Toelichting bij COM(2025)825 - Amendment of Regulation (EU) No 575/2013 on prudential requirements for credit institutions as regards requirements for securitisation exposures - Hoofdinhoud
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| dossier | COM(2025)825 - Amendment of Regulation (EU) No 575/2013 on prudential requirements for credit institutions as regards requirements for ... |
|---|---|
| bron | COM(2025)825  |
| datum | 17-06-2025 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
Inhoudsopgave
- General introduction
- The feedback gathered in that consultation is reflected in the evaluation of the securitisation framework.
- Interaction and consistency between elements of the package
- Amendments to the risk weight floors for senior positions
- Amendments to the (p) factor
- Resilient positions
- Table 1: Current framework requirements
- Table 3: Proposed requirements for transactions with other than resilient positions (changes compared to the current framework are marked in bold)
- Significant risk transfer (SRT)
- Replacement of the current mechanical tests by the new principle-based approach test
- Preserving supervisory flexibility
- Process of the supervisory SRT assessment
- Transitional measure related to the output floor in Art. 465(13)
- Other technical fixes and clarifications
- Review
Relaunching the European securitisation market can help increasing the amount of financing available to the real economy and enhancing risk diversification within the single market. That is more important than ever in the current economic and geopolitical environment where the Union faces significant investment needs to remain resilient and competitive. Well-functioning securitisation markets can contribute to higher economic growth and facilitate funding of Union strategic objectives, including investments in the green, digital and social transitio,n by allowing credit institutions (i.e. banks) to transfer risks to those that are best suited to bear them and thereby free up their capital. Banks are expected to use this capital for additional lending to households and businesses, including SMEs. By redistributing risk within the wider financial system, securitisation can also provide capital market investors with more investment opportunities. The current EU securitisation framework is keeping the EU economy from reaping all the benefits that securitisation can offer.
The reports from Enrico Letta 1 and Mario Draghi 2 have recommended securitisation as a means of strengthening the lending capacity of European Union’s banks for the financing needs of EU priorities including defence, creating deeper capital markets, building the Savings and Investments Union and increasing the EU’s competitiveness.
The European Council has asked the European Commission to identify measures to relaunch the European securitisation market, including “through regulatory and prudential changes, using available room for manoeuvre” 3 and to swiftly propose, in 2025, a revised securitisation framework 4 . There is also a call for action by many stakeholders, including issuers, investors and supervisors, to address the impediments that are hindering the development of the EU securitisation market 5 .
The EU securitisation framework was put in place in the aftermath of the 2008 financial crisis and responded to concerns about risky US securitisations. At the time, strict requirements were considered necessary to restore the reputation of the securitisation market which had been suffering from inadequate protections and severe investor distrust. Now that appropriate safeguards have been firmly embedded in the market’s organisation and securitisation is gaining back investors’ trust, a better balance between safeguards and growth opportunities - both for investments and issuance- needs to be found. The experience with the framework indicates that it is too conservative and limits the potential use of securitisations in the EU. High operational costs and overly conservative capital requirements keep many issuers and investors out of the securitisation market.
The review aims to recognise the risk mitigants implemented in the EU securitisation regulatory and supervisory frameworks, which have significantly reduced the risks embedded in securitisation transactions, as well as the good credit performance of EU securitisations.
This proposal contributes to the 2024-2029 Commission’s priority of ‘A new plan for Europe’s sustainable prosperity and competitiveness’. The proposal is a component of the Savings and Investments Union 6 , which is a cornerstone of the 2024-2029 Commission mandate, and it is the first legislative initiative under the Savings and Investments Union. At the same time, it is important to recognise that the Securitisation Review is not a ‘silver bullet’ on its own. The SIU project encompasses a broad range of other and complementary measures to achieve its goals. Nevertheless, the European Commission expects that the amendments to the non-prudential and prudential requirements envisaged in this package of proposals will lead financial institutions to engage in more securitisation activity and, importantly, to use the resultant capital relief for additional lending.
The proposed review of the EU securitisation framework aims to remove undue issuance and investment barriers in the EU securitisation market, specifically: (i) to reduce undue operational costs for issuers and investors, balancing with adequate standards of transparency, investor protection and supervision; (ii) to adjust the prudential framework for banks and insurers, to better account for actual risks and remove undue prudential costs when issuing and investing in securitisations, while at the same time safeguarding financial stability.
The review of the EU securitisation framework aims to remove undue obstacles that hinder the growth and development of the EU securitisation market, but without introducing risks to financial stability, market integrity or investor protection. To achieve this, the proposed reforms are carefully targeted to address specific impediments to issuance and (non-bank) investment. The review envisages changes to four legal acts:
·a legislative proposal amending the Regulation (EU) 2017/2402 of the European Parliament and of the Council (the ‘Securitisation Regulation’ 7 ), which sets out product rules and conduct rules for issuers and investors
·a proposal amending Regulation (EU) No 575/2013 of the European Parliament and of the Council (the ‘Capital Requirements Regulation’ or ‘CRR’ 8 ), which sets out the capital requirements for banks holding and investing into securitisation, as well as
·amendments to two delegated Regulations: the Commission Delegated Regulation (EU) 2015/61 (the ‘Liquidity Coverage Ratio (LCR) Delegated Act’ 9 ), governing the eligibility criteria for assets to be included in banks’ liquidity buffer, and the Commission Delegated Regulation (EU) 2015/35 (the ‘Solvency II (SII) Delegated Act’ 10 ), governing the capital requirements for insurance and reinsurance undertakings.
The envisaged changes aim to make targeted improvements to the framework, rather than overhaul it. Those changes should be viewed as a package, as none of the individual components will achieve the desired outcome on its own. The elements of the package address both the supply and demand side of the market and reinforce each other to produce the desired impact. Streamlining reporting requirements and lowering capital requirements will both lower entry barriers and make it cheaper for banks to originate securitisations. Simplifying due diligence and amending the capital charges and liquidity treatment will make it easier and more attractive to invest in securitisation. A larger and more dynamic investor base will also incentivise more issuance. Relaunching the EU securitisation market is a complex issue that requires changes to be made in various parts of the framework to foster supply and demand in the securitisation market.
