EBA consults on draft guidelines on implicit support for securitisation transactions
The European Banking Authority (EBA) has issued a consultation paper on draft guidelines on implicit support for securitisation transactions.
Under article 248 of the Capital Requirements Regulation (CRR), restrictions are placed on providing implicit support to securitisations. The CRR, recognising the potential for diverging interpretations in respect of what constitutes implicit support, sets out a mandate in article 248(2) for the EBA to issue guidelines on what constitutes arm’s length conditions and when a transaction is not structured to provide support.
The draft guidelines recognise the fact that implicit support should not cover support that institutions are already contractually obliged to provide. Such support is assessed under the EBA’s guidelines on significant credit risk transfers. The draft guidelines apply to transactions an institution is under no contractual obligation to enter into or is not under a contractual obligation to enter into on the specific terms of such transaction.
The draft guidelines propose an objective test for the definition of arm’s length conditions and for assessing when a transaction is not structured to provide support. Also, guidance is provided on those elements that should be considered when assessing whether a transaction is not structured to provide support and on the notification requirements applicable to such transactions. The draft guidelines include provisions to avoid a scenario where support is provided on behalf of the originator by another entity.
The deadline for comments on the consultation paper is 20 April 2016.
View EBA consults on draft guidelines on implicit support for securitisation transactions, 20 January 2016