EBA publishes final guidelines on the STS criteria in securitisation

The European Banking Authority (EBA) published today its final Guidelines, which will provide a harmonised interpretation of the criteria for the securitisation to be eligible as simple, transparent and standardised (STS) on a cross-sectoral basis throughout the Union. These Guidelines will play a crucial role in the new EU securitisation framework that becomes applicable on 1 January 2019, by providing a single point of consistent interpretation of the STS criteria for all entities involved in the STS securitisation including originators, sponsors, investors, competent authorities and third party STS verifiers.

The Guidelines, developed for both non asset-backed commercial paper (ABCP) and ABCP securitisation, clarify and ensure a common understanding of all the STS criteria, including those related to the expertise of the originator and servicer, the underwriting of standards, exposures in default and credit impaired debtors, and predominant reliance on the sale of assets.

The Guidelines will be applied on a cross-sectoral basis throughout the Union with the aim of facilitating the adoption of the STS criteria, which is one of prerequisites for the application of a more risk-sensitive regulatory treatment under the new EU securitisation framework.

The Guidelines are an important building block in a set of initiatives that aim to destigmatise and revive a sound securitisation market in the EU, and facilitate further lending to the real economy in line with the objectives of the Capital Market Union.

Legal basis and application

The Guidelines have been developed according to Articles 19(2) and 23(3) of the Securitisation Regulation (Regulation (EU) 2017/2402), which mandates the EBA, in close cooperation with ESMA and EIOPA, to adopt guidelines and recommendations on the harmonised interpretation and application of the criteria related to simplicity, transparency and standardisation for the non-ABCP securitisations, and transaction level and programme level criteria for the ABCP securitisations.

The Guidelines will apply from 15 May 2019. In order to support a consistent interpretation of the STS framework across the EU, it is expected that the competent authorities and other addressees of the Guidelines will generally apply the approach set out in the guidelines as from the application date of the EU securitisation framework on 1 January 2019.