Regulation alone can only go so far in terms of stimulating this market’s development: market participants must also step in and do their part, e.g. by embracing standardisation and industry-wide initiatives towards specific segments – without market participant efforts, scaling up of the market will not be possible.
Various inputs have informed this review, including the 2020 EBA report on the significant risk transfer , the 2020 www.esrb.europa.eu/pub/pdf/reports~27958382b5.en.pdf">ESRB report on Monitoring systemic risks in the EU securitisation market , the 2022 Commission Report on the Securitisation Regulation , the www.eiopa.europa.eu/publications">2022 Joint Committee of the ESAs advice on the prudential framework , the 2024 targeted consultation on the functioning of the EU securitisation framework , and the www.eba.europa.eu/sites/default/files/2025-03%20Committee%20report%20on%20the%20functionning%20of%20the%20securitisation%20regulation.pdf">2025 Joint Committee Report on the implementation and functioning of the securitisation framework . The Commission also held various bilateral meetings with stakeholders and organised a workshop in July 2024 to discuss stakeholder views about the EU securitisation framework.
In terms of timing, the amendments to the Securitisation Regulation and the Capital Requirements Regulation are adopted by the Commission together. On the same date, the draft amendments to the Liquidity Coverage Ratio Delegated Regulation are published on Have Your Say for a four-week consultation. The draft amendments to the Solvency II Delegated Regulation will be included in a broader package of amendments to that Regulation that is expected to be published for consultation in the second half of July of this year.
Objectives of the proposal amending the Regulation (EU) No 575/2013 (CRR)
The evaluation of the framework, supported by feedback from stakeholders, indicates that (i) the existing prudential securitisation requirements, as set out in Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), are insufficiently risk sensitive and, that, as a result of those requirements, (ii) the level of capital requirements that credit institutions need to comply with for their securitisation exposures are unduly high. Current requirements do not sufficiently acknowledge the good credit performance of EU securitisation and the risk mitigants implemented in the securitisation regulatory and supervisory frameworks which have significantly reduced the agency and model risks embedded in securitisation transactions 11 . While the principle of non-neutrality 12 of capital requirements – as one of the main defining elements of the securitisation capital framework for credit institutions - is justified, the magnitude of the non-neutrality seems no longer justified. In addition, there is an excessive conservativeness embedded in the securitisation standardised approach (SEC-SA), both in absolute terms and relative to the internal ratings-based approach (SEC-IRBA). The lack of risk sensitivity acts as a prudential impediment that disincentivises EU credit institutions from fully participating in the securitisation market, in particular in their capacity of securitisation originators, and reduces the potential for the credit institutions to use the freed up capital to offer more lending to the economy. It reduces the attractiveness of securitisation as an effective instrument for managing the credit institutions’ capital and balance sheets and redistributing risks across the wider financial system.
This proposal introduces targeted changes to the current prudential framework for credit institutions in order to achieve the following objectives: (i) introduce greater risk sensitivity into the existing framework; (ii) reduce unjustified levels of capital non-neutrality; (iii) differentiate between originators/sponsors and investors with regard to the prudential treatment of securitisations; (iv) mitigate undue discrepancies between the standardised approach (SEC-SA) and internal rating-based approach (SEC-IRBA) for the calculation of capital requirements for securitisations; and (iv) make the significant risk transfer framework more robust and predictable.
The proposed amendments to the CRR concern the following two areas: (i) the calibration of the two key parameters that set the level of non-neutrality, used in regulatory capital calculations to capture securitisation inherent risks, i.e. the risk weight floor for senior securitisation positions, and the (p) factor, and (ii) the framework for significant risk transfer. A number of additional technical amendments are proposed to address certain technical inconsistencies in the framework, as recommended in the Joint Committee of the European Supervisory Authorities’ 2022 report, and as proposed by the stakeholders in the Commission consultation.
• Consistency with existing policy provisions in the policy area
The revisions to the regulatory capital treatment of securitisation in the CRR are part of a broader legislative package which includes amendments to the Securitisation Regulation, the Liquidity Coverage Ratio Delegated Act and the Solvency II Delegated Act. The proposed changes have been drafted to ensure consistency across the various pieces of legislation and with the same general objective in mind.
• Consistency with other Union policies
The initiative is one piece in a set of measures to foster the Savings and Investments Union and make it more resilient and integrated. The proposal is also consistent with the Union's objective of safeguarding financial stability by introducing greater risk-sensitivity into the framework and by ensuring that securitisation markets operate in a transparent, prudent, and resilient manner.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The legal basis for this proposal is Article 114(1) of the Treaty on the Functioning of the European Union (‘TFEU’). This article empowers the European Parliament and the Council to adopt measures for the approximation of the Member States’ laws, regulations and administrative actions concerned with the establishment and functioning of the internal market.
This proposal aims to amend the CRR’s provisions related to the prudential framework for credit institutions. This proposal aims to enhance the rules that are uniformly and directly applicable to those institutions, including rules on capital requirements for their securitisation positions. This harmonisation will ensure a level playing field for EU credit institutions and will boost confidence in the stability of institutions across the EU, including in respect to their activity as originators, sponsors or investors in securitisation markets.
• Subsidiarity (for non-exclusive competence)
Only Union law can ensure that the regulatory capital treatment for securitisation is the same for all credit institutions operating in more than one Member State. Harmonised regulatory capital requirements ensure a level playing field, reduce regulatory complexity, avoid unwarranted compliance costs for cross-border activities and promote further integration of the internal market. Action at an EU level also ensures a high level of financial stability across the EU. For these reasons, regulatory capital requirements for securitisations are set out in the CRR and only amendments to that Regulation would achieve the purpose sought by this proposal. Accordingly, this proposal complies with the principles of subsidiarity and proportionality set out in Article 5 of the TFEU.
• Proportionality
The proposal makes targeted amendments to the CRR only where such changes are necessary to address the problems described above and analysed in the impact assessment. Proportionality has been an integral part of the impact assessment accompanying the proposal. The proposed amendments in different parts of the legislative package have been individually assessed against the proportionality objective.
