Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation to help the recovery from the COVID-19 pandemic
Date: 2020-07-24
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: banking, capital market, credit, credit institution, epidemic, financial legislation, financial market, infectious disease, investment, investment company

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   EUROPEAN COMMISSION  Brussels, 24.7.2020  COM(2020) 282 final 2020/0151 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation to help the recovery from the COVID-19 pandemic  (Text with EEA relevance) {SWD(2020) 120 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

• 
Regulation  (EU)  2017/2402  (the  Securitisation  Regulation1)  together  with  Regulation  (EU) 
575/2013  (the  CRR  Regulation2)  establish  a  general  EU  framework  for  securitisation  and 
create a specific framework for simple, transparent and standardised (STS) securitisation. The 
objective  of  the  framework  is  to  promote  a  safe,  deep,  liquid  and  robust  market  for 
securitisation, which is able to attract a broad and stable investor base to help allocate finance 
to  where  it  is  most  needed  in  the  economy.  The  new  securitisation  regime  is  in  place  since 
January 2019 and it is a cornerstone of the EU’s efforts to establish a Capital Markets Union.  

The  severe  economic  shock  caused  by  the  COVID-19  pandemic  and  the  exceptional 
containment  measures  are  having  a  far-reaching  impact  on  the  economy.  Businesses  are 
facing disruption in supply chains, temporary closures and reduced demand. Public authorities 
at Union and Member State levels have taken decisive actions to support solvent undertakings 
to  withstand  this  severe  but  temporary  slowdown  in  economic  activity  and  the  liquidity 
shortages that it will cause.  

The  European  Commission’s  summer  2020  economic  forecast3  points  to  a  very  deep 
recession as economic activity collapsed in the first half of 2020 and real GDP for 2020 as a 
whole in the EU is projected to decline by 8.3%. The magnitude of the economic decline is 
thus  expected  to  be  much  more  severe  than  the  one  observed  in  2009,  while  the  recovery 
prospects are uneven and uncertain. This is why the immediate emergency measures should 
be complemented by targeted measures of more medium-term effect that can support a speedy 
recovery.    

It will remain key for the banks to be able to continue lending to corporates also in the coming 
months once the immediate shock of the COVID-19 crisis will have passed. Therefore, it is 
important to prepare or upgrade any tools allowing banks to maintain and even enhance their 
capacity  to  lend  to  the  real  economy,  in  particular  to  SMEs.  Securitisation  can  be  a  key 
enabler in this respect. By transforming loans into tradable securities, securitisation could free 
up  bank  capital  for  further  lending  and  allow  a  broader  range  of  investors  to  fund  the 
economic recovery.  

The  current  framework  does  not  reach  its  full  potential  in  two  respects,  which  are  very 
important for fostering economic recovery: the framework does not cater for on-balance-sheet 
synthetic  securitisation  and  it  is  not  entirely  fit  for  purpose  for  the  securitisation  of  non 
performing exposures (NPEs). 

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Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying 
down a general framework for securitisation and creating a specific framework for simple, transparent 
and  standardised  securitisation,  and  amending  Directives  2009/65/EC,  2009/138/EC  and  2011/61/EU 
and Regulations (EC) No 1060/2009 and (EU) No 648/2012 – (OJ L 347/35, 28.12.2017 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential  requirements  for  credit  institutions  and  Directive  2013/36/EU  of  the  European  Parliament 
and  of  the  Council  of  26  June  2013  on  access  to  the  activity  of  credit  institutions  and  the  prudential 
supervision of credit institutions. 
https://ec.europa.eu/info/business-economy-euro/economic-performance-and-forecasts/economic-
forecasts/summer-2020-economic-forecast-deeper-recession-wider-divergences_en. 

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The  securitisation  framework  will  be  subject  to  a  comprehensive  review  with  possible 
legislative  amendments  if  appropriate  due  by  January  2022.  Nevertheless,  the  present 
proposal  lays  out  targeted  amendments  now,  given  their  usefulness  for  economic  recovery. 
Waiting for the review of the framework in 2022 and possible legislative amendments would 
lead to desirable legal adjustments probably only in a few  years’ time and thus frustrate the 
goal  to  use securitisation in  the most efficient  manner to  promote the economic recovery in 
the coming months.  

The  current  proposal  does  not  substitute  or  diminish  in  any  way  the  scope  of  the 
aforementioned  review,  which  is  mandated  to  take  a  broad  look  at  the  effects  of  the  new 
regime,  including  issues  such  as  the  risk  retention  modalities,  the  use  of  private 
securitisations, the impact of the disclosure regime and others. The upcoming review will also 
take  into  account  the  recommendations  of  the  High-Level  Forum  of  the  Capital  Markets 
Union4 on scaling up the European securitisation market. 

Moreover,  these  targeted  amendments  will  not  only  make  a  contribution  to  funding  the 
recovery, but they will also contribute to the resilience of our financial system: by extending 
the STS framework also to balance sheet securitisations it can be expected that the STS label 
with its additional requirements ensuring less complexity and more transparency will be used 
for  a  broader  share  of  the  EU  securitisation  market.  This  way  we  can  provide  additional 
incentives  for  securitisation  to  take  place  within  the  robust  EU  framework  for  Simple, 
Transparent  and  Standardised  Securitisation  and  help  banks  find  ways  to  share  risk  with 
capital market actors, which is one of the objectives of the Capital Markets Union project. 

• 

Consistency with existing policy provisions in the policy area 

The EU securitisation framework is in place since January 2019. The proposed amendments 
are fully consistent with the existing policy provisions in the field of securitisation. Provisions 
are also included in delegated and implementing acts. The proposed amendments are also in 
line with the prudential requirements for institutions and their supervision.  

• 

Consistency with other Union policies 

This  proposal  is  part  of  the  broader  response  by  the  European  Commission  to  facilitate 
economic  recovery  post-COVID-19  pandemic,  including  the  amendments  to  MiFID  and 
Prospectus Regulation adopted at the same time as this proposal (insert right reference). It is 
fully  consistent  with  the  Commission  Communication  on  the  economic  aspects  of  the 
coronavirus crisis issued on 13 March 20205, with ‘COVID 19 – Economic package – Using 
every available Euro’ launched on 2 April 20206 as  well as  with  Commission  Interpretative 
Communication on the application of the accounting and prudential frameworks to facilitate 
EU bank lending (Supporting businesses and households amid COVID-19)7.  

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https://ec.europa.eu/info/files/200610-cmu-high-level-forum-final-report_en. 
Communication from the Commission to the European Parliament, the European Council, the Council, 
the  European  Central  Bank,  the  European  Investment  Bank  and  the  Eurogroup  on  Coordinated 
economic response to the COVID-19 Outbreak, COM(2020) 112 final of 13.03.2020. 
Communication from the Commission to the European Parliament, the European Council, the Council, 
the  European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions  on  Coronavirus 
Response  -  Using  every  available  euro  in  every  way  possible  to  protect  lives  and  livelihoods, 
COM(2020) 143 final of 02.04.2020. 
Commission  Interpretative  Communication  on  the  application  of  the  accounting  and  prudential 
frameworks to facilitate EU bank lending (Supporting businesses and households amid COVID-19). 

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The  securitisation  framework  is  already  an  important  building  block  of  the  Capital  Markets 
Union.  The  CMU  is  one  of  the  Commission's  priorities  to  ensure  that  the  financial  system 
supports  jobs  and  growth  for  an  economy  that  works  for  people.  It  aims  at  better  linking 
savings with growth and provide more options and better returns for savers and investors. It 
intends to offer businesses more funding choices at different stages of their development and 
to channel investment to where it can be used most productively, increasing the opportunities 
for  Europe's  companies  and  projects.  Today’s  proposal  will  reinforce  and  enlarge  this 
framework  bringing  more  opportunities.  These  amendments  will  help  provide  additional 
funding  sources  for  companies,  strengthen  banks'  ability  to  support  the  economy,  diversify 
source  of  investments,  expand  investors’  base  and  spread  risks  across  market  participants, 
while avoiding the excesses that led to the financial crisis.  

Finally,  this  initiative,  in  particular  by  removing  regulatory  obstacles  to  securitisation  of 
NPEs, is in line with the Action Plan to tackle non-performing loans in Europe adopted by the 
ECOFIN  Council  in  July  20178  as  well  as  with  the  Commission  Communication  on 
completing the Banking Union9. They both call for the development of secondary markets for 
distressed  assets.  The  need  to  take  determined  action  to  address  NPEs  has  also  been 
underlined in some European Semester recommendations to Member States.  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The legal basis of the STS Regulation is Article 114 of the Treaty on the Functioning of the 
European  Union  (TFEU)  which  confers  to  the  European  institutions  the  competence  to  lay 
down appropriate provisions that have as their objective the establishment and functioning of 
the single market. Those Regulations can only be amended , including by reducing their scope 
on a temporary basis, by the Union legislator, in this case on the basis of Article 114 of the 
Treaty. 

• 

Subsidiarity  

The amendments concern changes to Union rules in response to the COVID-19 pandemic and 
to  foster  economic  recovery.  The  objectives  pursued  by  the  envisaged  amendments  can  be 
better achieved at Union level rather than by different national initiatives. The proposal does 
not go beyond what is necessary to achieve those objectives. 

