of the STS on-balance-sheet securitisations which are not specified in these RTS?

Please see our general comments. For on-balance-sheet securitisations the
Originator should have more flexibility for the asset class ”loans to
enterprises”, since the Originator is always a prudentially regulated bank, and
all sub-portfolios would have to be on the same group balance sheet. The size
of the corporates seems a random divide for determining homogeneity which
does not take into account regional differences.

Q8: Are there any impediments or practical implications of the criteria as defined in these draft RTS for STS traditional securitisations?

Effectively the same impediments apply around the 500 mln threshold,
although admittedly traditional securitisations are not often used for
securitising corporate exposures, but it could certainly play a role for Auto and
Lease securitisations.

Q9: Are there any important and severe unintended consequences of the application of the homogeneity criteria as specified in these RTS?

We assume that it is not the intention to impede synthetic transactions of SME
and/or Corporate exposures, but it looks like the proposed criteria will not
facilitate these transactions either.

Our general comments:
Our main comment is that the proposed amendment is mainly an intended
improvement of the existing definitions around enterprises and corporates by
introducing wording that might in the not so near future become part of the
new CRR.
What we are missing is an attempt to bring the homogeneity criteria in line
with the characteristics of SRT transactions, that are a large part of the
universe of on-balance-sheet securitisations.
This could have been achieved by defining exposures under SRT transactions
as a separate asset type. Homogeneity is there to protect investors, but
investors in SRT transactions have a much more detailed insight into
portfolios compared to investors in traditional public transactions, so some
more flexibility in these portfolio’s in terms of jurisdictions and borrower types
would be justified. The additional risk, if any, would be mitigated by the fact
that SRT transactions are subject to strict regulatory scrutiny.

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Name of the organization

Dutch Securitisation Association