PCS responds to EBA Consultation on Synthetic Express Spread

PCS filed its response to the European Banking Authority's consultation paper on synthetic excess spread. Although this might appear the most abstruse of technical issues, fit only for quants and CRR geeks, the truth is - as PCS sets out in the introduction to its response - that this highly technical matter will have substantially damaging effects on the European economy as a whole if not properly calibrated. Unfortunately, PCS feels that the current EBA proposals are indeed not only miscalibrated but would result in the virtual eradication of the use of synthtetic excess spread in Europe. This, we feel, […]

Commission's report on the securitisation regulation is out - but the real battle is yet to come

The European Commission released its report on the review of the Securitisation Regulation on Monday. This was mandated by the Securitisation Regulation itself as part of a normal review process often found in European legislation. There was little to cause surprise to anyone who had been listening to the clear messaging coming from Brussels. The headline was that the Regulation having come into force in 2019 the Commission felt it was too early to tell whether it was working and so no meaningful changes were being proposed. Suggestions of changes to the disclosure rules were welcome, the rejection of a […]

The European Banking Authority has just launched a consultation on the treatment of "synthetic excess spread" or "SES". The issue of the capital treatment of synthetic excess spread in the context of synthetic STS securitisation is a topic that is as arcane as it is important. We will not review here the arguments and possible approaches as this would take way more space that is appropriate for a news item. To summarise, though, in a synthetic securitisation the originator and the investor can agree to an amount which will be deducted from any losses suffered on the securitised pool before […]

The European Banking Authority has just launched a consultation on the homogeneity of the underlying exposures in STS securitisation. The consultation is addressing the issue of the homogeneity in the context of synthetic STS securitisation. Although the scope is extended to also cover on-balance-sheet (synthetic) securitisations, at the same time it establishes the same criteria for the assessment of homogeneity for all securitisations. More specifically, given the relevance of corporate and SME loans in the context of synthetic securitisations, adjustments have been made to the type of obligor to reflect the current market practices and the credit risk assessment approaches […]

PCS filed its response to EIOPA’s disappointing consultation on a possible reform of the capital requirements for insurance companies investing in securitisations. The response may be found here. The consultation was, in our view, a major disappointment. EIOPA’s preliminary conclusions – underlined by their statements at a public roundtable attended by PCS – were that the current framework was “fit for purpose”. For all the reasons set out in our response, PCS feels that this is not borne out by the facts and that the assertion itself as set out in EIOPA’s consultation document feels more like an “act of […]

PCS responds to the Joint-Committee's Consultation on Sustainable Disclosure for STS

PCS has responded to the Joint-Committee of the European Supervisory Authorities on its consultation regarding the optional disclosure relating to sustainability of the assets securitised through an STS transaction. Our response can be read here. Acknowledging the very narrow mandate that had been given the Joint-Committee and the challenges this posed, PCS nevertheless believes that this was the wrong mandate, at the wrong time for far too narrow a sub-set of capital market instruments. Through no fault of the committee, this feels like another siloed regulatory endeavour that risks again punishing unnecessarily securitisation and tilting yet further an already unlevel […]

We have previously referred to the issue of capital calibration for securitisations purchased by insurance undertaking as the "Cinderella issue". Of all the issues on which the European Commission has asked the ESA's to provide advice, it is both the least noticed and yet, in our view, the most important of the unfinished reforms begun with the passing of the Securitisation Regulation. Today, insurance companies are holding a minuscule percentage of securitisations in their books - just above 2%. Their holdings of high quality STS securitisations are in homeopathic amounts at around 0.05%. Yet, if we are to see a […]

EBA publishes excellent report of "Green Securitisation"

Today the European Banking Authority released its Report on Developing a Framework for Sustainable Securitisation. This report was requested by the co-legislators who asked the EBA to outline how they would envisage a regime for green securitisation. Although PCS still has to review the report in detail, a first look suggests that the EBA should be commended for the logical, coherent and fair approach it has brought to bear of this subject. First, the EBA has concluded that there is no need or rationale for having a conceptually different approach to the definition and regulation of green securitisations from that […]

Green securitisation - ECB adds its voice in support of the "green proceeds" approach

The European Central Bank has just published its opinion on the draft EU Green Bond Standard legislation. Overall an excellent piece, it is notable when it comes to securitisation for its support for a definition of green that encompasses issuance where the proceeds are used by the originator to finance sustainable projects. This can be found in article 3.1.5 of their opinion. As our readers will recall, a debate arose as to whether the legal EU definition of sustainable securitisation should be limited solely to securitisations of green assets (eg mortgages of green housing or auto loans for electric vehicles) […]

Commission's Call for Evidence on Securitisation - progress...but ever so slow

In the securitisation consultation which closed last month, the Commission wrote that it would issue a call for evidence to the Joint Committee of the ESAs on the key unfinished parts of the STS reform - namely capital calibrations and LCR treatment. True to its word, the Commission has now issued this call for evidence (found here). The good news is that it seems to cover all the items needing to be covered including the capital calibrations for both bank and insurance investors and the treatment of securitisations for the liquidity coverage ratio. It also name checks the excellent report […]

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PCS responds to EBA Consultation on Synthetic Express Spread

Commission's report on the securitisation regulation is out - but the real battle is yet to come

EBA publishes consultation on synthetic excess spread

EBA publishes consultation on updated homogeneity

PCS files its response to EIOPA’s consultation

PCS responds to the Joint-Committee's Consultation on Sustainable Disclosure for STS

The Cinderella Regulation - EIOPA launches a consultation on Solvency II capital

EBA publishes excellent report of "Green Securitisation"

Green securitisation - ECB adds its voice in support of the "green proceeds" approach

Commission's Call for Evidence on Securitisation - progress...but ever so slow