The  existing  legal  framework  introducing  an  EU  Securitisation  framework  was  set  up  at 
Union level. Given the cross-border nature of securitisation, the scope of the proposed rules 
needs to be sufficiently aligned, coherent and consistent at Union level to be truly effective. 
Improving  the  existing  legal  framework  cannot  be  achieved  by  Member  States  acting 
autonomously. The ability of Member States to adopt national measures is limited, given that 
the Securitisation Regulation already provides for a harmonised set of rules at EU level and 
changes at national level would conflict with Union law currently in force. In the absence of 
action by the Union the existing regulatory framework would be less effective in supporting 
the  various  measures  taken  by  public  authorities  at  both  Union  and  national  level  and  less 

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https://www.consilium.europa.eu/en/press/press-releases/2017/07/11/conclusions-non-performing-
loans/ . 
Communication  to  the  European  Parliament,  the  Council,  the  European  Central  Bank,  the  European 
Economic and Social Committee and the Committee of the Regions on completing the Banking Union 
of 11 October 2017. 

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reactive to exceptional market challenges. If the Union were to cease regulating those aspects, 
the internal market for securitisation would become subject to different sets of rules, leading 
to fragmentation and undermining the recently build single rulebook in this area. This would 
lead to an uneven playing field and to regulatory arbitrage.  

Furthermore, action at national level cannot effectively create a more risk-sensitive treatment 
for securitisations, since the prudential treatment  is already laid down in EU law, nor can it 
ensure  consistency  and  standardisation  of  those  provisions  that  are  currently  covered  by 
different EU legal acts such as those regarding disclosure, due diligence and risk retention. 

• 

Proportionality 

This Union action is necessary to achieve the objective of expanding credit institutions’ and 
investment firms’ capacity to lend to corporates and SMEs and to free their balance sheets of 
non-performing  exposures  whilst  maintaining  the  consistency  of  the  prudential  framework 
following the COVID-19 crisis. The proposed amendments are limited to what is necessary to 
achieve  these  objectives  and  build  on  rules  already  in  force,  in  line  with  the  principle 
of proportionality.  The  proposed  amendments  do  not  go  beyond  addressing  selected 
provisions in the Union’s securitisation framework for credit institutions and investment firms 
that target exclusively measures aimed at ensuring support for the recovery of the economy in 
the  months  after  the  immediate  COVID  crisis.  Moreover,  the  proposed  amendments  are 
limited to those issues which cannot be addressed within the existing margin of discretion the 
current rules provide for. 

The Commission considers that the proposed rule changes are proportionate to the objectives. 

• 

Choice of the instrument 

The current proposal is an amendment of the Securitisation Regulation and, therefore, it is  a 
Regulation.  No  alternative  means  –  legislative  or  operational  –  can  be  used  to  attain  the 
objectives of this proposal.  

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Collection and use of expertise 

The proposal is based on two reports by the European Banking Authority – the Report on STS 
framework  for  Synthetic  Securitisation  under  Article  45(1)  of  the  Securitisation  regulation 
(‘the  STS  synthetics  report’)10  and  the  Opinion  on  the  regulatory  treatment  of  NPE 
securitisations (‘the NPE Opinion’)11. 

The  STS  synthetics  report  is  mandated  by  Article  45(1)  of  the  Securitisation  Regulation, 
which  asks  the  EBA  to  analyse  the  feasibility  of  a  specific  framework  for  STS  synthetic 
securitisation, limited to balance-sheet synthetic transactions. 

On  the  basis  of  the  analysis  therein,  the  EBA  STS  synthetics  report  makes  three 
recommendations: 

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11 

https://eba.europa.eu/eba-proposes-framework-sts-synthetic-securitisation. 
https://eba.europa.eu/eba-publishes-opinion-regulatory-treatment-non-performing-exposure-
securitisations. 

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to  establish  a  cross-sectoral  framework  for  simple,  transparent  and  standardised 
synthetic securitisation, limited to balance-sheet securitisation;  

that to be eligible for the ‘STS’ label, synthetic securitisation shall comply with the 
proposed criteria on simplicity, standardisation and transparency;  

to consider the risks and benefits of establishing a differentiated capital treatment for 
STS balance sheet synthetic securitisation. 

The Commission  prepared a report, under  Article 45(2) of the Securitisation Regulation,  on 
the  creation  of  a  specific  framework  for  simple,  transparent  and  standardised  synthetic 
securitisation,  limited  to  balance-sheet  synthetic  securitisation.  The  Commission  report 
accompanies this proposal. The Commission report agrees with the analysis conducted by the 
EBA,  which  shows  that  it  is  possible  to  set  standards  for  synthetic  securitisation  that  allow 
mitigating the main drivers of structuring risk, such as agency and model risks, in the same 
way as for traditional securitisation, thereby creating a subset of synthetic securitisation that is 
comparable to STS traditional securitisation. Furthermore, there seems to be no evidence that 
would  suggest  that  synthetic  securitisation  structure  inherently  results  in  higher  losses  than 
traditional  securitisation  structure.  The  analysis  does  not  point  to  any  material  negative 
consequences  that  could  be  foreseeably  generated  by  the  creation  of  a  specific  STS 
framework for balance-sheet synthetic securitisations.  

The NPE Opinion by EBA examined the role of securitisation as a funding tool for removing 
NPEs from the balance sheets of banks. The EBA analysis found a number of constraints in 
the  Securitisation  Regulation  and  in  the  Capital  Requirements  Regulation  that  restrict  the 
market  capacity  to  absorb  non-performing  assets  from  the  balance  sheets  of  banks,  thus 
largely limiting the market to bilateral sales only.  

With  regard  to  the  Securitisation  Regulation,  the  constraints  on  NPE  securitisations  result 
from certain elements of the risk retention and credit-granting standards requirements. Using 
nominal values for risk retention purposes overstates the intended requirement as it disregards 
the  price  discount  at  which  the  underlying  assets  are  transferred  and  which  represents  the 
actual risk loss for investors. In addition, the text does not allow the risk retention requirement 
to  be  fulfilled  by  the  special  servicer,  who  usually  has  more  substantive  interest  than  the 
originator  in  the  workout  of  the  assets  and  value  recovery  and  thus  its  interests  are  better 
aligned with those of the investors. Finally, the existing credit-granting standards requirement 
in Article 9 of the Securitisation Regulation also does not cater for NPE securitisations. The 
proposal  clarifies  the  verification  duties  on  originators  when  it  comes  to  securitising  non-
performing  exposures.  In  fact,  the  requirements  have  to  take  into  account  the  specific 
circumstances  of  the  purchase  of  the  assets  and  the  type  of  securitisation.  In  these  cases,  it 
may  not  be  possible  to  gain  certainty  around  the  circumstances  in  which  the  assets  were 
created,  but  it  is  nonetheless  possible  to  carry  out  a  due  diligence  on  the  quality  and 
performance of the assets in order to make a sensible, well-informed investment decision.  

• 

Impact assessment 

Due to the urgent nature of the proposal, no impact assessment was carried out. However, the 
main  cost  and  benefits  resulting  from  the  amendments  were  analysed  in  a  separate  staff 
working  document.    Moreover,  this  proposal  is  based  on  the  two  aforementioned  EBA 
documents, the STS synthetics report and the NPE opinion, both of which analyse in detail the 
appropriateness of the proposed amendments and were subject to extensive discussions with 
stakeholders.  

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The proposed amendments do not alter the substance of the Regulation and do not therefore 
impose any additional obligations on businesses. 

• 

Fundamental rights 

The proposal is not likely to have a direct impact on the rights provided in the the Charter of 
Fundamental Rights of the European Union. 

4. 

BUDGETARY IMPLICATIONS 

This proposal does not have any budgetary implications.   

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

Since the instrument proposed is a Regulation that is based to a significant extent on existing 
EU law, there is no need to prepare an implementation plan. By January 2022, the legislative 
act that is being amended will be subject to a complete evaluation in order to assess, among 
other things, how effective and efficient it has been in terms of achieving its objectives. The 
evaluation will be accompanied by a legislative proposal, if appropriate. In that context, the 
reviewing and reporting requirements would be aligned, if needed.  

• 

Detailed explanation of the specific provisions of the proposal 

A) Interaction and consistency between elements of the package  

This  Regulation  forms  a  legislative  package  with  the  amendments  to  the  Capital 
Requirements  Regulation.  As  pointed  out  by  many  stakeholders,  the  development  of  STS 
eligibility  criteria  for  balance  sheet  synthetic  securitisation  and  addressing  regulatory 
obstacles  affecting  NPE  securitisations  would  not  be  sufficient  on  their  own  to  achieve  the 
objective  of  optimising  the  role  that  securitisation  can  play  in  the  economic  recovery.  They 
need  to  be  accompanied  by  a  new  prudential  treatment,  including  in  the  area  of  capital 
requirements, better reflecting the specific features of these types of securitisations. 

Addressing shortcomings in the regulatory framework for securitisation of non-performing 
exposures 

Definition of an NPE securitisation (Article 2) 

In  order  to  tackle  comprehensively  the  regulatory  shortcomings  of  NPE  securitisation,  this 
proposal  puts  forward a  definition of NPE securitisation, which is  aligned with  the work of 
the Basel Committee on Banking Supervision. 

Risk retention (Article 6) 

NPE securitisations are made subject to a special regime when it comes to fulfilling the risk 
retention requirement in order to better take account of their special characteristics. Namely, it 
is  proposed  that  the  risk  retention  requirement  is  calculated  on  the  basis  of  the  discounted 
value of the exposures transferred to the securitisation special purpose entity. In addition, the 
servicer  in  NPE  transaction  is  allowed  to  take  on  the  risk  retention  slice,  given  its  special 
position in the deal that ensures the alignment of its interests with those of the investors. 

Verification of credit-granting standards (Article 9) 

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The proposal clarifies the verification duties on originators when it comes to securitising non-
performing exposures. 

