Navigating the European Rules and Regulations.
Synthetic securitization has had a rocky ride in Europe. 2004-2005 was the high watermark. The financial crisis almost killed off the market, before a gradual recovery began. In 2018, there were 49 European synthetic securitization deals, reaching a post-crisis record of EUR 105 billion.
On 24 September 2019, the European Banking Authority published its draft report on an STS Framework for synthetic securitization (the “EBA Discussion Paper”). The EBA Discussion Paper is driven by the EBA’s mandate under the Securitization Regulation to develop a report on the feasibility of a framework for “simple, transparent and standardized” (STS) synthetic securitization, limited to balance sheet securitization.
Part three of our series, looks at:
- the criteria for effective credit risk mitigation and the operational requirements for synthetic securitizations under the EU bank capital rules and the Capital Requirements Regulation (the “CRR”);
- the insurance regulatory and guarantee issues under English law;
- the potential impact of EU regulation of derivatives contracts under the European Market Infrastructure Regulation (“EMIR”); and
- the (a) proposed criteria for “simple, transparent and standardized” (STS) framework for synthetic securitization proposed by the European Banking Authority (EBA); and (b) the EBA Report on the Credit Risk Mitigation (CRM) Framework dated 19 March 2018 (the “EBA CRM Report”).
Read the Full Legal update here.