• Choice of the instrument
The current proposal is an amendment to the CRR and is therefore also a Regulation. No alternative means – legislative or operational – can be used to attain the objectives of this proposal.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
The Commission has conducted an evaluation of the EU securitisation framework in general, as part of the impact assessment. The evaluation also specifically covers the securitisation prudential framework in the CRR (as set out in the Chapter 5 of Title II or Part III of the CRR). It covers the period from the entry into application of the amendments introduced as part of the securitisation framework (1 January 2019) up to the present. In line with the Better Regulation Toolbox, the evaluation examines whether the objectives of the securitisation framework were met during that period (effectiveness), whether the objectives are still appropriate (relevance) and whether, taking account of the costs and benefits, the framework has been efficient in achieving its objectives (efficiency). The evaluation also considers whether the securitisation framework, in the form of EU level legislation, has provided ‘EU added value’ and whether it is consistent with other related pieces of legislation (coherence).
The evaluation concluded that amendments are needed to ensure that securitisation can meaningfully contribute to improve the financing of the EU economy and further develop the Savings and Investments Union. The prudential framework for credit institutions is insufficiently risk sensitive and capital ‘non-neutrality’ is disproportionately high for certain securitisation positions. Therefore, to address undue prudential impediments, a revision of the prudential treatment of securitisations for banks is necessary.
• Stakeholder consultations
On 3 July 2024, the Commission hosted a Securitisation Workshop, which invited representatives from the banking industry/associations, Ministries, European Supervisory Authorities (ESAs), the Single Supervisory Mechanism of the European Central Bank, the European Investment Bank, insurers, asset managers, nongovernmental organisations and pension funds to share their views.
A targeted public consultation on the functioning of the EU securitisation framework was carried out between 9 October 2024 to 4 December 2024. 133 responses were received from a variety of stakeholders 13 . The consultation was split into twelve sections which sought to gather views from a broad range of stakeholders active in the EU securitisation market on whether the Securitisation Framework met and continues to meet its objectives in terms of market safety, operational cost reduction and prudential risk-sensitivity. The consultation was also used to collect feedback on the operation of the STS standard, the effectiveness of supervision, and the prospect of a future securitisation platform(s). In addition, the Commission has carried a series of bilateral meetings with a wide range of stakeholders who confirmed the feedback already received.
The feedback gathered in that consultation is reflected in the evaluation of the securitisation framework.
A call for evidence was opened between 19 February 2025 and 26 March 2025 14 to request feedback from stakeholders on the review of the Securitisation Framework. Stakeholders were asked to provide views on the Commission's understanding of the problem and possible solutions, and provide relevant information. 34 respondents replied to the call for evidence and presented their views 15 . Out of those 34 respondents, 26 16 had also replied to the 2024 targeted consultation, with their views remaining broadly the same. Points made by first-time respondents were also consistent with the feedback of the targeted consultation previously received.
• Collection and use of expertise
The preparation of this proposal has benefited from extensive expert input, including stakeholder consultations, meetings, and analytical work carried out by the European Supervisory Authorities. The proposal takes account of the ESAs’ Joint Committee’s advice on the review of the securitisation prudential framework, which was published in December 2022 in response to the European Commission’s October 2021 call for advice. The Joint Committee report assessed the performance of the rules on capital requirements (for credit institutions, insurance and reinsurance undertakings) and liquidity requirements (for credit institutions) with respect to the framework’s original objective of contributing to the sound revival of the EU securitisation framework.
The proposal also takes account of the advice in the 2020 European Banking Authority (EBA) report on significant risk transfer (SRT) in securitisation, which the EBA was mandated to produce under Articles 244(6) and 245(6) of the CRR. Taking account of the findings of the EBA discussion paper on SRT published in 2017, and further analysis based on the review of SRT market practices and the supervisory approaches to SRT assessments, the report included a set of detailed recommendations to the European Commission on the harmonisation of SRT assessment practices and processes.
National authorities were consulted in the framework of the Eurogroup Working Group+ (EWG+), the Council Financial Services Committee (FSC), and the Commission Expert Group on Banking, Payments and Insurance (EGBPI). Several Member States also replied to the Targeted Consultation through their finance ministries and engaged with the Commission bilaterally.
• Impact assessment
An impact assessment was carried out for this proposal covering the complete legislative package i.e. including the amendments to the Securitisation Regulation, the Liquidity Coverage Ratio (LCR) Delegated Act as well as the Solvency II Delegated Act.
The impact assessment clearly shows the benefits in terms of efficiency and effectiveness of introducing targeted changes to the risk weight floors, (p) factor and the SRT framework in the CRR. The proposals are expected to be effective in reducing undue prudential impediments for credit institutions to engage in securitisation. They are also expected to increase the economic viability of securitisation as a risk transfer tool. By mitigating some of the key barriers to entry for new EU credit institutions, the proposals are expected to make securitisation more accessible to a larger number of credit institutions across the EU. This should help strengthen the EU banking system’s ability to provide credit to the economy and to provide funding to new businesses. Overall, as the measures do not propose a fundamental overhaul of the methods that banks use for the calculation of capital, they rather involve an adaptation of existing systems and parameters and make the framework more risk sensitive - the costs are therefore expected to be limited. Some costs are expected for competent authorities to adapt their methodologies, in particular as a consequence of changes to the SRT framework. However, overall, the supervisory processes would be simplified. The proposals have a targeted scope, aim to ensure a positive impact on the EU securitisation market going forward, and aim to support the international competitiveness of EU credit institutions.
The measures focus on economic incentives through removing undue prudential impediments. That said, a simpler, more risk-sensitive, and proportionate regulatory framework is expected to incentivise credit institutions to issue more securitisation transactions and hence increase the amount of capital relief, which is expected in turn to give rise to additional lending to EU businesses and households.
The impact assessment report was submitted to the Regulatory Scrutiny Board and was examined by the Board on 9 April 2025.
The Board gave a positive opinion with reservations, noting that a limited number of shortcomings were identified that required to be addressed in the final impact assessment. The Board called for additional input in some areas, including further details on the content of changes in the prudential framework and a substantiated comparative analysis of financial stability risks related to the changes in the prudential framework. These issues have been addressed and incorporated into the final version which is available on the Commission website.