Creating a specific framework for balance-sheet synthetic securitisations 

A  new  Section  contains  the  criteria  for  Simple,  Transparent  and  Standardised  ("STS") 
balance-sheet synthetic securitisation. As with true-sale STS securitisations, the synthetic STS 
label should not be understood to mean that the securitisation is risk-free, but rather that the 
product respects a number of criteria and that a diligent protection seller and buyer, as well as 
a national competent authority, will be able to analyse the risk involved. The proposed criteria 
are  aligned  as  much  as  possible  with  those  for  traditional  STS  securitisation,  but  they  also 
take  into  account  the  specificities  of  the  synthetic  product  and  the  different  objectives  of 
synthetic  securitisations  and  therefore  seek  to  ensure  protection  for  both  originators  and 
investors (as the originator is also an investor in the transaction, retaining the senior tranche). 

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2020/0151 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EU) 2017/2402 laying down a general framework for 
securitisation and creating a specific framework for simple, transparent and 
standardised securitisation to help the recovery from the COVID-19 pandemic 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 

Having regard to the opinion of the European Central Bank, 

Having regard to the opinion of the European Economic and Social Committee 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

The COVID-19 pandemic is severely affecting people, companies, health systems and 
the  economies  of  Member  States.  The  Commission,  in  its  Communication  to  the 
European Parliament, the European Council, the Council, the European economic and 
social  committee  and  the  Committee  of  the  regions  of  27  March  2020  entitled 
‘Europe's  moment:  Repair  and  Prepare  for  the  Next  Generation’[1]  stressed  that 
liquidity and access to finance will be a continued challenge in the months to come. It 
is therefore crucial to support the recovery from the severe economic shock caused by 
the  COVID-19  pandemic  by  introducing  targeted  amendments  to  existing  pieces  of 
financial  legislation.  This  package  of  measures  is  adopted  under  the  label  “Capital 
Markets Recovery Package”. 

The  severe  economic  shock  caused  by  the  COVID-19  pandemic  and  the  exceptional 
containment  measures  have  a  far-reaching  impact  on  the  economy.  Businesses  are 
facing  disruption  in  supply  chains,  temporary  closures  and  reduced  demand,  while 
households are confronted with unemployment and a fall in income. Public authorities 
at  Union  and  Member  State  level  have  taken  decisive  actions  to  support  households 
and  solvent  undertakings  in  withstanding  the  severe  but  temporary  slowdown  in 
economic activity and the resulting liquidity shortages. 

(3) 

It is important that credit institutions and investment firms ('institutions') employ their 
capital  where  it  is  most  needed  and  the  Union  regulatory  framework  facilitates  their 

[1]              COM/2020/456 final of 27.5.2020. 

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(4) 

(5) 

(6) 

(7) 

(8) 

doing  so  while  ensuring  that  institutions  act  prudently.  In  addition  to  the  flexibility 
provided  in  the  existing  rules,  targeted  changes  to  Regulation  (EU)  No  2017/2402 
should ensure that the Union securitisation framework provides for an additional tool 
to foster economic recovery in the aftermath of the COVID-19 pandemic.  

The  extraordinary  circumstances  of  the  COVID-19  crisis  and  the  unprecedented 
magnitude  of  challenges  triggered  a  call  for  immediate  action  to  ensure  that 
institutions  have  the  ability  to  channel  sufficient  funds  to  businesses  and  so  to  help 
absorbing the economic shock caused by the COVID-19 pandemic. 

As  pointed  out  by  the  European  Banking  Authority  (‘EBA’)  in  its  Opinion  on  the 
Regulatory  Treatment  of  Non-Performing  Exposure  Securitisation12,  the  risks 
associated  with  the  assets  backing  non-performing  asset  (NPE)  securitisations  are 
economically distinct from those of securitisations of performing assets. The NPEs are 
securitised at a discount on their nominal or outstanding value and reflect the market’s 
assessment  of,  inter  alia,  the  likelihood  that  the  debt  workout  process  will  generate 
sufficient cash flows and asset recoveries. The risk for investors is, therefore, that the 
debt  workout  of  the  assets  generates  insufficient  recoveries  to  cover  the  net  value  at 
which  those  NPEs  have  been  purchased.  The  actual  risk  loss  for  investors  does, 
therefore,  not  represent  the  nominal  value  of  the  portfolio,  but  the  discounted  value, 
net of the price discount at which the underlying assets are transferred. It is therefore 
appropriate,  in  the  case  of  NPE  securitisations,  to  calculate  the  amount  of  the  risk 
retention on the basis of that discounted value. 

The  risk  retention  requirement  aligns  the  interests  of  issuers  and  investors  in  the 
performance  of  the  underlying  assets.  Typically,  in  securitisations  of  performing 
assets, the prevalent interest on the sell-side is that of the originator, who is often also 
the  original  lender.  In  NPE  securitisations,  however,  originators  seek  to  offload  the 
defaulted assets from their balance sheets, as they may no longer wish to be associated 
with those defaulted assets in any way. In those cases, the special servicer of the assets 
has more substantive interest in the workout of the assets and value recovery.  

Before  the  financial  crisis,  some  securitisation  activities  followed  an  “originate  to 
distribute”  model.  In  that  model,  assets  of  inferior  quality  were  selected  for 
securitisation  to  the  detriment  of  investors,  who  ended  up  with  more  risk  then  they 
might  have  intended  to  undertake.  The  requirement  to  verify  the  credit  granting 
standards used in the creation of the securitised assets was introduced to prevent such 
practices  for  the  future.  For  NPE  securitisations  however,  that  verification  of  credit 
granting  standards  should  take  into  account  the  specific  circumstances  including  the 
purchase of those non-performing assets and the type of securitisation. It is therefore 
necessary to amend the verification of credit granting standards to enable the investor 
to  carry  out  a  due  diligence  on  the  quality  and  performance  of  the  non-performing 
assets in order to make a sensible and well-informed investment decision. 

An  on-balance-sheet  synthetic  securitisation  involves  transferring  the  credit  risk  of  a 
set  of  loans,  typically  large  corporate  loans  or  SME  loans,  by  a  credit  protection 
agreement  where  the  originator  buys  credit  protection  from  the  investor.  The  credit 
protection is achieved by the use of financial guarantees or credit derivatives while the 
ownership  of  the  assets  remains  with  the  originator  and  it  is  not  transferred  to  a 
securitisation  special  purpose  entity,  as  is  the  case  in  traditional  securitisations.  The 

12 

Opinion of the European Banking Authority to the European Commission on the Regulatory Treatment 
of Non-Performing Exposure Securitisations, EBA-OP-2019-13, published on 23 October 2019. 

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9 

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originator  as  protection  buyer  commits  to  pay  a  credit  protection  premium,  which 
generates the return for investors. In turn, the investor as protection seller commits to 
pay a specified credit protection payment at the occurrence of a pre-determined credit 
event.  

(9) 

It  should  be  ensured  that  the  overall  complexity  of  the  securitisations  structures  and 
associated  risks  are  appropriately  mitigated  and  that  no  regulatory  incentives  are 
provided 
traditional 
securitisations.  The  requirements  for  simple,  transparent  and  standardised  (STS)  on-
balance-sheet  synthetic  securitisations  should  therefore  be  highly  consistent  with  the 
STS criteria for traditional true sale securitisations.  

to  prefer  synthetic  securitisations  over 

to  originators 

(10)  However, there are certain requirements for STS traditional securitisations that do not 
work for STS synthetic securitisation transactions due to inherent differences between 
those  two  types  of  securitisation,  in  particular  due  to  the  fact  that  in  synthetic 
securitisations the risk transfer is achieved via a credit protection agreement instead of 
a  sale  of  the  underlying  assets.  Therefore,  the  STS  criteria  should  be  adapted  where 
necessary in order to take these differences into account. Furthermore, it is necessary 
to introduce a set of new requirements, specific to synthetic securitisations, to ensure 
that the STS framework only targets on-balance-sheet synthetic securitisations and that 
the credit protection agreement is structured to adequately protect the position of both 
the  originator  and  the  investor.  This  new  set  of  requirements  should  seek  to  address 
counterparty credit risk for both the originator and the investor.  

(11)  Object  of  the  credit  risk  transfer  should  be  exposures  originated  or  purchased  by  a 
Union  regulated  institution  within  its  core  lending  business  activity  and  held  on  its 
balance sheet or, in the case of a group structure, on its consolidated balance sheet at 
the closing date. This  requirement of the originator to  hold  the securitised exposures 
on  the  balance  sheet  should  exclude  arbitrage  securitisations  from  the  scope  of  the 
STS label.  

(12)  The originator should make sure that it does not hedge the same credit risk more than 
once by obtaining credit protection in addition to the credit protection provided by the 
synthetic  securitisation.  In  order  to  ensure  its  robustness,  the  credit  protection 
agreement  should  meet  the  credit  risk  mitigation  requirements  laid  down  in  Article 
249 of Regulation (EU) No 575/2013 of the European Parliament and of the Council13   
that have to be met by institutions seeking significant risk transfer through a synthetic 
securitisation. 

(13)  To avoid conflicts between the originator and the investor and to ensure legal certainty 
in terms of the scope of the credit protection purchased for underlying exposures, such 
credit protection should reference clearly identified reference obligations,  giving rise 
to  the  underlying  exposures,  of  clearly  identified  entities  or  obligors.  Therefore,  the 
reference obligations on which protection is purchased should be clearly identified at 
all times, via a reference register, and kept up to date. This requirement should also be 
indirectly part of the criterion defining the balance-sheet securitisation and excluding 
arbitrage securitisation from the STS framework. 

13 

Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 
648/2012 Text with EEA relevance (OJ L 176, 27.6.2013, p. 1). 

