On 31 July 2018, the European Banking Authority (EBA) published final draft regulatory technical standards (RTS) under the Securitisation Regulation. The RTS set out the conditions for securitisation to be deemed homogeneous. Homogeneity is a critical element for a securitisation transaction to be assessed as simple, transparent and standardised and to be eligible for more risk-sensitive risk weights under the new securitisation framework.

The draft RTS cover:

  • homogeneity of the underlying exposures in securitisation (RTS1); and
  • the requirements for originators, sponsors and original lenders relating to risk retention pursuant to Article 6(7) of the Securitisation Regulation (RTS2).

RTS1 further specify which underlying exposures are deemed homogeneous. It establishes four conditions for the underlying exposures to be considered homogeneous: (i) they have been underwritten according to similar underwriting standards; (ii) they are serviced according to similar servicing procedures; (iii) they fall within the same asset category; (iv) and, for a majority of asset categories, they need to be homogeneous with reference to at least one homogeneity factor.

RTS1 specifies a list of asset categories as well as lists of the homogeneity factors available for the majority of the asset categories, a list reflecting the most common types of underlying exposures securitised in market practice: residential mortgages; commercial mortgages; credit facilities to individuals for personal, family and household consumption purposes; credit facilities to enterprises and corporates including SMEs; auto loans and leases; credit card receivables; and trade receivables.

RTS2 specify in greater detail the risk retention requirement and, in particular, the matters listed in Article 6(7) of the Securitisation Regulation (including the modalities of retaining risk, the measurement of the level of retention, the prohibition of hedging or selling the retained interest and the conditions for retention on a consolidated basis).

The draft RTS will be submitted to the European Commission for adoption. They will then be scrutinised by the European Parliament and the Council before being published in the Official Journal of the European Union.