The Council of the EU has announced that it has reached an agreement with the European Parliament on proposals aimed at facilitating the development of a securitisation market in Europe. The agreement covers two draft Regulations:

  • Regulation laying down common rules on securitisation and creating a European framework for simple, transparent and standardised (STS) securitisation; and
  • Regulation amending the Capital Requirements Regulation. The proposed Regulation sets out capital requirements for positions in securitisations and provides for a more risk-sensitive regulatory treatment for STS securitisations.

One of the main political issues resolved relates to a so-called risk retention requirement. This refers to the interest in the securitisation that originators, sponsors or original lenders of securitisations need to retain themselves. The requirement will ensure that securitised products are not created solely for the purpose of distribution to investors. Negotiators have agreed to set the risk retention requirement at 5%, in accordance with existing international standards.

In terms of next steps, the agreement will be submitted to EU ambassadors for endorsement on behalf of the Council, following technical finalisation of the texts. The European Parliament and Council will then be called on to adopt the proposed Regulations at first reading. The Regulations require a qualified majority for adoption by the Council, in agreement with the European Parliament.

View Capital Markets Union: Agreement reached on securitisation, 30 May 2017

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