EN 

10 

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(14)  Credit  events  triggering  payments  under  the  credit  protection  agreement  should 
include  at  least  those  referred  to  in  Article  178  of  Regulation  (EU)  No  575/2013. 
Those  events  are  well-known  and  recognisable  from  the  market’s  perspective  and 
should  serve  to  ensure  consistency  with  the  prudential  framework.  Forbearance 
measures, which consist of concessions towards a debtor that is experiencing or about 
to  experience  difficulties  in  meeting  its  financial  commitments,  should  not  preclude 
the  triggering  of  the  credit  protection  event.  Restructuring  should  be  excluded  as  a 
credit  event  in  the  case  of  financial  guarantees  in  order  to  avoid  that  the  financial 
guarantees could be treated as a derivative in accordance with the relevant accounting 
standards. 

(15)  The  right  of  the  originator  as  protection  buyer  to  receive  timely  payments  on  actual 
losses  should  be  adequately  protected.  Accordingly,  the  transaction  documentation 
should provide for a sound and transparent settlement process for the determination of 
actual losses in the reference portfolio to prevent the originator from being underpaid. 
As working out the losses may be a lengthy process and to ensure timely payments to 
the  originator,  interim  payments  should  be  made  at  the  latest  six  months  after  such 
credit event has occurred. Furthermore, there should be a final adjustment mechanism 
to  ensure that interim payments  cover actual  losses  and to  prevent  that those interim 
losses  do  not  overpay  to  the  detriment  of  investors.  The  loss  settlement  mechanism 
should  also  clearly  specify  the  maximum  extension  period  that  should  apply  to  the 
workout  process  for  those  exposures  and  such  extension  period  should  be  no  longer 
than two years. That loss settlement mechanism should, thus, ensure the effectiveness 
of  the  credit  protection  arrangement  from  the  originator’s  perspective,  and  give 
investors legal certainty on the termination date of their obligation to make payments, 
contributing to a well-functioning market. 

(16)  Having a third-party verification agent is a widespread market practice that enhances 
legal certainty in the transaction for all parties involved, thus decreasing the likelihood 
of disputes and litigations that could arise in relation to the loss allocation process. To 
enhance  the  soundness  of  the  transaction’s  loss  settlement  mechanism,  a  third-party 
verification agent should be appointed to carry out a factual review of the correctness 
and accuracy of certain  aspects of the credit protection when a credit event has been 
triggered. 

(17)  Credit protection premiums should depend only on the outstanding size and credit risk 
of the protected tranche. Non-contingent premiums should not be permitted in STS on-
balance-sheet  securitisations  as  they  could  be  used  to  undermine  the  effective  risk 
transfer  from  the  originator  as  protection  buyer  to  the  protection  sellers.  Other 
arrangements,  such  as  up-front  premium  payments,  rebate  mechanisms  or  overly 
complex  premium  structures,  should  also  be  prohibited  for  STS  on-balance-sheet 
securitisations. 

(18)  To ensure the stability and continuity of credit protection, the early termination of an 
STS balance-sheet synthetic securitisation by the originator should only be possible in 
certain limited, well-defined circumstances. Whilst the originator should be entitled to 
close out the credit protection early upon the occurrence of certain specified regulatory 
events, those events should constitute actual changes in legislation or taxation with a 
material adverse effect on the originator’s capital requirements or the economics of the 
transaction  relative  to  the  parties’  expectation  at  the  time  of  entering  the  transaction 
and  provided  that  such  changes  could  not  have  been  reasonably  anticipated  at  that 
time.  STS  balance-sheet  synthetic  securitisations  should  not  feature  complex  call 
clauses  for  the  originator,  in  particular  very  short-dated  time  calls  with  the  aim  of 

EN 

11 

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temporarily  changing  the  representation  of  their  capital  position  on  a  case  by  case 
basis. 

(19)  Synthetic  excess  spread  is  widely  present  in  certain  types  of  transactions,  and  it  is  a 
helpful mechanism for both investors and originators, in order to reduce the cost of the 
credit protection and the exposure at risk respectively. In this regard, synthetic excess 
spread  is  essential  for  some  specific  retail  asset  classes,  such  as  small  and  medium-
sized enterprises (SME) and consumer lending, that show both higher yield and credit 
losses than other asset classes, and for which the securitised exposures generate excess 
spread  to  cover  for  those  losses.  However,  where  the  amount  of  synthetic  excess 
spread  subordinated  to  the  investor  position  is  too  high,  it  is  possible  that  under  no 
realistic scenario the investor in the securitisation positions will experience any losses, 
resulting  in  no  effective  risk  transfer.  To  mitigate  supervisory  concerns  and  further 
standardise  this  structural  feature,  it  is  important  to  specify  strict  criteria  for  STS 
balance-sheet  synthetic  securitisations  and  to  ensure  full  disclosure  on  the  use  of 
synthetic excess spread. 

(20)  Only high quality credit protection arrangements should be eligible for STS balance-
sheet synthetic securitisations. In the case of unfunded credit protection, this should be 
ensured by  restricting  the scope of eligible protection providers  to those  entities that 
are  eligible  providers  in  accordance  with  Regulation  (EU)  No  575/2013  and 
recognised  as  counterparties  with  a  0%  risk-weight  in  accordance  with  Title  II,  Part 
Three,  Chapter  2  of  that  Regulation.  In  the  case  of  funded  credit  protection,  the 
originator  as  protection  buyer  and  the  investors  as  protection  sellers  should  have 
recourse to high quality collateral, which should refer to collateral of any form which 
may  be  assigned  a  0%  risk  weight  under  the  Title  II,  Part  Three,  Chapter  2  of  
Regulation (EU) No 575/2013, subject to appropriate deposit or custody arrangements. 
When  the  collateral  provided  is  in  the  form  of  cash,  it  should  be  held  either  with  a 
third-party  credit  institution  or  on  deposit  with  the  protection  buyer,  subject  in  both 
cases to a minimum credit quality standing. 

(21)  Member States should designate the  competent  authorities that would be  responsible 
to  supervise  the  requirements  that  on-balance-sheet  synthetic  securitisation  have  to 
meet in order to qualify for the STS designation. The competent authority could be the 
same  as  the  one  designated  to  supervise  the  compliance  of  originators,  sponsors  and 
SSPEs  with  the  requirements  that  traditional  securitisations  have  to  meet  in  order  to 
acquire  the  STS  designation.  Like  in  the  case  of  traditional  securitisations,  such 
competent  authority  could  be  different  from  the  competent  authority  responsible  to 
supervise  the  compliance  of  originators,  original  lenders,  SSPEs,  sponsors  and 
investors with the prudential obligations incumbent under Articles 5 to 9 of Regulation 
(EU)  2017/2402,  and  the  compliance  of  which,  given  the  prudential  dimension  of 
those obligations, was specifically entrusted to the competent authorities in charge of 
the prudential supervision of the relevant financial institutions. 

(22)  Regulation (EU) No 2017/2402 should therefore be amended accordingly. 

(23)  Since  the  objectives  of  this  Regulation,  namely  to  extend  the  STS  securitisation 
framework  to  on-balance-sheet  synthetic  securitisation  and  to  remove  regulatory 
obstacles  to  securitisation  of  NPEs  to  further  increase  lending  capacities  without 
lowering the prudential standards for bank lending, cannot be sufficiently achieved by 
the  Member  States  but  can  rather,  by  reason  of  their  scale  and  effects,  be  better 
achieved  at  Union  level,  the  Union  may  adopt  measures,  in  accordance  with  the 
principle  of  subsidiarity  set  out  in  Article  5  of  the  Treaty  on  European  Union.  In 

EN 

12 

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accordance  with  the  principle  of  proportionality,  as  set  out  in  that  Article,  this 
Regulation does not go beyond what is necessary in order to achieve those objectives,  

HAVE ADOPTED THIS REGULATION: 

Article 1 

Amendment to Regulation (EU) No 2017/2402 

Regulation (EU) No 2017/2402 is amended as follows: 

(1) 

in Article 2, the following points (24), (25), (26), (27) and (28) are added: 

“(24)  ‘non-performing  exposure  (NPE)  securitisation’  means  a  securitisation 
backed by a pool of non-performing exposures that meet the conditions set out 
in Article 47a(3) of Regulation 575/2013 and the value of which makes  up at 
least 90% of the pool’s value at the time of origination;  

(25) ‘credit protection agreement’ means an agreement concluded between the 
originator  and  the  investor  to  transfer  the  credit  risk  of  securitised  exposures 
from the originator to the investor by the use of credit derivatives or financial 
guarantees, whereby the originator commits to pay a credit protection premium 
to the investor and the investor commits to pay a credit protection payment to 
the originator in case one of the contractually defined events occurs; 

(26)  ‘credit  protection  premium’  means  the  amount  the  originator  has 
committed under the credit protection agreement to pay to the investor for the 
credit protection promised by the investor; 

(27)  ‘credit  protection  payment’  is  the  amount  the  investor  has  committed 
under the credit protection agreement to  pay to  the originator in  case a credit 
event defined in credit protection agreement has occurred; 

(28) ‘synthetic excess spread’ means the amount committed in the transaction 
documentation by the originator to cover losses of the referenced portfolio that 
might occur during the life time of the transaction.;” 

(2) 

Article 6 is amended as follows: 

(a) 

in paragraph 1, the following subparagraph is added: 

“In case of NPE securitisations, the requirement of this paragraph may also be 
fulfilled by the servicer.”; 

(b)  The following paragraph [3a] is inserted: 

“3a.  By way of derogation from points (b) to (e) of paragraph 3, in the case 
of NPE securitisations, the retention of a material net economic interest for the 
purposes  of  those  points  shall  not  be  less  than  5%  of  the  net  value  of  the 
securitised exposures that qualify as non-performing exposures as referred to in 
Article 47a(3) of Regulation 575/2013. 

