In December 2017, the European Parliament and the European Council created a new kind of securitisation: the “simple, transparent and standardised securitisation” or “STS securitisation” which will, when the STS Regulation (Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017) comes fully into force in January 2019, benefit from certain regulatory advantages over non-STS securitisations.
To be able to obtain STS status though, a securitisation will need to meet a long list of criteria. Some are complex and not always straightforward to analyse. Recognising that transitioning from current market practice to the new STS regime may pose legal, structural, informational and IT challenges to issuers and investors, PCS is seeking to do as much as it can to assist. With this in mind, PCS will provide – upon request of any market participant – an STS Reports in respect of securitisations presented to it.
The STS Report will seek to analyse a transaction and determine whether and to what extent such transaction could achieve STS status. If requested to do so, PCS will also analyse the transaction to determine whether it could, after January 1st 2019, benefit from the grandfathering provisions set out in article 43 of the STS Regulation (a Grandfathering Report).
In addition, PCS will also, if so requested, analyse a securitisation against the additional criteria that a securitisation able to obtain STS status would need to meet to be able to benefit from the lower capital requirements set out in the Capital Requirements Regulation were it held by European Union banks (a CRR Report).
The STS criteria, as drafted in the STS Regulation, are subject to a potentially wide variety of interpretations. In compiling an STS Report (including a Grandfathering Report and CRR Report), PCS has had to use its discretion to interpret the STS criteria. Although PCS believes its interpretations reflect a reasonable approach based on PCS’ reading of the text and knowledge of the legislative history, there can be no guarantees that any regulatory authority or any court of law interpreting the STS criteria will agree with the PCS interpretation and therefore the conclusions of any report compiled by us.
Accordingly, an STS Report indicating compliance with any STS criteria is not and cannot be a definitive statement or promise or undertaking on behalf of PCS that this STS criteria will be considered to be met as a legal or regulatory matter. In this respect, it is imperative that you read our disclaimer, which may be found here.
Also, during the course of 2018, a dialogue will be taking place between regulatory authorities (especially the European Banking Authority) and the market to refine the regulatory interpretation of the STS criteria. As this dialogue progresses and greater clarity is provided as to possible regulatory interpretations, PCS may modify its interpretations of STS criteria to better reflect the general direction of regulatory interpretation. Any PCS Report reflects the views of PCS at the moment of the issue of the report as to the then most reasonable interpretation of the STS criteria in PCS’ view.
Finally, a PCS STS Report (or Grandfathering or CRR Report) is not a recommendation to buy, sell or hold securities. It is not investment advice whether generally or as defined under Markets in Financial Instruments Directive (2004/39/EC) and it is not a credit rating whether generally or as defined under the Credit Rating Agency Regulation (1060/2009/EC).
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