On 25 September 2019, the European Banking Authority (EBA) announced that it had published a discussion paper on its proposals for a simple, transparent and standardised (STS) framework for synthetic securitisation.

The discussion paper has been developed in response to a mandate assigned to the EBA as per Article 45 of the Securitisation Regulation, which requires the EBA to publish a report on STS balance sheet synthetic securitisation.

The discussion paper contains an analysis of market developments and trends in the EU including data on the historical default and loss performance of synthetic transactions both before and after the financial crisis. It also examines the rationale behind STS synthetic products and assesses the positive and negative implications of its possible introduction. The discussion paper also proposes a list of criteria to be considered when labelling a synthetic securitisation as an STS. Significantly, the discussion paper contains a separate chapter dedicated to analysis of possible differentiated regulatory treatment of the STS synthetic securitisation.

A public hearing on the discussion paper will take place on 9 October 2019. The deadline for comments is 25 November 2019.

Based on the EBA final report, the European Commission shall submit a report to the European Parliament and the Council, together with a legislative proposal, if appropriate.