The  net  value  of  a  non-performing  exposures  shall  result  from  deducting  the 
non-refundable purchase price discount agreed at the time of origination from 
the exposure’s nominal value or, where applicable, its outstanding value at the 
same time.”;  

(3) 

in Article 9(1), the following subparagraph is added: 

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13 

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“The  requirement  set  out  in  this  paragraph  shall  not  apply  to  underlying 
exposures that are non-performing exposures as referred to in Article 47a(3) of 
Regulation  575/2013  at  the  time  the  originator  purchased  them  from  the 
relevant third party.;” 

(4) 

in Article 18(1), point (a) is replaced by the following: 

“(a)   the securitisation meets all the requirements of Section 1, Section 2 or Section 
2a of this Chapter, and ESMA has been notified pursuant to Article 27(1).;” 

(5) 

Article 19 is amended as follows: 

(a) 

 the title of the article is replaced by the following: 

“Simple, transparent and standardised traditional securitisation”; 

(b)  paragraph 1 is replaced by the following: 

“(1).  Securitisations,  except  for  ABCP  programmes  and  ABCP  transactions, 
and  on-balance  sheet  securitisations  that  meet  the  requirements  set  out  in 
Articles 20, 21, 22, shall be considered STS.”; 

(6) 

the following Section 2a is inserted:  

“SECTION 2A REQUIREMENTS FOR SIMPLE, TRANSPARENT AND 
STANDARDISED ON-BALANCE SHEET SECURITISATIONS  

Article 26 a  

Simple, transparent and standardised on-balance-sheet securitisation 

1. 

2. 

STS  on-balance-sheet  securitisations  are  synthetic  securitisations  that  meet  the 
requirements set out in Articles 26b to 26e.  

The EBA, in  close  cooperation with  ESMA  and  EIOPA, may  adopt,  in  accordance 
with Article 16 of Regulation (EU) No 1093/2010, guidelines and recommendations 
on  the  harmonised  interpretation  and  application  of  the  requirements  set  out  in 
Articles 26bto 26e.  

Article 26 b 

Requirements relating to simplicity 

1. 

The originator shall be an entity that is authorised or licenced in the Union. It shall be 
the originator with respect to the underlying exposures. 

An originator that purchases a third party’s exposures on its own account and 
then  securitises  them  shall  apply  to  the  purchased  third  party’s  exposures 
policies with regard to credit, collection, debt workout and servicing that are 
no  less  stringent  than  those  that  the  originator  applies  to  comparable 
exposures that have not been purchased.  

2. 

3. 

The underlying exposures shall be originated as part of the core business activity of 
the originator.  

At the  closing date, the  underlying exposures  shall be held  on the balance sheet  of 
the originator or of an entity of the same group of which the originator belongs.  

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4. 

5. 

6. 

For the purposes of this paragraph, a group shall be either of the following:  

(a) 

a  group  of  legal  entities  subject  to  prudential  consolidation  in 
accordance  with  Part  One,  Title  II,  Chapter  2  of  Regulation  (EU) 
No 2013/575;  

(b) 

a  group  as  defined  in  point  (c)  of  Article  212(1)  of  Directive 
2009/138/EC.  

The originator shall not double hedge the credit risk of the underlying exposures of 
the transaction.   

The  credit  protection  agreement  shall  comply  with  the  credit  risk  mitigation  rules 
laid down in Article 249 of Regulation (EU) No 2013/575, or where that Article is 
not applicable, with requirements that are no less stringent that the requirements of 
that Article. 

The  originator  shall  provide  representations  and  warranties  that  the  following 
requirements have been met: 

(a) 

the originator or an entity of the group to which the originator belongs has full 
legal and valid title to the underlying exposures and their associated ancillary 
rights; 

(b)  where the originator is a credit institution as defined in point (1) of Article 4(1) 
of  Regulation  (EU)  No 575/2013,  or  an  insurance  undertaking  as  defined  in 
point  (1)  of  Article  13  of  Directive 2009/138/EC,  the  originator  or  an  entity 
which is included in the scope of supervision on a consolidated basis keeps the 
credit risk of the underlying exposures on their balance sheet; 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

each underlying exposure complies, at the date it is included in the securitised 
portfolio,  with  the  eligibility  criteria  and  with  all  conditions,  other  than  the 
occurrence of a credit event as referred to in Article 26e, for a credit protection 
payment; 

to the best of originator’s knowledge, the contract for each underlying exposure 
contains  an  legal,  valid,  binding  and  enforceable  obligation  to  the  obligor  to 
pay the sums of money specified in that contract; 

the  underlying  exposures  comply  with  underwriting  criteria  that  are  no  less 
stringent  than  the  standard  underwriting  criteria  that  the  originator  applies  to 
similar exposures that are not securitised; 

to  the  best  of  originator’s  knowledge,  none  of  the  obligors  are  in  material 
breach  or  default  of  any  of  their  obligations  in  respect  of  an  underlying 
exposure  on  the  date  on  which  that  underlying  exposure  is  included  in  the 
securitised portfolio; 

to  the best  of originator’s knowledge, the transaction documentation does not 
contain any false information on the details of the underlying exposures;  

at the date of the closing of the transaction or when the underlying exposure  is 
included in  the securitised portfolio, the  contract  between the obligor  and the 
original lender in relation to that underlying exposure has not been amended in 
such way that the enforceability or collectability  of that underlying exposures 
has been affected.  

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7. 

The underlying exposures shall meet predetermined, clear and documented eligibility 
criteria  that  do  not  allow  for  active  portfolio  management  of  those  exposures  on  a 
discretionary basis.  

For  the  purpose  of  this  paragraph,  the  substitution  of  underlying  exposures 
that are in breach of representations or warranties or, where the securitisation 
includes  a  replenishment  period,  the  addition  of  exposures  that  meet  the 
defined  replenishment  conditions,  shall  not  be  considered  active  portfolio 
management. 

Any  exposure  added  after  the  closing  date  of  the  transaction  shall  meet 
eligibility  criteria  that  are  no  less  stringent  that  those  applied  in  the  initial 
selection of the underlying exposures. 

An  underlying  exposure  may  be  removed  from  the  transaction  where  that 
underlying exposure: 

(a) 

has been repaid or matured otherwise; 

(b)  has  been  disposed  of  during  the  ordinary  course  of  the  business  of  the 
originator,  provided  that  such  disposal  does  not  constitute  implicit  support  as 
referred to in Article 250 of Regulation (EU) No 575/2013; 

(c) 

is  subject  to  an  amendment  that  is  not  credit  driven,  such  as  refinancing  or 
restructuring of debt, and which occurs during the ordinary course of servicing 
of that underlying exposure;  

(d)  did not meet the eligibility criteria at the time it was included in the transaction. 

8. 

The  securitisation  shall  be  backed  by  a  pool  of  underlying  exposures  that  are 
homogeneous in terms of assets type, taking into account the specific characteristics 
relating to the cash flows of the asset type including their contractual credit-risk and 
prepayment characteristics. A pool of assets shall comprise only one asset type.  

The  underlying  exposures  shall  contain  obligations  that  are  contractually 
binding and enforceable, with full recourse to debtors and, where applicable, 
guarantors. 

The  underlying  exposures  shall  have  defined  periodic  payment  streams,  the 
instalments of which may differ in their amounts, relating to rental, principal 
or  interest  payments,  or  to  any  other  right  to  receive  income  from  assets 
supporting  such  payments.  The  underlying  exposures  may  also  generate 
proceeds from the sale of any financed or leased assets.  

The underlying exposures shall not include transferable securities, as defined 
in  point (44)  of  Article  4 (1)  of  Directive  2014/65/EU,  other  than  corporate 
bonds that are not listed on a trading venue. 

9. 

10. 

The underlying exposures shall not include any securitisation positions. 

The  underwriting  standards  pursuant  to  which  the  underlying  exposures  are 
originated and any material changes from prior underwriting standards shall be fully 
disclosed to potential investors without undue delay. The underlying exposures shall 
be underwritten with full recourse to an obligor that is not an SSPE. No third parties 
shall  be  involved  in  the credit  or  underwriting  decisions  concerning  the  underlying 
exposures. 

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In  case  of  securitisations  where  the  underlying  exposures  are  residential 
loans,  the  pool  of  loans  shall  not  include  any  loan  that  was  marketed  and 
underwritten  on  the  premise  that  the  loan  applicant  or,  where  applicable, 
intermediaries were made aware that the information provided might  not  be 
verified by the lender.  

the  borrower’s  creditworthiness  shall  meet 

The  assessment  of 
the 
requirements set out in Article 8 of Directive 2008/48/EC or paragraphs 1 to 
4,  point  (a)  of  paragraph  5,  and  paragraph  6  of  Article  18  of  Directive 
2014/17/EU, or where applicable, equivalent requirements in third countries.  

The originator or original lender shall have expertise in originating exposures 
of a similar nature to those securitised.  

11. 

