Synthetic issuers, it is time to get ready

23/10/2024

It is now official: the new guidelines on the STS criteria for on-balance-sheet securitisations will apply from 9 December 2024. After a consultation phase in 2023 in which all major market participants including PCS participated, the Final EBA Report on the guidelines was published on 27 May 2024 and scheduled to become applicable two months after its translation into all 23 European languages.

These translations are now all done. They can be downloaded from the EBA website, and in each case , 9 December 2024 is the date they come into force.

Quoting the EBA: "the Guidelines on the STS criteria for on-balance-sheet securitisations aim to provide a harmonised interpretation, in alignment with the EBA Guidelines for traditional securitisations, and clarify aspects with a potential level of ambiguity, thus both ensuring a harmonised understanding of the criteria, but also a harmonised implementation in terms of capital requirements."

Though mainly directed towards the interpretations of the on-balance sheet (synthetic) securitisation regulation (articles 26(b) to 26(e) of the Securitisation Regulation updated for synthetics in 2021) and filling some important gaps of interpretation of the on-balance-sheet regulation, some guidance is also applicable for non-ABCP (term) and ABCP transactions, thus updating for all transactions certain provisions of the May 2019 guidelines.

The good news is that the guidelines do not apply retroactively and all transactions closed before 9 December will be grandfathered. Any transactions closing thereafter, though, will have to take into account the new guidelines.

Synthetic issuers, it is time to get ready
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