• Regulatory fitness and simplification
The proposal puts forward a series of refinements to enhance the proportionality and risk sensitivity of the existing securitisation prudential framework. Some elements of the proposal simplify certain burdensome requirements and make the framework more consistent and predictable. Some other elements, notably those which increase the risk sensitivity, introduce some additional complexity into the framework. This is however inevitable to maintain the prudence of the framework and promote financial stability; the introduced risk sensitivity allows to reduce the capital requirements only for transactions where risks have been reduced. The additional complexity is, however, limited. Ultimately, taking together all proposed changes in the context of the overall securitisation framework, the framework is being simplified and is expected to give rise to greater efficiency within the securitisation market.
• Fundamental rights
The proposal has no consequences for the protection of fundamental rights.
4. BUDGETARY IMPLICATIONS
The proposal has no budgetary implications.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The impact of the new framework will be closely monitored in cooperation with the EBA and competent supervisory authorities. Monitoring will be based on the supervisory reporting arrangements and disclosure requirements by institutions provided for in the CRR, and will form part of the ongoing supervision and the supervisory assessments of the significant risk transfer.
The Commission will also evaluate this package of proposed amendments, four years after its entry into application, and present a report on its main findings to the European Parliament and the Council. The evaluation will be carried out in accordance with the Commission's Better Regulation Guidelines. It will be based on a list of specific and measurable indicators that are relevant to the objective of the reform, as also presented in the impact assessment. To prepare the evaluation report, the Commission will consult EBA and will also mandate the European Supervisory Authorities, the European Central Bank/Single Supervisory Mechanism and the Member States to collect data to calculate the indicators and report on them to the Commission.
• Detailed explanation of the specific provisions of the proposal
This proposal for a Regulation is part of a wider securitisation review which encompasses changes to two Regulations (in addition to the CRR, the Securitisation Regulation) and two Delegated Acts (the LCR Delegated Act and the Solvency II Delegated Act). The proposed changes should be viewed as a package of measures that tackle supply and demand issues in the securitisation market in a comprehensive manner.
Risk weight floors are minimum risk weights that credit institutions issuing and investing in securitisation must apply to their securitisation exposures, even if the capital requirements calculations under SEC-SA and SEC-IRBA approaches suggest a lower risk weight. They ensure a bottom level of capital requirements. The current framework is quite risk-insensitive, as it only allows for two fixed risk weight floors for senior positions: a 10% risk weight floor for the exposure to a senior position of simple, transparent and standardised (STS) transactions, and a 15% risk weight floor for the exposure to a senior position of non-STS transactions.
The proposal introduces the new concept of a risk-sensitive risk weight floor, where the risk weight floors for senior securitisation positions are proportionate to the riskiness (i.e. average risk weights) of the underlying pool of exposures. This significantly increases the risk sensitiveness of the securitisation capital framework and decreases existing disincentives for the securitisation of portfolios with low risk weights. To prevent excessively low risk weights floors and to preserve consistency with international standards, the risk weight floors calculated under this risk-sensitive formula should be subject to a minimum level.
The calculation of the risk weight floor for senior positions differentiates between STS and non-STS securitisations by using a different scalar for each, to reflect the inherent better quality of STS securitisations framed by a set of detailed STS criteria and by a dedicated supervision. The scalars have been calibrated to achieve moderate to ambitious results in terms of reduction of the capital requirements, while still keeping prudent results.
The (p) factor is a parameter driving the ‘non-neutrality’ of the securitisation capital requirements for securitisation exposures held by credit institutions. It is one of the parameters used in the formulae for calculating securitisation risk weights, and it increases the amount of capital for securitisation positions, above what would be required for the underlying exposures if they were not securitised. A (p) factor of 1 should be interpreted as a 100% higher capital requirement or a doubling of the capital requirement for all securitisation positions, compared to the capital requirement of the underlying non-securitised assets, while a (p) factor of 0.3 results in a 30% higher capital requirement. The (p) factor only exists in the formula-based approaches (SEC-IRBA and SEC-SA) and does not exist in the SEC-ERBA external rating-based approach (where risk weights are specified directly in a table defined in the CRR, to ‘mirror’ the risk weights computed under the SEC-SA formula).
One of the main takeaways from the evaluation of the current framework and the consultation with stakeholders is that the levels of the (p) factor are excessively high and lead to unjustified levels of overcapitalisation for some securitisation transactions. In addition, the non-neutrality of capital requirements is particularly high under the SEC-SA approach and causes unjustified differences between the capital requirements calculated under SEC-IRBA and SEC-SA approaches.
Targeted amendments should therefore be introduced to the (p) factor under the SEC-IRBA and SEC-SA approaches, in order to: (i) introduce more risk sensitivity; (ii) address excessive levels of non-neutrality; (iii) reduce the excessive conservativeness of the SEC-SA approach; (iv) maintain the principle of the hierarchy of approaches (i.e. that the SEC-IRBA approach at the top of the hierarchy should, as a principle, lead to lower capital requirements than the SEC-SA approach in the middle and the SEC-ERBA approach at the bottom of the hierarchy leading to the most conservative outcomes).
The targeted amendments therefore differentiate between positions in STS and non-STS securitisations, originators/sponsors and investors positions, and senior and non-senior positions. Generally, the focus of the reductions of the (p) factor is on senior positions, originators/sponsors positions and on STS securitisations. Put differently, investor exposures in non-STS securitisations and in non-senior positions of STS securitisations should not benefit from a reduced (p) factor, as credit institutions’ investments in non-senior positions of securitisation are not desirable and should not be supported.
Under SEC-IRBA, where the framework requires the (p) factor to be calculated based on a specific formula, it is proposed that the (p) factor is subject to a reduced scaling factor, a reduced floor and subject to a newly introduced cap. These changes are focused on the senior positions. Apart from the changes explained above (to the cap, the floor and the scaling factor), the formula for calculating the (p) factor under SEC-IRBA remains unchanged.