The  underlying  exposures  shall  not  include,  at  the  time  of  the  selection  of  those 
exposures, exposures in default within the meaning of Article 178(1) of Regulation 
(EU) No 575/2013, or exposures to a credit-impaired debtor or guarantor who to the 
best of the originator’s or original lender’s knowledge: 

(a) 

has  been  declared  insolvent,  had  a  court  grant  his  creditors  a  final  non-
appealable  right  of  enforcement  or  material  damages  as  a  result  of  a  missed 
payment  within  three  years  prior  to  the  date  of  the  origination,  or  has 
undergone  a  debt-restructuring  process  with  regard  to  his  non-performing 
exposures within three years prior to the date of the selection of the underlying 
exposures, except where:  

(i)  

(ii)  

a restructured underlying exposure has not presented new arrears 
since the date of the restructuring, which must have taken place at 
least one year prior to the date of the selection of the underlying 
exposures;  

the  information  provided  by  the  originator  in  accordance  with 
point (a) and point (e)(i) of the first subparagraph of Article 7(1) 
explicitly  sets  out  the  proportion  of  restructured  underlying 
exposures,  the  time  and  details  of  the  restructuring  and  their 
performance since the date of the restructuring;  

(b)  was at the time of origination of the underlying exposure, where applicable, on 
a public credit registry of persons with adverse credit history or, where there is 
no  such  public  credit  registry,  another  credit  registry  that  is  available  to  the 
originator or the original lender; 

(c) 

has a credit assessment or a credit score indicating that the risk of contractually 
agreed  payments  not  being  made  is  significantly  higher  than  for  comparable 
exposures held by the originator which are not securitised. 

12. 

The  debtors  shall,  at  the  time  of  the  inclusion  of  the  exposures  in  the  transaction, 
have made at least one payment, except where: 

(a) 

the securitisation is a revolving securitisation, backed by exposures payable in 
a  single  instalment  or  having  a  maturity  of  less  than  one  year,  including 
without limitation monthly payments on revolving credits;  

(b) 

the  exposure  that  represents  the  refinancing  of  a  exposure  that  is  already 
included in the transaction.  

EN 

17 

  EN 

 
13. 

The  EBA,  in  close  cooperation  with  ESMA  and  EIOPA,  shall  develop  draft 
regulatory  technical  standards  further  specifying  which  underlying  exposures 
referred to in paragraph 8 are deemed to be homogeneous.  

The  EBA  shall  submit  those  draft  regulatory  technical  standards  to  the 
Commission by [6 months after the date of entry into force of this amending 
Regulation]. 

The  Commission  is  empowered  to  supplement  this  Regulation  by  adopting 
the regulatory technical standards referred to in this paragraph in accordance 
with Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 26 c 

Requirements relating to standardisation 

1. 

2. 

The  originator  or  original  lender  shall  satisfy  the  risk  retention  requirements  in 
accordance with Article 6. 

The interest rate and currency risks arising from the securitisation and their possible 
effects on the payments to the originator and the investors shall be described in the 
transaction  documentation.  Those  risks  shall  be  appropriately  mitigated  and  any 
measures  taken  to  that  effect  shall  be  disclosed.  Any  collateral  securing  the 
obligations  of  the  investor  under  the  credit  protection  agreement  shall  be 
denominated  in  the  same  currency  in  which  the  credit  protection  payment  is 
denominated.  

In case of a securitisation using a SSPE, the amount of liabilities of the SSPE 
concerning the interest payments to the investors shall at any time be equal to 
or be less than the amount of the SSPE’s income from the originator and any 
collateral arrangements. 

Except  for  the  purpose  of  hedging  interest  rate  or  currency  risks  of  the 
underlying exposures, the portfolio of underlying exposures shall not include 
derivatives.  Those  derivatives  shall  be  underwritten  and  documented 
according to common standards in international finance.  

3. 

Any referenced interest rate payments in relation to the transaction shall be based on 
any of the following: 

(a) 

generally  used  market  interest  rates,  or  generally  used  sectoral  rates  that  are 
reflective  of  the  costs  of  funds,  and  shall  not  reference  complex  formulae  or 
derivatives;  

(b) 

income  generated  by  the  collateral  securing  the  obligations  of  the  investor 
under the protection agreement. 

Any  referenced  interest  payments  due  under  the  underlying  exposures  shall 
be  based  on  generally  used  market  interest  rates,  or  generally  used  sectoral 
rates reflective of the cost of funds, and shall not reference complex formulae 
or derivatives. 

4. 

Following  the  occurrence  of  an  enforcement  event  in  respect  of  the  originator,  the 
investor shall be permitted to take enforcement action, terminate the credit protection 
agreement or do both. 

EN 

18 

  EN 

 
 
In case of a securitisation using a SSPE, where an enforcement or termination 
notice of the credit protection agreement is delivered, no amount of cash shall 
be  trapped  in  the  SSPE  beyond  what  is  necessary  to  ensure  the  operational 
functioning  of  that  SSPE,  the  payment  of  the  protection  payments  for 
defaulted underlying exposures that are still being worked out at the time of 
the termination, or the orderly repayment of investors in accordance with the 
contractual terms of the securitisation. 

5. 

Losses  shall  be  allocated  to  the  holders  of  a  securitisation  position  in  the  order  of 
seniority of the tranches, starting with the most junior tranche. 

Sequential  amortisation  shall  be  applied  to  all  tranches  to  determine  the 
outstanding  amount  of  the  tranches  at  each  payment  date,  starting  from  the 
most senior tranche. 

Transactions  that  feature  non-sequential  amortisation  shall  have  triggers  for 
the  performance  of  the  underlying  exposures  changing  the  amortisation  to 
sequential  in  order  of  seniority.  Such  performance-related  triggers  shall 
include  the  deterioration  in  the  credit  quality  of  the  underlying  exposures 
below a pre-determined threshold.  

As tranches amortise, an amount of the collateral equal to the amount of the 
amortisation of those tranches shall be returned to the investors, provided the 
investors have collateralised those tranches.  

Where a credit event as referred to in Article 26e has occurred in relation to 
underlying  exposures  and  the  debt  workout  process  for  those  exposures  has 
not  been  completed,  the  amount  of  credit  protection  remaining  at  any 
payment date shall be at least equivalent to the outstanding notional amount 
of  those  underlying  exposures,  minus  the  amount  of  any  interim  payment 
made in relation to those underlying exposures. 

6. 

The  transaction  documentation  shall  include  appropriate  early  amortisation  triggers 
for  a  termination  of  the  revolving  period,  where  a  securitisation  is  a  revolving 
securitisation, including at least the following: 

(a) 

a deterioration in the credit quality of the underlying exposures to 
or below a predetermined threshold; 

(b) 

a rise in losses above a predetermined threshold;  

(c) 

a failure to generate sufficient new underlying exposures that meet 
the predetermined eligibility criteria during a specified period. 

7. 

The transaction documentation shall clearly specify:  

(a) 

(b) 

the  contractual  obligations,  duties  and  responsibilities  of  the 
servicer, the trustee, other ancillary service providers or the third-
party verification agent referred to in Article 26e(4), as applicable; 

the provisions that ensure the  replacement of the servicer, trustee, 
other  ancillary  service  providers  or  the  third-party  verification 
agent  referred  to  in  Article 26e(4)  in  the  event  of  default  or 
insolvency  of  either  of  those  service  providers,  in  a  manner  that 
does not result in the termination of the provision of those services;  

EN 

19 

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(c) 

(d) 

the servicing procedures that apply to  the underlying exposures at 
the closing date and thereafter and the circumstances under which 
those procedures may be modified; 

the  servicing  standards  that  the  servicer  is  obliged  to  adhere  to  in 
servicing  the  underlying  exposures  within  the  entire  maturity  of 
securitisation. 

8. 

The servicer shall have expertise in servicing exposures of a similar nature to those 
securitised  and  shall  have  well-documented  and  adequate  policies,  procedures  and 
risk-management controls relating to the servicing of exposures.  

9. 

10. 

1. 

2. 

3. 

4. 

The servicer shall apply servicing procedures to the underlying exposures that 
are  at  least  as  stringent  as  the  ones  applied  by  the  originator  to  similar 
exposures that are not securitised. 

The  originator  shall  maintain  an  up-to-date  reference  register  to  identify  the 
underlying exposures at all times. That register shall identify the reference obligors, 
the  reference  obligations  from  which  the  underlying  exposures  arise,  and,  for  each 
underlying exposure, the notional amount that is protected and that is outstanding.  

The transaction documentation shall include clear provisions that facilitate the timely 
resolution  of  conflicts  between  different  classes  of  investors.  In  case  of  a 
securitisation  using  a  SSPE,  voting  rights  shall  be  clearly  defined  and  allocated  to 
bondholders  and  the  responsibilities  of  the  trustee  and  other  entities  with  fiduciary 
duties to investors shall be clearly identified. 

Article 26 d  

Requirements relating to transparency  

The originator shall make available data on static and dynamic historical default and 
loss  performance  such  as  delinquency  and  default  data,  for  substantially  similar 
exposures  to  those  securitised,  and  the  sources  of  those  data  and  the  basis  for 
claiming  similarity,  to  potential  investors  before  pricing.  Those  data  shall  cover  a 
period of at least five years.  

A sample of the underlying exposures shall be subject to external verification prior to 
the  closing  of  the  transaction  by  an  appropriate  and  independent  party,  including 
verification that the underlying exposures are eligible for credit protection under the 
credit protection agreement. 

The  originator  shall,  before  the  pricing  of  the  securitisation,  make  available  to 
potential  investors  a  liability  cash  flow  model  that  precisely  represents  the 
contractual relationship between the underlying exposures and the payments flowing 
between the originator, investors, other third parties and, where applicable, the SSPE, 
and  shall,  after  pricing,  make  the  model  available  to  investors  on  an  ongoing  basis 
and to potential investors upon request. 

In  case  of  a  securitisation  where  the  underlying  exposures  are  residential  loans  or 
auto loans or leases, the originator shall publish the available information related to 
the environmental performance of the assets financed by such residential loans, auto 
loans or leases, as part of the information disclosed pursuant to point (a) of the first 
subparagraph of Article 7(1). 

EN 

20 

  EN 

 
5. 

The  originator  shall  be  responsible  for  compliance  with  Article  7.  The  information 
required by point (a) of the first subparagraph of Article 7(1) shall be made available 
to potential investors before pricing upon request. The information required by points 
(b)  and  (d)  of  the  first  subparagraph  of  Article  7(1)  shall  be  made  available  before 
pricing at least in draft or initial form. The final transaction documentation shall be 
made available to investors at the latest 15 days after closing of the transaction.   

