EBF adviser: Saif Chaibi 

Publication date: 19 December 2017

Key points:

• EBF supports the EBA proposals that aim at enhancing the process of the SRT assessment and would like to highlight the importance of ensuring that banks receive feedback from the competent regulatory authority ahead of the closing of the transaction.

• EBF is opposed to a possible retrospective application of the legal framework that would arise from these discussions on SRT in securitisation. In addition, EBA should clarify that any retrospective application of the forthcoming legal framework is discarded to minimize uncertainty.

• Excess spread which is not funded or “trapped” in either traditional or synthetic securitisations should in no case be considered as a securitisation position and subject to Pillar 1 own fund requirements,

• It is important to provide enough flexibility to use other alternative amortisation structures than pro-rata amortisation.

• The proposal that requires that time calls in synthetic securitisations can only be exercised later than weighted average life plus replenishment period puts a significant penalty on the transactions.

• The EBF strongly opposes the prohibition of time calls in traditional securitisations.

• The use-it-or-lose-it approach must be allowed for both traditional and synthetic securitisations.

• The use of the originator’s bankruptcy as an early termination clause should not be automatically banned.

• The design of the new proposed tests is somehow flawed and should be corrected to avoid discarding the achievement of SRT for operations that show viable features to achieve it.

• The EBF agrees with the EBA’s recommendation to take into account the purchase price discount in calculating the attachment points of retained tranches.  We believe the same principle should apply to securitisations of non-NPL assets which the originator may have acquired at a discount.