Under SEC-SA, where the framework sets out flat levels of the (p) factor, differentiating only between STS and non-STS securitisations, it is proposed that the (p) factor is reduced for senior positions.
Under SEC-ERBA, the risk weights in the look-up tables have been recalibrated, to reflect changes proposed to the risk weight floor and to the (p) factor under SEC-IRBA and SEC-SA approaches, while at the same time maintaining the hierarchy of approaches (i.e. to maintain the principle that SEC-ERBA should lead to most conservative outcomes out of the three approaches). To reflect the introduction of the risk sensitive risk weight floor, the look-up tables have to incorporate the formula for calculating the risk sensitive risk weight floor, for the positions with the highest credit quality steps (CQSs) that are likely to touch the lowest risk weights. Therefore, the risk weight floor formula should override the updated risk weights in the look-up tables, if it produces higher results. If banks cannot calculate KA 17 (because, for example, they cannot obtain the parameter w for the calculation of KA), they must use the current risk weights of 10% for STS or 15% for non-STS. This is to avoid the risk of regulatory arbitrage, where SEC-ERBA would be able to result in lower risk weights for these highest CQS positions than under the formula-based (SEC-IRBA and SEC-SA) approaches (where the formula has to be used for the calculation of the risk weight floor).
Overall, the proposed changes aim to maintain prudent results and take into consideration EBA and supervisory concerns that reducing the (p) factor may lead to the undercapitalisation of the mezzanine positions and cliff effects (i.e. situation where small changes in the (p) factor result in large changes in the capital requirements and steep differences between capital requirements for different positions).
In addition, building on the proposals in the 2022 Joint Committee advice on the review of the securitisation prudential framework, the proposal introduces a new concept of resilient securitisation positions. The resilient securitisation positions are senior positions in securitisations which satisfy a set of eligibility criteria that ensure low agency and model risk and a robust loss absorbing capacity for the senior positions. The eligibility criteria build on the Joint Committee’s recommendations. They are adapted to capture a larger part of the securitisation market positions, while still ensuring prudent results.
The requirements are the following:
·Reduced agency and model risks. Only securitisation positions which feature reduced agency and model risks are eligible. This includes (i) positions by originators, both in STS and non-STS securitisation (as originators have more detailed knowledge of and control over the underlying exposures and the securitisation origination process than investors); (ii) positions by sponsors, both in STS and non-STS securitisations (as sponsors have access to more information than investors and agency risks are smaller than risks associated with investors’ positions); and (iii) investor positions - in STS securitisations only (because STS criteria largely mitigate the agency and model risks). Investor positions in non-STS securitisations are excluded as the agency and model risks are not reduced.
·Amortisation mechanism. Only sequential amortisation is allowed, or pro-rata amortisation, provided the transaction includes performance-related triggers requiring a switch to sequential amortisation. This aims to ensure a conservative credit enhancement for the senior position over the life of the transaction. These are existing STS criteria. Therefore, traditional securitisation needs to comply with the existing STS criterion defined in the Article 21(5) of the Regulation (EU) 2017/2402 and with the additional guidance provided in the EBA Guidelines for non-ABCP securitisation EBA/GL/2018/09. Synthetic securitisation needs to comply with the existing STS criterion defined in the Article 26c(5) of the Regulation (EU) 2017/2402, along with the guidance provided in the EBA Guidelines on the STS criteria for on-balance-sheet securitisation EBA/GL/2024/05, and the requirements of the Delegated Regulation (EU) 2024/920 on performance related triggers.
·Concentration/granularity. The exposures in the pool must comply with a maximum concentration limit of 2%, i.e. exposures to a single obligor may not exceed 2% of the aggregate exposure value. A granular pool facilitates a higher-risk diversification, generally reduces the probability of correlated defaults and better insulates the senior position from the risk of losses.
·Counterparty credit risk (only relevant for synthetic transactions). Only credit protection supported by high quality collateral or in the form of guarantees provided by sovereigns or supra-nationals is allowed. This reduces the counterparty credit risk associated with the credit protection to which the originator is exposed, enables the originator to quickly compensate the losses incurred in SRT structures and contributes to the effectiveness of the risk transfer. The focus of this requirement is to protect the originator (and the originator’s exposure to the senior position), since in synthetic securitisations the senior position is usually retained by the originator.
·Minimum credit enhancement (i.e. maximum thickness) of the senior position. This requirement aims to ensure sufficiently thick non-senior positions to cushion the senior position against potential losses. A specific formula is introduced for calculating the minimum attachment point of the senior position under the SEC-IRBA approach. This is largely consistent with the Single Supervisory Mechanism’s expectations in the context of the SRT supervisory assessments. For SEC-SA and SEC-ERBA approaches, a separate formula is introduced which is easier to implement and which avoids complexities with the application of the formula applied under the SEC-IRBA approaches (for example, the complexities of the calculation of the lifetime expected losses under the standardised approach). The formula for calculating the minimum attachment point under the SEC-IRBA approach uses the weighted average life (WAL) of the initial reference portfolio, as one of the inputs. The WAL should be calculated consistently with the guidance provided in the Guidelines on the STS criteria (EBA/GL/2024/05), which is consistent with the assumptions of the calculation of WAL under the EBA Guidelines on the determination of the weighted average maturity of the contractual payments due under the tranche (EBA/GL/2020/04). Accordingly, the calculation of WAL should not take into account any prepayments for synthetic securitisations, while for true sale securitisation the prepayments should be allowed to be taken into account under specific conditions (as set out in the section 4.3.2 of the respective guidelines).
In practice, for STS securitisations, only two out of five criteria are new, as the criteria on amortisation mechanism, concentration/granularity and counterparty credit risk are already existing STS criteria (set out in the Securitisation Regulation) or ‘STS+’ criteria for preferential capital treatment (set out in Article 243 of the CRR).
Securitisation positions compliant with the above criteria are allowed to benefit from additional reductions to the risk weight floors and, for certain investor positions, also reductions in the (p) factor.