Article 26 e 

Requirements concerning the credit protection agreement, the third-party 
verification agent and the synthetic excess spread 

1. 

The credit protection agreement shall cater for the following credit events: 

(a) 

failure to pay by the underlying obligor, which includes the default 
referred  to  in  point  (b)  of  Article 178(1)  of  Regulation  (EU)  No 
575/2013; 

(b)  bankruptcy of the underlying obligor, which includes the elements 
referred  to  in  points  (e)  and  (f)  of  Article 178(3)  of  Regulation 
(EU) No 575/2013; 

(c) 

for  a  credit  protection  agreement  other  than  by  a  financial 
guarantee, restructuring of the underlying exposure, which includes  
the elements referred to in point (d) of Article 178(3) of Regulation 
(EU) No 575/2013. 

All credit events shall be documented.  

Forbearance measures, as referred to in Annex V, Section 30, paragraphs 163 
to  183,  to  Commission  Implementing  Regulation  (EU)  2015/227*  that  are 
applied to the underlying exposures  shall not preclude the trigger of eligible 
credit events. 

2. 

The  credit  protection  payment  following  the  occurrence  of  a  credit  event  shall  be 
calculated based on the actual realised loss suffered by the originator or the lender, as 
worked  out  in  accordance  with  their  standard  recovery  policies  and  procedures  for 
the relevant exposure types and recorded in their financial statements at the time the 
payment  is  made.  The  final  credit  protection  payment  shall  be  payable  within  a 
specified  period  of  time  following  the  end  of  the  debt  workout  process  for  the 
relevant  underlying  exposure  where  the  end  of  the  debt  workout  process  occurs 
before  the  scheduled  legal  maturity  or  early  termination  of  the  credit  protection 
agreement. 

An interim credit protection  payment shall be made at  the latest  six months 
after a credit event as referred to in paragraph 1 has occurred in cases where 
the  debt  workout  of  the  losses  for  the  relevant  underlying  exposure  has  not 
been  completed  by  the  end  of  that  six  months  period.  The  interim  credit 
protection payment shall be at least the higher of the following:  

(a) 

impairment  recorded  by 

the 
its  financial 
statements in accordance with the applicable accounting framework 
at the time the interim payment is made;   

the  originator 

in 

EN 

21 

  EN 

 
(b)  where  applicable,  the  Loss  Given  Default  as  determined  in 
accordance with Part Three, Title II, Chapter 3, of Regulation (EU) 
No 575/2013. 

Where  an  interim  credit  protection  payment  is  made,  the  final  credit 
protection  payment  referred  to  in  the  first  subparagraph  shall  be  made  in 
order to adjust the interim settlement of losses to the actual realised loss. 

The method for the calculation of interim and final credit protection payments 
shall be specified in the credit protection agreement. 

The  credit  protection  payment  shall  be  proportional  to  the  share  of  the 
outstanding notional amount of the corresponding underlying exposure that is 
covered by the credit protection agreement.   

The  right  of  the  originator  to  receive  the  credit  protection  payment  shall  be 
enforceable. The amounts payable by investors under the securitisation shall 
be  clearly  set  out  in  the  credit  protection  agreement  and  limited.  It  shall  be 
possible to calculate those amounts in all circumstances. The credit protection 
agreement shall clearly set out the circumstances under which investors shall 
be required to make payments. The third-party verification agent referred to 
in paragraph 4 shall assess whether such circumstances have occurred. 

The amount of the credit protection payment shall be calculated at the level of 
the individual underlying exposure for which a credit event has occurred. 

3. 

The  credit  protection  agreement  shall  specify  the  maximum  extension  period  that 
shall  apply  for  the  debt  workout  process  for  underlying  exposures  in  relation  to 
which a credit event as referred to in paragraph 1 has occurred, but where the debt 
workout process has not been completed upon the scheduled legal maturity or early 
termination of the credit protection agreement. Such an extension period shall not be 
longer than two years. The credit protection agreement shall provide that by the end 
of that extension period a final credit protection payment shall be made on the basis 
of  the  originator’s  final  loss  estimate  as  recorded  by  the  originator  in  its  financial 
statements at that time. 

In case of a termination of the credit protection agreement, the debt workout 
process  shall  continue  in  respect  of  any  outstanding  credit  events  that 
occurred  prior  to  that  termination  in  the  same  way  as  that  described  in  the 
first subparagraph. 

The  credit  protection  premiums  to  be  paid  under  the  credit  protection 
agreement  shall  be  structured  as  contingent  on  the  performance  of  the 
underlying exposures and reflect the risk of the protected tranche. For those 
purposes,  the  credit  protection  agreement  shall  not  stipulate  guaranteed 
premiums,  upfront  premium  payments,  rebate  mechanisms  or  other 
mechanisms  that  may  avoid  or  reduce  the  actual  allocation  of  losses  to  the 
investors  or  return  part  of  the  paid  premiums  to  the  originator  after  the 
maturity of the transaction.  

The  transaction  documentation  shall  describe  how  the  credit  protection 
premium  and  any  note  coupons,  if  any,  are  calculated  in  respect  of  each 
payment date over the life of the securitisation. 

The  rights  of  the  investors  to  receive  credit  protection  premiums  shall  be 
enforceable. 

EN 

22 

  EN 

 
4. 

The originator shall appoint a third-party verification agent before the closing date of 
the transaction. The third party verification agent shall verify all of the following for 
each of the underlying exposures for which a credit event notice is given: 

(a) 

(b) 

(c) 

that the credit event referred to in the credit event notice is a credit 
event as specified in the terms of the credit protection agreement; 

that the underlying exposure was included in the reference portfolio 
at the time of the occurrence of the credit event concerned; 

that the underlying exposure met the eligibility criteria at the time 
of its inclusion in the reference portfolio; 

(d)  where an underlying exposure has been added to the securitisation 
as a result of a replenishment, that such a replenishment complied 
with the replenishment conditions; 

(e) 

(f) 

that the final loss amount is consistent with the losses recorded by 
the originator in its profit and loss statement; 

that,  at  the  time  the  final  credit  protection  payment  is  made,  the 
losses  in  relation  to  the  underlying  exposures  have  correctly  been 
allocated to the investors. 

The  third-party  verification  agent  shall  be  independent  from  the  originator 
and investors, and, where applicable, from the SSPE and shall have accepted 
the appointment as third-party verification agent by the closing date. 

The  third-party  verification  agent  may  perform  the  verification  on  a  sample 
basis instead of on the basis of each individual underlying exposure for which 
credit  protection  payment  is  sought.  Investors  may  however  request  the 
verification  of  the  eligibility  of  any  particular  underlying  exposure  where 
they are not satisfied with the sample-basis verification. 

The originator shall include a commitment in the transaction documentation 
to provide the third-party verification agent with all the information necessary 
to verify the requirements set out in the first subparagraph. 

5. 

The originator may not terminate a transaction prior to its scheduled maturity for any 
other reason than any of the following events: 

(a) 

(b) 

the insolvency of the investor; 

the  investor’s  failures  to  pay  any  amounts  due  under  the  credit 
protection  agreement  or  a  breach  by  the  investor  of  any  material 
obligation laid down in the transaction documents; 

(c) 

relevant regulatory events, including: 

(i)  

to 

officially 

competent 

authorities 

relevant  changes  in  Union  or  national  law,  relevant  changes 
by 
published 
interpretations  of  such  laws,  or  relevant  changes  in  the 
taxation or accounting treatment of the transaction that have a 
material  adverse  effect  on  the  amount  of  capital  that  the 
originator  is  required  to  hold  in  connection  with  the 
securitisation  or  its  underlying  exposures,  in  each  case 
compared with that anticipated at the time of entering into the 

EN 

23 

  EN 

 
transaction  and  which  could  not  reasonably  be  expected  at 
that time; 

(ii)   a  determination  by  a  competent  authority  that  the  originator 
or  any  affiliate  of  the  originator  is  not  or  is  no  longer 
permitted to recognise significant risk transfer in accordance 
with  Article  245(3)  of  Regulation  (EU)  No  575/2013  in 
respect of the securitisation; 

(d) 

exercise of an option to call the transaction at a given point in time 
(time call), when the time period measured from the closing date is 
equal  to  or  greater  than  the  weighted  average  life  of  the  initial 
reference portfolio at closing; 

(e) 

the  exercise  of  a  clean-up  call  option  as  defined  in  point (1)  of 
Article 242  of Regulation (EU) No 575/2013. 

The  transaction  documentation  shall  specify  whether  any  of  the  call  rights 
referred to in points (d) and (e) are included in the transaction concerned in. 

For  the  purposes  of  point  (d),  the  time  call  shall  not  be  structured  to  avoid 
allocating  losses  to  credit  enhancement  positions  or  other  positions  held  by 
investors and shall not be otherwise structured to provide credit enhancement. 

6. 

The  originator  may  commit  synthetic  excess  spread,  which  shall  be  available  as 
credit enhancement for the investors, where all of the following conditions are met: 

(a) 

(b) 

(c) 

the  amount  of  the  synthetic  excess  spread  that  the  originator 
commits to using as credit enhancement at each payment period is 
specified in the transaction documentation and expressed as a fixed 
percentage of the total outstanding portfolio balance at the start of 
the relevant payment period (fixed synthetic excess spread); 

the synthetic excess spread which is not used  to cover credit losses 
that materialise during the payment period shall be returned to the 
originator; 

for originators using the IRB Approach referred to in Article 143 of 
Regulation (EU) No 575/2013, the total committed amount per year 
shall  not  be  higher  than  the  one-year  regulatory  expected  loss 
amounts  on  the  underlying  portfolio  of  underlying  exposures, 
calculated  in  accordance  with  Article  158  of  Regulation  (EU)  No 
575/2013; 

(d) 

for  originators  not  using  the  IRB  Approach  referred  to  in 
Article 143 of Regulation (EU) No 575/2013, the calculation of the 
one-year expected loss of the underlying portfolio shall be clearly 
determined in the transaction documentation; 

(e) 

the transaction documentation specifies the conditions laid down in 
this paragraph. 

