Two for one on news today.
First, PCS filed its response to the EBA's consultation on the draft guidelines for synthetic/on-balance-sheet STS securitisations. As we approach the final implementation of the Basel III rules, the issue of capital management has loomed ever larger for many European banks. The increase in synthetic/on-balance-sheet securitisations reflects this trend. Going forward, the creation of a large and successful STS synthetic securitisation segment is likely to be a key element of the future development of the European banking system. This is why this seemingly exceedingly technical and dry consultation is, in reality, of great importance. The stark binary nature of STS - you either fully meet all the criteria or you fail - gives disproportionate importance to every nuance of the rules. Globally, the EBA proposals are sensible but we do point out some aspects of the proposal that we think could benefit from some fine tuning.
Secondly, the European Commission, yesterday, published the RTS on retention. This does not quite make it law, as the European Parliament and Council have three months to object, should they wish to do so. However, taking into account the technical natured of this RTS, this does not appear likely. If no objections are raised, the RTS will become law twenty days after it is published in the Official Journal, in the weeks following the end of the three months.
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