Securitisation regulation, the next chapter: EBA launches consultation on synthetic securitisation

Today, the EBA released a consultation on synthetic securitisation and STS.

This two months consultation is designed to inform the EBA in the preparation of a report that it has been instructed to prepare by the European Commission on how an STS standard may be crafted for synthetic/risk transfer securitisations.  This report, in turn, was requested of the Commission by the European Parliament.  The European Parliament was looking into the possibilities of introducing a similar scheme to that of the current STS regime which is today only available for “true sale” securitisations. 

Although  this may seem, at first glance, a fairly dry, technical and even arcane subject, the stakes are in reality very high.  In the era of substantially increasing capital requirements for banks and in a continent where 75% of all financing is still sourced from banking institutions, the availability of synthetic/risk transfer securitisations and the terms of this availability will play a key role in shaping the overall architecture of European finance and in the scope of the banking sector’s capacity to fund growth in the economy.

PCS, with the launch of its Risk Transfer Label last year, is already helping to address these issues and hopes to continue contributing  usefully to this debate.