7. 

The credit protection agreements shall meet one of the following conditions: 

(a) 

a  guarantee  meeting  the  requirements  set  out  in  Chapter  4  of  Part 
Three,  Title  II,  of  Regulation  (EU)  No  575/2013,  by  which  the 
credit risk is transferred to any of the entities listed in points (a) to 
(d)  of  Article 214(2)  of  Regulation  (EU)  No  575/2013,  provided 

EN 

24 

  EN 

 
(b) 

(c) 

that  the  exposures  to  the  investor  qualify  for  a  0%  risk  weight 
under Chapter 2 of Part Three, Title II, of that Regulation; 

a  guarantee  meeting  the  requirements  set  out  in  Chapter  4  of  Part 
Three,  Title  II,  of  Regulation  (EU)  No  575/2013,  which  benefits 
from a counter-guarantee of any of the entities referred to in point 
(a) of this paragraph; 

other  credit  protection  not  referred  to  in  points  (a)  and  (b)  of  this 
paragraph  in  the  form  of  guarantees,  credit  derivatives  or  credit 
linked  notes  that  meet  the  requirements  set  out  Article  249  of 
Regulation (EU) No 575/2013, provided that the obligations of the 
investor  are  secured  by  collateral  meeting  the  requirements  laid 
down in paragraphs 9 and 10 of this Article. 

8. 

The  other  credit  protection  referred  to  in  point  (c)  of  paragraph 7  shall  meet  the 
following requirements: 

(a) 

(b) 

the  right  of  the  originator  to  use  the  collateral  to  meet  protection 
payment  obligations  of  the  investors  is  enforceable  and  the 
enforceability of that right is ensured through appropriate collateral 
arrangements;  

the right of the investors, when the securitisation is unwound or as 
the tranches amortise, to return any collateral that has not been used 
to meet protection payments is enforceable; 

(c)  where  the  collateral  is  invested  in  securities,  the  transaction 
the  eligibility  criteria  and  custody 

documentation  sets  out 
arrangement for such securities. 

The  transaction  documentation  shall  specify  whether  investors  remain 
exposed to the credit risk of the originator. 

The  originator  shall  obtain  an  opinion  from  a  qualified  legal  counsel 
confirming  the  enforceability  of  the  credit  protection  in  all  relevant 
jurisdictions. 

9. 

Where other credit protection is provided in accordance with point (c) of paragraph 
(7) of this Article, the originator shall have recourse to high-quality collateral, which 
shall be either of the following: 

(a) 

collateral  in the form of 0% risk-weighted debt  securities referred 
to  in  Chapter  2,  of  Part  Three,  Title  II,  of  Regulation  (EU)  No 
575/2013  that meet all of the following conditions:  

(i) 

(ii) 

those debts securities have a remaining maximum maturity of 
three months which matches the payment dates; 

those debt securities can be redeemed into cash in an amount 
equal to the outstanding balance of the protected tranche;  

(iii) 

those  debt  securities  are  held  by  a  custodian  independent  of 
the originator and the investors; 

(b) 

collateral  in  the  form  of  cash  held  with  a  third-party  credit 
institution  or  in  the  form  of  cash  on  deposit  with  the  originator, 

EN 

25 

  EN 

 
subject  to  a  minimum  credit  quality  step  2  as  referred  to  in 
Article 136 of Regulation (EU) No 575/2013. 

For  the  purposes  of  point (b),  where  the  third-party  credit  institution  or  the 
originator no longer satisfy the minimum credit quality step 2, the collateral 
shall  be  promptly  transferred  to  a  third-party  credit  institution  with  a  credit 
quality  step  of  2  or  higher  or  the  collateral  shall  be  invested  in  securities 
meeting the criteria laid down in point (a) of this paragraph. The requirements 
set out in this point (b) shall be deemed satisfied in the case of investments in 
credit linked notes issued by the originator, in accordance with Article 218 of 
Regulation (EU) No 575/2013. 

________________________________________ 

* 

Commission  Implementing  Regulation  (EU)  2015/227  of  9  January  2015  amending 
Implementing  Regulation  (EU)  No  680/2014  laying  down  implementing  technical 
standards with regard to supervisory reporting of institutions according to Regulation (EU) 
No 575/2013 of the European Parliament and of the Council (OJ L 48, 20.2.2015, p. 1).”; 

(7) 

Article 27 is amended as follows: 

(a) 

paragraph 1 is amended as follows: 

(i) in the first subparagraph: 

-  the first sentence is replaced by the following: 

“Originators  and sponsors shall jointly notify ESMA by  means 
of the template referred to in paragraph 7 of this Article where a 
securitisation  meets  the  requirements  of  Articles  19  to  22  or 
Articles 23 to 26 or Articles 26b to 26e (‘STS notification’).”; 

-  the following sentence is added: 

“In case of an on-balance-sheet synthetic securitisation, only the 
originator shall be responsible for the notification.”; 

(ii) the second subparagraph is replaced by the following: 

“The  STS  notification  shall  include  an  explanation  by  the  originator 
and sponsor of how each of the STS criteria set out in Articles 20 to 
22  or  Articles  24  to  26  or  Articles  26b  to  26e  has  been  complied 
with.”; 

(b)  paragraph 2 is amended as follows: 

(i) 

in the first subparagraph, the first sentence is replaced by the following:  

“The originator, sponsor or SSPE may use the service of a third party 
authorised under Article 28 to check whether a securitisation complies 
with Articles 19 to 22 or Articles 23 to 26 or Articles 26b to 26e.”; 

in  the  second  subparagraph,  the  first  sentence  is  replaced  by  the 

(ii) 
following:  

“Where  the  originator,  sponsor  or  SSPE  uses  the  service  of  a  third 
party  authorised  pursuant  to  Article  28  to  access  whether  a 
securitisation complies with Articles 19 to 22 or Articles 23 to 26 or 
Articles 26b to 26e, the STS notification shall include a statement that 
compliance  with  the  STS  criteria  was  confirmed  by  that  authorised 
third party.”; 

EN 

26 

  EN 

 
(c) 

paragraph 4 is replaced by the following:  

The originator and, where applicable, sponsor, shall immediately notify 
“4. 
ESMA  and  inform  their  competent  authority  when  a  securitisation  no  longer 
meets the requirements of Articles 19 to 22, Articles 23 to 26, or Articles 26b 
to 26e.”; 

(d) 

 in paragraph 5, the first sentence is replaced by the following:  

“ ESMA shall maintain on its official website a list of all securitisations which 
the originators and sponsors have notified to it as meeting the requirements of 
Articles 19 to 22,  Articles 23 to 26, or Articles 26b to 26e.”. 

(e) 

in paragraph 6, the second subparagraph is replaced by the following: 

“ESMA  shall  submit  those  draft  regulatory  technical  standards  to  the 
Commission  by  [6  months  after  the  date  of  entry  into  force  of  this  amending 
Regulation].”; 

(f) 

in paragraph 7, the second subparagraph is replaced by the following: 

“ESMA  shall  submit  those  draft  implementing  technical  standards  to  the 
Commission  by  [6  months  after  the  date  of  entry  into  force  of  this  amending 
Regulation].”; 

(8) 

in Article 28(1) the first sentence is replaced by the following: 

“1. 
A third party as referred to in Article 27(2) shall be authorised by the 
competent  authority  to  assess  the  compliance  of  securitisations  with  the  STS 
criteria provided for in Articles 19 to 22, Articles 23 to 26, or Articles 26b to 
26e.”; 

(9) 

in Article 29(5), the second sentence is replaced by the following:  

“‘Member  States  shall  inform  the  Commission and  ESMA  of  the  designation 
of competent authorities pursuant to this paragraph by […].”; 

(10) 

in Article 30(2), the following point (d) is added: 

‘(d) for STS on-balance sheet securitisations, the processes and mechanism to 
ensure compliance with Articles 26 (b) to 26(e).’;  

(11) 

in Article 32(1), point (e) is replaced by the following:  

‘(e) a securitisation is designated as STS and an originator, sponsor or SSPE of 
that securitisation has failed to meet the requirements provided for in Articles 
19 to 22 or Articles 23 to 26 or Articles 26b to 26e;”; 

(12) 

the following Article 43a is inserted: 

“Article 43a 

Transitional provision for on-balance sheet synthetic securitisations 

1.  

In  respect  of  on-balance-sheet  synthetic  securitisations  for  which  the  credit 
protection  agreement  has  become  effective  before  [date  of  entry  into  force], 
originators  and  SSPEs  may  use  the  designation  ‘STS’  or  ‘simple,  transparent  and 
standardised’, or a designation that refers directly  or indirectly to  those terms,  only 

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where the requirements set out in Article 18 and the conditions set out in paragraph 3 
of this Article are complied with at the time of the notification referred to in Article 
27(1). 

2.  

Until  the  day  of  application  of  the  regulatory  technical  standards  referred  to  in 
Article 27(6) and, originators shall, for the purposes of the obligation set out in point 
(a) Article 27(1), make the necessary information available to ESMA in writing.”; 

(13) 

Article 45 is deleted. 

Article 2 

Entry into force 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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