On 9 August 2022, the European Banking Authority launched a public consultation on its draft regulatory technical standards (RTS) on the determination by originator institutions of the exposure value of synthetic excess spread (SES) in securitisations. The draft RTS have been developed in accordance with Article 248(4) of Capital Requirements Regulation (CRR).
The Capital Markets Recovery Package amended the CRR in several aspects, including a preferential treatment for senior tranches of simple, transparent and standardised on-balance-sheet securitisations. It also introduced a provision on how to determine the exposure value of SES in synthetic securitisations.
The draft RTS specify the calculation of the exposure value of the elements that should be included in the exposure value of the SES, taking into account the relevant losses expected to be covered by SES. These elements include: (i) any income from the securitised exposures recognised by the originator institution in its income statement under the applicable accounting framework that the originator institution has contractually designated to the transaction as SES that is still available to absorb losses; (ii) any SES contractually designated by the originator institution in any previous periods that is still available to absorb losses; (iii) or for the current period that is still available to absorb losses; and (iv) any SES contractually designated by the originator institution for future periods.
The deadline for comments on the Consultation Paper is 14 October 2022. A public hearing will take place via conference call on 6 September 2022 from 11:00 to 12:00 CET.
The final RTS will be submitted to the European Commission for adoption. Following the submission, the draft RTS will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union.