These criteria are specified in the Article 243 of the CRR. Article 243 of the CRR now specifies two sets of criteria for differentiated capital treatment: first, existing criteria for STS securitisations qualifying for STS capital treatment, and second, new ‘resilience’ criteria for securitisation positions to qualify for more favourable capital treatment than other (non-resilient) positions.
The risk of regulatory arbitrage (where the originator credit institution would be incentivised to structure an unduly thick senior position to benefit from the lower (p) and lower risk weights) is mitigated as follows: in the case of resilient positions, through a ‘resilience’ requirement on the maximum thickness of the senior position; and for other positions, through the significant risk transfer framework, where the new principle-based approach test prevents such arbitrage. Similarly, credit institutions investing in senior positions of STS securitisation are able to benefit from a lower (p) only if the position is resilient and therefore complies with the requirement on the thickness of the position.
All the proposed changes to the risk weight floors and to the (p) factor are summarised in the following three tables.
| STS | Non-STS | ||||||||
| Originator/ sponsor | Investor | Originator/ sponsor | Investor | ||||||
| SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | ||
| Senior position | Risk weight floors | 10% | 15% | ||||||
| (p) factor | Formula, Scaling factor 0.5, Floor 0.3 | 0.5 | Formula, Scaling factor 0.5, Floor 0.3 | 0.5 | Formula, Scaling factor 1, Floor 0.3 | 1 | Formula, Scaling factor 1, Floor 0.3 | 1 | |
| Non-senior positions | (p) factor | Formula, Scaling factor 0.5, Floor 0.3 | 0.5 | Formula, Scaling factor 0.5, Floor 0.3 | 0.5 | Formula, Scaling factor 1, Floor 0.3 | 1 | Formula, Scaling factor 1, Floor 0.3 | 1 |
Table 2: Proposed requirements for transactions with resilient positions (changes compared to the current framework are marked in bold, changes compared to the proposed treatment for other transactions are marked in bold underlined)
| STS | Non-STS | ||||||||
| Originator/ sponsor | Investor | Originator/ sponsor | Investor | ||||||
| SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | ||
| Senior position | Risk weight floors | Formula: 10% * KIRB or KA * 12.5 Floor 5% | Formula: 15% * KIRB or KA * 12.5 Floor 10% | Formula: 15% * KIRB or KA * 12.5 Floor 12% | |||||
| (p) factor | Formula, Scaling factor 0.3, Floor 0.2, Cap 0.5 | 0.3 | Formula, scaling factor 0.3, Floor 0.2, Cap 0.5 | 0.3 | Formula, Scaling factor 0.7, Floor 0.3, Cap 1 | 0.6 | Formula, Scaling factor 1, Floor 0.3, Cap 1 | 1 | |
| Non-senior positions | (p) factor | Formula, Scaling factor 0.5, Floor 0.2, Cap 0.5 | 0.5 | Formula, Scaling factor 0.5, Floor 0.3, Cap 0.5 | 0.5 | Formula, Scaling factor 1, Floor 0.3, Cap 1 | 1 | Formula, Scaling factor 1, Floor 0.3, Cap 1 | 1 |
Table 3: Proposed requirements for transactions with other than resilient positions (changes compared to the current framework are marked in bold)
| STS | Non-STS | ||||||||
| Originator/ sponsor | Investor | Originator/ sponsor | Investor | ||||||
| SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | SEC-IRBA | SEC-SA | ||
| Senior position | Risk weight floors | Formula: 10% * KIRB or KA * 12.5 Floor 7% | Formula: 15% * KIRB or KA * 12.5 Floor 12% | ||||||
| (p) factor | Formula, Scaling factor 0.3, Floor 0.2, Cap 0.5 | 0.3 | Formula, Scaling factor 0.5, floor 0.3, Cap 0.5 | 0.5 | Formula, Scaling factor 0.7, Floor 0.3, Cap 1 | 0.6 | Formula, Scaling factor 1, Floor 0.3, Cap 1 | 1 | |
| Non-senior positions | (p) factor | Formula, Scaling factor 0.5, Floor 0.2, Cap 0.5 | 0.5 | Formula, Scaling factor 0.5, Floor 0.3, Cap 0.5 | 0.5 | Formula, Scaling factor 1, Floor 0.3, Cap 1 | 1 | Formula, Scaling factor 1, Floor 0.3, Cap 1 | 1 |
*KIRB means a capital charge for the underlying exposures in securitisation using the IRB (Internal Ratings Based) framework. KA means a capital charge for the underlying exposures in securitisation, adjusted to reflect adverse performance, using the Standardised framework.
The EBA report on the significant risk transfer 18 published in 2020 documented that the existing SRT regulatory framework in the CRR had a number of limitations, in particular in three areas: a) the SRT tests, with limitations relating to the interpretation of the quantitative thresholds and measures used by the CRR mechanical tests and to the qualitative ‘commensurateness‘ test in general, for which the CRR provides only high‐level criteria; b) the process applied by competent authorities to assess SRT, and c) specific structural features of securitisation transactions, which may be detrimental to complying with SRT requirements on a continuous basis and, thus, affect the effectiveness of the risk transfer. These framework limitations have contributed to market uncertainty and delays for competent authorities in assessing some securitisation transactions. In some cases, they have also led to unjustified inconsistencies in SRT outcomes and capital calculations in the SRT treatment of securitisations with comparable characteristics across Member States.
The amendments to the SRT framework aim to address the limitations to the SRT framework identified above (i.e. limitations relating to the current SRT tests, structural features of securitisations and supervisory processes) and to make the SRT framework more consistent and predictable. SRT predictability is enhanced by laying down the main elements of the SRT assessment, including the broad design of the new SRT test, in the CRR. The operationalisation of the technical details of the test, requirements as regards the structural features and the principles of the supervisory assessment process are left to EBA regulatory technical standards.
In line with the EBA recommendations, and with the aim of addressing the limitations identified with respect to the existing mechanical tests, a new principle-based approach test (PBA test) is introduced that replaces the existing two mechanical tests. This PBA test requires the originator to transfer at least 50% of unexpected losses of the exposures of the underlying portfolio of the securitisation transaction to third parties.
