PCS was glad to respond to the EBA’s consultation on the possibility of introducing an STS regime for synthetic securitisations. It may be found here.
Notwithstanding that this topic may seem highly technical and of interest only for the hard-core enthusiast, we believe that it is – in fact – possibly one of the most important financial files in front of policy makers today. Even if you have little interest in the detailed responses to the specific proposals, we would invite everyone to read our general comments at the start of our response. (They are only three pages long).
Broadly, the EBA discussion paper is a good starting point and much in the approach is to be commended. Where PCS has some concerns are first the importation of significant risk transfer (SRT) requirements when these erode the quality of the STS standard without commensurate benefit for the integrity of the prudential regime and secondly the, for us, inexplicable lack of any proposal for an appropriate capital benefit when such benefit is fully justified both by the data and by the fundamental analysis.
We look forward though in further discussions with the regulatory community on this important topic.
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