News - PCS

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07/06/2023

June 2023 Newsletter

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26/05/2023

Joint-Committee publishes final draft of sustainability disclosure templates for STS

Yesterday, the Joint-Committee of the ESA's published the final draft of the RTS on sustainability disclosure templates for STS. To remind everyone, the original STS rules passed in 2017 required mortgage and auto transactions to disclose sustainability information for the underlying assets but only to the extent it was available to the originator. In the 2021 amendment, an additional but entirely optional measure provided that originators of mortgage or auto STS could, should they wish, disclose slightly different information on the "principal adverse impact of the assets financed by underlying exposures on sustainability factors". The legislators then mandated the ESAs […]

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25/04/2023

EBA publishes the RTS on “synthetic excess spread” achieving a sensible and balanced approach

Following their consultation last August the EBA has just published the final draft regulatory technical standard (“RTS”) on the capital treatment of synthetic excess spread. Although a seemingly exceedingly dry and technical subject, the impact of this paper on the European banking industry should not be underestimated. In the last few years, synthetic securitisations have become a key capital management tool for an increasing number of European banks. Without such a tool, the risk of the exiguity of bank capital, in the near future, constraining the credit available to European borrowers was substantial. The regulatory treatment of synthetic excess spread […]

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21/04/2023

EBA publishes consultation paper on Guidelines on the STS criteria for on-balance-sheet (synthetic) securitisation

The European Banking Authority has just launched a consultation on the guidelines for the STS criteria for on-balance-sheet securitisation. Given the growth of on-balance-sheet (synthetic) securitisations since the inclusion in Q2 2021 of synthetic securitisations to the STS framework this is quite important. We will, in due course, review the paper and publish our views. A public hearing will take place via conference call on 30 May 2023 from 14:30 to 15:30 (CEST). The deadline for this consultation is the 7 July, PCS will, of course, be responding.

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03/03/2023

EU Green Bond Standard getting close

This week the European Parliament, European Council and European Commission reached an agreement on a text for the European Union Green Bond Standard. This much anticipated piece of legislation will create a statutory standard for EU green bonds. As those in the securitisation community following these issues know, there was some controversy early on as to how to define "green securitisations" - particularly around whether a green securitisation ought to be a securitisation of green assets or, like other green bonds, a securitisation whose proceeds would be used for EU taxonomy compliant financings. There was also a subsidiary, if connected, […]

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02/03/2023

Under the radar

One that we suspect passed most of you by is a call for papers by CEBRA, the Central Bank Research Association, to be discussed at their annual meeting in New York this July. As many as 37 topics will be discussed, but we spotted this one, organised by Europe’s Financial Stability Board: 19*. “Effects of Financial Reforms on Securitisation Markets” With a deadline of March 10th 2023 (!) for submission of papers, it is unlikely that CEBRA will be deluged. But the fact that the FSB chose to organise this session is not uninteresting, taking into account all the discussions […]

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19/02/2023

Busy Week for the EBA - Homogeneity(Final draft) RTS and Green Lending

Last week was a busy week for the EBA when it comes to items of importance to securitisations. First, the EBA published a final draft RTS on homogeneity for synthetic securitisations. In PCS’ view, this is a thoughtful and altogether excellent proposal. First, it leaves unchanged the division for corporate loans between SMEs and larger corporates but without an artificial line being drawn between the two. On the contrary, the EBA makes it clear that the dividing line should lie where it is drawn by the bank’s own underwriting procedures (and therefore as approved by their prudential regulator. as part […]

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15/12/2022

2022 - The STS Year in Review

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12/12/2022

Joint-Committee of the ESAs response to the Commission is published - expected disappointment has materialised

Today, the Joint-Committee of the ESAs (grouping the EBA, EIOPA and ESMA) has published the long awaited response to the European Commission's Call for Advice on a possible reform of the securitisation capital calibrations under CRR and Solvency II. The response comes in two reports: one for banking and one for insurance. These can be found here and here. As they have just been published, we have yet to read the full conclusions. But the EBA announcement page gives some indication as to the proposals (or lack thereof) contained in the documents. For the CRR, the EBA has proposed to […]

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11/12/2022

UK publishes proposed amendments to the Securitisation Regulation

At the end of last week, the Chancellor of the Exchequer unveiled the government’s roadmap to a new regulatory framework for British finance. Although overlooked by most commentators, the announcement contained detailed proposals to revise the Securitisation Regulation inherited from the EU. These proposals may be found in a draft statutory instrument. There are quite a few highly technical drafting changes the implications of which are still somewhat unclear. But here are the highlights. The definition of “securitisation” remains unchanged. The STS regime remains in place. However, the STS criteria have disappeared from the legislative text altogether and are now […]

