Securitisation Regulation

The EU Securitization regulation, currently in proposed form, aims at harmonizing the securitization regime in the EU, and to establish a favorable capital treatment for certain securitizations.

The harmonization requirements for all securitizations (subject to grandfathering) are threefold: First, the (original) securitizing parties shall retain a risk in the securitization. Second, the parties shall disclose information on risk retention and securitization features to investors and supervisors. Third, investors shall comply with certain due diligence requirements.

In addition, the regulation defines criteria for simple, transparent and standardized (STS) securitization structures and asset-backed commercial paper, allowing favorable capital treatment, accompanied by an STS notification requirement.

Implementation / enforcement 04/2014 - 09/2015
Discussion / consultation 09/2015 - 06/2017

On 30 September 2015, the European Commission issued a proposal for the Securitisation Regulation. The regulation is under review for adoptation by the European Parliament and European Council. Upon publication in the Official Journal, which is dependent on the current legislative procedure, it will enter into force after 20 days.

The single regime for securitization, as part of a CMU, was welcomed by the market and would further add to EU's aim to create a sound foundation for the EU economy. The harmonization is further strengthened by replacing existing articles in CRR, Solvency II and AIFMD on risk retention, disclosure and due diligence with one single article for each of these items in the securitization regulation. While risk retention and favorable capital treatment are beneficial for investors in securitizations, the new regulation also introduces new administrative burdens and risks, both for securitizing parties (risk retention on their balance sheet, as well as disclosure, STS notification and the possible misrepresentation thereof) and for investors (due diligence).

Further information:
European Commission: Securitisation

Ivo Raschl Director
Categories: Financial Market Organisation