In addition, a new requirement is introduced for the originator to submit a self-assessment to the competent authority. The self-assessment should demonstrate that significant risk transfer is met, including in stress conditions. As part of this self-assessment, the originator should provide a cash-flow model analysis which provides evidence of the SRT’s sustainability over the life of the transaction and demonstrates how lifetime expected losses and unexpected losses of the securitised exposures are allocated to the positions of the transaction. The cash-flow analysis should cover both baseline as well as stress conditions and should be produced at origination for the whole life of the transaction. Finally, the self-assessment should also include information on the capital relief achieved by the securitisation. This should allow the supervisor to assess whether a securitisation with complex or innovative features leads to a disproportionate amount of capital relief compared to the risk transferred. The self-assessment would in general make it easier for the competent authorities to identify those features of securitisation transactions requiring greater supervisory attention. This would enable them to provide originators with greater transparency and predictability for originators and to streamline the SRT assessment.
Given the deletion of the mechanical tests, it is proposed to also delete the definition of the mezzanine securitisation position. The definition is now redundant, given that the only reference to the mezzanine position was made in the context of the mechanical tests. Moreover, an amendment should also be introduced in the definition of the senior position, where an additional condition/clarification should be introduced that the senior tranche needs to attach above KIRB/KA.
In due course, the EBA will issue a regulatory technical standard (RTS) containing: (i) further details on the conditions for the competent authorities to apply the PBA test, and (ii) technical specificities of the self-assessment and cash-flow modelling (including standards for the allocation of the lifetime expected losses and the unexpected losses to the positions). This should ensure a homogeneous implementation of the PBA test and address the main concerns raised by stakeholders on these matters. Additionally, the RTS will deal with structural features that may hinder the significant transfer of risk, along the lines of the recommendations made in the EBA report on SRT.
Under the proposal, the current permission-based approach – rarely used – will be removed from the CRR (i.e. achievement of SRT through permission granted by the competent authority is no longer allowed).
It is crucial to preserve flexibility for competent authorities in their SRT assessments, and the competence to carry out a comprehensive review of SRT transactions if there are complex and innovative transactions. Further details on the conditions for the competent authorities to apply the comprehensive review of SRT will be set out in the RTS developed by the EBA.
The process of the supervisory SRT assessment is currently not covered in the CRR. High-level principles governing SRT supervisory assessments should be harmonised at EU level with the aim of making them more efficient. The EBA should formulate such high-level principles in the RTS. This should also include high-level principles for a fast-track process for qualifying securitisations, building on EBA recommendations and drawing on experience with the fast-track process currently being developed by the Single Supervisory Mechanism in cooperation with the European Banking Federation.
The changes to the (p) factor and the risk weight floors for senior positions have been calibrated in such a way as to mitigate any excessive results for the output floor measure, stemming from the conservative treatment under the SEC-SA approach and disproportionate differences between the SEC-IRBA and SEC-SA approaches. The demands that have led to the introduction of the transitional measure in Article 465(13) have therefore been largely addressed, which also suggests that the transitional measure, which is in any case set to expire after 31 December 2032, is not necessary to the same extent.
A number of technical amendments and fixes, proposed by EBA and by stakeholders in the Commission consultation, should be introduced as part of the review.
These include the following:
–Time calls in synthetic securitisations and positive incentive in the context of Article 238. A clarification is included in Article 238 that a positive incentive, as referred to in Article 238, for the purpose of determining a maturity mismatch, is present in time calls only when at origination the contract includes terms apparently intended to increase the advantageousness of exercising the time call option (such as step-up coupon, the possibility to exercise a time call option less frequently than on an annual basis after the first eligible time call date, or the release of collateral securing the claims of the protection buyer at or after the first eligible time call date).
–Criteria for STS securitisations qualifying for differentiated (STS) capital treatment in Article 243. Some adjustments are necessary to make the securitisation framework consistent with changes to risk weights applied to some types of exposures under the credit risk framework, as introduced by the Capital Requirements Regulation III.
·First, the requirement for a 75% risk weight limit for retail exposures on an individual basis is deleted and merged with the requirement for a maximum 100% risk weight for any other exposures on an individual basis. This would make retail exposures to individuals above EUR 1 million eligible, for example.
·Second, the risk weight limit of 50% for commercial mortgages is increased to 60%. This would maintain the approach applied under the previous CRR regime, where a 50% loan-to-value (LTV) limit has been applied to exposures to commercial non-income-producing real estate (commercial non-IPRE). This also means that exposures to commercial IPRE, which are not desirable for the STS label, would not be eligible.
·Third, no change is introduced to the risk weight limit applied to residential mortgages. In fact, the 40% limit makes it possible to maintain an 80% LTV limit for the majority of exposures and at the same time a higher share of residential non-IPRE exposures with a 100% LTV limit than the previous CRR regime. This enables income producing residential real estate exposures to be included.
–Clarifications with respect to the Article 248(1). The mandate, given to EBA in Article 248(1) to draft RTS specifying what constitutes an appropriately conservative method for calculating the nominal amount for the undrawn part of a liquidity facility, is deleted, as no further clarification is considered necessary on the calculation of the nominal amount of the drawn portion, beyond what is already set out in the relevant Article. Also, as the calculation of the nominal amount of the undrawn portion (the off-balance sheet item) is straight forward, because it can be determined as the difference between the total nominal amount of the liquidity facility and the nominal amount of the drawn portion (an on-balance sheet item), the requirement for the institution to demonstrate application of an appropriately conservative method for measuring the amount of the undrawn portion, is deleted.
–Treatment of specific credit risk adjustments (SCRAs) for calculating capital requirements post securitisation, under Article 248(1)(d). Article 248(1)(d) is amended to extend the possibility to deduct SCRAs also to tranches that have been assigned a risk weight lower than 1250%, provided they have an attachment point A that is smaller than KIRB or KA. If this condition is satisfied, the securitisation position may be treated as two securitisation positions: the more senior position with A equal to KIRB or KA and the junior position with A below KIRB or KA and detachment point D equal to KIRB or KA. In this case SCRAs will be deductible only from the exposure value of this more junior position, which would be assigned a risk weight of 1250%.