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06/11/2022

Stakeholders' letter to European policy makers: "Securitisation cannot play its vital role for the European economy without reform"

PCS has added its name to a securitisation market stakeholders' letter to European policy makers. In addition to PCS, the letter is co-signed by AFME representing wholesale markets, the European Banking Federation representing the banking sector, Leaseurope representing the leasing sector, Eurofinas representing consumer lenders, IACPM representing credit portfolio managers as well as the DSA, Europlace and TSI respectively representing market participants based in The Netherlands, France and Germany. The letter comes back to themes that those who follow PCS have often seen us write about. The importance of a safe but deep securitisation market for the health and growth […]

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31/10/2022

November 2022 Newsletter

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30/10/2022

PCS responds to the EBA's consultation on the draft "homogeneity" RTS

PCS filed its response to the EBA's consultation on the draft "homogeneity" RTS. Broadly, PCS is very supportive of the EBA's overall approach. We are especially in agreement with the idea of keeping a single definition of "homogeneity" for all types of STS transactions, whether true sale or synthetic. We also agree with the need to clarify the definition of "large corporate". We do, however, depart from the EBA in the best way to do this and have concerns with the proposed solution being the only solution on offer. Our response also draws attention to the vital importance of the […]

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16/10/2022

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, […]

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10/10/2022

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 […]

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08/09/2022

The AMF publishes its investigation of STS practices by French banks – it was not impressed

The French AMF, in its capacity as national competent authority under the Securitisation Regulation, did a spot check of five unnamed financial institutions issuing STS securitisations. The regulator looked at the institutions’ procedures around the issuance of STS securitisations generally, then examined in detail a number of transactions. Their conclusions are now published in the form of a report (in English) It would be fair to say that the regulator was deeply unimpressed by what it found in a number of cases. They expressed the view that, for several institutions (unnamed to spare blushes), the processes around the due diligences […]

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06/09/2022

PCS Launches New Website

PCS is excited to announce that today its new website had gone live: www.pcsmarket.org (same place as before, so no need to update those bookmarks). Our website has not just been updated but entirely recreated with a cornucopia of new functionality and up to date information on the European securitisation market. We strongly encourage you to take a tour through the new site and see how much of the information you always wanted to have in an easily readable format in an easily accessible place you can now find there. For clients and potential clients, we have introduced an easy […]

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11/08/2022

EBA publishes consultation on synthetic excess spread

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 […]

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28/07/2022

EBA publishes consultation on updated homogeneity

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 […]

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18/07/2022

PCS files its response to EIOPA’s consultation

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 […]

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02/07/2022

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 […]

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01/07/2022

PCS European Symposia Series 2022-23

Following its successful launch in Warsaw and Lisbon, PCS is proud to confirm the remainder of its European Symposia Series with confirmed dates for Athens (20 September) and Helsinki (22 September) and to be announced dates for Milan, Dublin, Madrid, Amsterdam, Paris, Frankfurt and London Securitisation – an indispensable tool for growth and capital management Each event will be devoted to the securitisation market generally as well as in the local market. It will cover fundamental principles as well as discuss the most recent market and regulatory developments. It will explore the benefits of securitisation, as a crucial mechanism for […]

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17/06/2022

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

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 […]

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12/06/2022

PCS welcomes two new members

The PCS initiative is honoured to welcome two new members in DLA Piper and Morgan Lewis. DLA Piper is a global law firm with lawyers and tax advisors located in more than 40 countries around the world. The firm has extensive experience advising on a wide array of ABS transactions in Europe and the US including CLOs, CMBS, RMBS and consumer loan securitisations as well as the securitisation of assets such as renewable energy and energy efficiency assets, project loans, trade receivables and SME loans. Morgan Lewis has been a key player in the securitisation markets since their inception and […]

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08/06/2022

June 2022 Newsletter

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02/03/2022

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 […]

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14/12/2021

2021 - The STS Year in Review

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13/12/2021

UK Treasury publishes report on the review of the securitisation regime

The UK Treasury just released its report on the review of the securitisation regime. The overall impression is that the UK government is broadly happy with the current regime and is certainly not evincing any wish to tear up the rule book or effect radical changes to the regime inherited from the EU Securitisation Regulation. This report is about tweaking not transforming. A number of technical issues are broached, some small – but not insignificant – changes are mooted but the report is light on concrete proposals or time frames. On many of the issues where the report does suggest […]

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11/11/2021

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) […]

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27/10/2021

October 2021 Newsletter

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