EBA Consultation on Significant Risk Transfer in Securitisation

19 September 2017

On  19 September 2017, the European Banking Authority (EBA) launched  a public consultation on its discussion paper on significant risk transfer in securitisation. This work builds on the EBA’s monitoring activity of supervisory practices in the area of significant risk transfer, which the Authority started in 2014 with the publication of the EBA Guidelines on this topic. The discussion paper aims at seeking stakeholders’ views on how to further harmonise the regulation and supervision of the risk transfer through securitisation. The EBA’s proposals are based on the newly agreed European securitisation legislation.


In response to the mandate on significant risk transfer laid down in the Capital Requirements Regulation (CRR), this paper puts forward for public discussion proposals to strengthen the regulation and supervision framework of significant risk transfer and to improve regulatory certainty and level playing field for institutions transferring risk through securitisation.


Based on its monitoring activity, the EBA found that further regulatory specifications may be needed with regards to the process of significant risk transfer assessment, its quantitative assessment by competent authorities as well as the supervisory approach to core structural features of the securitisation transaction, such as, for example, amortisation structure, excess spread, cost of credit protection, and call options. The EBA’s analysis also covers the significant risk transfer in securitisation of non-performing loans (NPLs), one of the key measures towards the NPL resolution.


Consulting stakeholders at this stage is particularly important as the EBA’s proposals are fully based on the newly agreed European securitisation framework, which will enter into force in the coming months, and will introduce simple transparent and standardised securitisations across the EU. Significant risk transfer will be a crucial aspect of such a reform.


The amendments to the CRR, put forward as part of the new European securitisation framework, mandate the EBA to monitor the range of supervisory practices in relation to the recognition of the significant risk transfer in traditional and synthetic securitisations, respectively. The EBA is in particular requested to review the following items: (i) the conditions for the transfer of significant credit risk to third parties; (ii) the interpretation of the concept of “commensurate” transfer of credit risk to third parties; and (iii) the requirements for competent authorities when assessing the significant risk transfer.


A public hearing on this subject will take place at the EBA premises in London on 17 November 2017.