–Clarification on the exposure value of synthetic excess spread under Article 248(1), point (e). some minor technical clarifications are included in the provision on the calculation of the exposure value of the synthetic excess spread, such as moving the reference to the contractually designated SES to the introductory sentence and its deletion from the points (i) to (iv), to avoid unnecessary repetitions.
–Conditions in Article 254(1)(c) under which SEC-SA may not be used. Article 254(1) defines the hierarchy of approaches. However, the conditions under which SEC-SA may not be used are not well specified. Article 254(1)(c) is therefore amended to clarify that the only cases where the SEC-SA may not be used are specified in paragraphs 2 and 4 of the same article. These paragraphs specify respectively the conditions for a mandatory switch to SEC-ERBA and the cases in which the use of the SEC-SA is prohibited by the relevant competent authority.
–Scope of application of the internal assessment approach (IAA) under Article 254 i. Article 254(5) of the CRR is amended to clarify that the IAA cannot replace the mandatory application of SEC-IRBA, but rather may only be used as an alternative to the application of other approaches, i.e. the SEC-SA, the SEC-ERBA or the application of a 1250% risk weight.
–Calculation of KA in Article 256(1) within the application of the SEC-SA. Article 255(6) is amended to clarify that KSA should be calculated on the basis of the capital requirements of the non-defaulted exposures in the pool of underlying exposures only, to avoid double-counting those exposures in the calculation of KA in accordance with Article 261(2) of the CRR. Article 261(2) gives a definition of ‘exposure in default’ for the purpose of calculating W; this definition should also be used for the purpose of calculating KSA, to ensure consistency between the formula for KA and the calculation of KSA. In addition, the second subparagraph of Article 255(6) is amended to improve clarity on the fact that that KSA should be calculated on the basis of the exposure value of the underlying exposures gross of any SCRAs and additional value adjustments on such underlying exposures (and not net of these).
–Treatment of defaulted exposures in calculation of attachment and detachment points in Article 256. It is clarified that the outstanding balance of the pool of securitised exposures should, for the purpose of calculating the attachment and detachment points of the tranches, be reduced by the amount of losses already allocated to the tranches in respect of the defaulted exposures that are still included in the securitisation portfolio. This is to ensure that the calculation of the attachment and detachment points of a tranche adequately reflects the balance of the securitised exposures. This is relevant in case of a tranche which has been written down to reflect losses on the securitised exposures that remain in the securitised portfolio. Consistently with the clarification provided in the Article 256, Article 261(2) is amended to clarify that, for the purpose of the formula for the W parameter, the nominal amount of defaulted exposures is the accounting value of the defaulted exposures minus any amounts by which the tranches have already been written down to absorb losses on those defaulted exposures, or which have been absorbed by the excess spread.
–Calculation of K for mixed pools under Article 259(7). KSA 19 is replaced with KA in the formula which specifies the calculation of KIRB for mixed pools. KA is better suited in the formula than KSA, as KA reflects the capital requirements to be used in the formula for exposures in a mixed pool which are treated under the SEC-SA.
–Clarifications with respect to the calculation of the overall cap on capital requirements for a securitisation position, under Article 268(1). Article 268(1) is amended to align the calculation of the overall cap on capital requirements for a securitisation position under Article 268 with the amendment made for NPE securitisations in Article 269a(5) of the CRR. Consequently, originators using the SEC-IRBA in case of non-NPE securitisations should deduct SCRAs from the expected loss component of KIRB (capital requirements for the underlying exposures) for the purposes of calculation of the overall cap in accordance with Article 268, similarly as it allowed in the case of NPE securitisations. This is to ensure consistency with the IRB Approach when calculating the capital requirements pre-securitisation and, therefore, the cap in accordance with Article 268. In addition, the Article 268(1) should be amended to remove the existing restriction, according to which the cap on the capital requirements cannot be applied by the SEC-SA and SEC-ERBA investors, as the restriction is not justified.
–Carving out fully capitalised tranches from the calculation of V (i.e. the largest proportion of interest that the institution holds in the relevant tranches) in Article 268(3) of the CRR: An option is included to carve out from the calculation of V (i.e. the largest proportion of interest that the institution holds in the relevant tranches) under Article 268(3) of the CRR any tranche in full to which the originator applies a 1250% risk weight or which is deducted from Common Equity Tier 1 (CET1) items in accordance with point (k) of Article 36(1). The maximum capital requirement should be the sum of the capital requirements calculated under Chapter 2 or 3 on the ‘net underlying exposures’, i.e. total underlying exposure net of the exposure value relative to the carved-out tranche, multiplied by the revised V and the sum of the exposure values (which equal the capital requirements after securitisation) of the securitisation positions which are carved out from the calculation of V. The scope of this option should be as broad as the proposed amended scope of the Article 268(1).
–Recital 11 is added to clarify the underlying rationale of paragraph 2 of Article 254 on the quantitative rules to switch to SEC-ERBA, and the intended scope of application of this requirement. The aim here is to ensure a consistent interpretation and application of the requirement by the competent authorities and institutions across the Union. The recital clarifies that the article is aimed at avoiding the mandatory use of SEC-ERBA in relation to transactions for which the sovereign ceiling – and not the risk profile of the transactions – is the prevalent driver in determining the risk weights under this approach.
–Reports on STS on-balance sheet securitisations under Article 270(2) and (3). Mandate for reports by the Commission and the EBA in relation to the STS on-balance sheet securitisations are replaced by a mandate for a more general monitoring report by EBA, under Article 506d(2), and a more general report by the Commission, under Article 506d(1).
It is also proposed that the framework, along with the targeted amendments introduced by this current review, is to be reviewed 4 years after its entry into force. The review would be an opportunity to assess the appropriateness of the amended Union prudential securitisation framework. In particular, it would be an opportunity to consider whether a more fundamental change to the risk-weight formulae and functions would lead to greater risk sensitivity and more proportionate levels of capital non-neutrality, mitigate cliff effects and address the structural limitations of the current framework. It is also proposed that the EBA submits a monitoring report 2 years after its entry into force, monitoring the developments and dynamics of the EU securitisation market resulting from the amended prudential framework.