Securitization Ordinance

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Regulation (EU) 2017/2402

Title: Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisations and creating a specific framework for simple, transparent and standardized securitization and amending Directives 2009/65 / EC, 2009 / 138 / EG, 2011/61 / EU and the regulations (EG) No. 1060/2009 and (EU) No. 648/2012
Designation:
(not official) 		Securitization Ordinance
Legal matter: civil right
Basis: TFEU , in particular Art. 114
To be used from: 1st January 2019
Reference: OJ L 347, December 28, 2017, pp. 35–80
Full text Consolidated version (not official)
basic version
Regulation has entered into force and is applicable.
Please note the information on the current version of legal acts of the European Union !

The Securitization Ordinance (also: Securitization Regulation or STS Regulation ) is intended to "revitalize the securitization markets for high-quality securitisations ", "in which the mistakes made before the financial crisis of 2008 should be avoided. Building a simple, transparent and standardized securitization market is a building block of the Capital Markets Union and contributes to the Commission's priority objective of supporting job creation and the return to sustainable growth. "

In order to avoid a repetition of the circumstances that triggered the global financial crisis in 2007, stricter regulations for securitization in the European Union were introduced with this regulation and the amending regulation (EU) 2017/4201 that was adopted at the same time , which prevent "unsound practices on the securitization markets" should. For this purpose, in particular

  • "The essential elements of an overarching securitization framework are defined, the criteria for determining simple, transparent and standardized ('simple, transparent and standardized', 'STS') securitisations and a supervisory system to monitor the correct application of these criteria by originators, sponsors, issuers and institutions Investor includes ",
  • "A series of uniform requirements in connection with the risk deductible",
  • special due diligence and
  • special disclosure requirements

intended for the entire financial services sector.

Purpose and aim of the regulation

The Securitization Ordinance is intended to enable transactions by “a lender or a creditor - usually a credit institution or a company - to refinance loans, risk positions or receivables such as real estate loans, loans for vehicle purchases or vehicle leasing transactions, consumer loans, credit cards or trade receivables by converting them into negotiable securities ”. “The lender bundles and 'repackages' selected parts of its loan portfolio, assigns them to different risk categories for different investors and in this way enables investors to invest in loans or other risk positions to which they usually do not have direct access. The investor returns are generated from the cash flows of the securitized loans. "

The aim and purpose of the Securitization Ordinance is therefore "to strengthen the legal framework created after the financial crisis to deal with the highly complex, opaque and high-risk risks inherent in securitization transactions." For this purpose, "rules are to be enacted with which simple, transparent and standardized products can be better removed from complex, opaque and risky instruments and the supervisory framework is better tailored to the actual risks ”, which should strengthen the European capital markets and the capital markets union, which has lost or stagnated in volume in recent years.

Subject matter of the Securitization Ordinance

According to Article 1 (1) of the Securitization Ordinance, this “defines a general framework for securitisations”. It defines the term securitization and lays down requirements relating to due diligence, rules on risk retention and transparency requirements for parties involved in securitisations, criteria for lending, strict requirements for the sale of securitisations to retail investors , a ban on re- securitization , requirements for securitization SPEs (english special purpose vehicle , abbreviated SPV) and conditions and procedures for securitization register fixed. It also creates a specific framework for simple, transparent and standardized (English simple, transparent and Standardized STS, abbreviated) securitizations.

From the regulations regarding small investors according to Article 3 of the Securitization Ordinance, it can be concluded that the Union legislature still sees a very high risk and great complexity (probably connected with an institutional or systemic intransparency) of these securitisations. The Union legislature is evidently of the opinion that institutional investors would be better able to identify this securitization market and the securitization of the products themselves, analyze them and assess the risks better.

Personal scope of the securitization regulation

According to Article 1 (2) of the Securitization Ordinance, this primarily applies “to institutional investors as well as originators , sponsors, original lenders and special purpose vehicles”.

The securitization markets regulated by the Securitization Ordinance are global markets and predominantly institutional investors who invest in them. Securitization instruments are generally not suitable for small investors within the meaning of Directive 2014/65 / EU, and this is one of the reasons why the Securitization Ordinance is primarily aimed at institutional investors (e.g. banks , investment funds , insurance companies and others). The Securitization Ordinance also includes institutions for occupational retirement provision, UCITS management companies and certain internally managed UCITS in this regulatory framework.

Structure and main features of the regulation

  • CHAPTER 1 (General Provisions)
    • Article 1 (subject matter and scope)
    • Article 2 (definitions)
    • Article 3 (sale of securitisations to retail investors)
    • Article 4 (Requirements for SSPEs)
  • CHAPTER 2 (Provisions applicable to all securitisations)
    • Article 5 (Due diligence requirements for institutional investors)
    • Article 6 (risk deductible)
    • Article 7 (transparency requirements for originators, sponsors and special purpose vehicles)
    • Article 8 (prohibition of re-securitization)
    • Article 9 (lending criteria)
  • CHAPTER 3 (Conditions and procedure for registering a securitization register)
    • Article 10 (registration of a securitization register)
    • Article 11 (informing and consulting competent authorities before registration or extension of registration)
    • Article 12 (examination of the application)
    • Article 13 (Notification of decisions by ESMA on registration or extension of registration)
    • Article 14 (Powers of ESMA)
    • Article 15 (withdrawal of registration)
    • Article 16 (supervision fees)
    • Article 17 (availability of data held in a securitization register)
  • CHAPTER 4 (Simple, transparent and standardized securitization)
    • Article 18 (use of the term "simple, transparent and standardized securitization")
    • SECTION 1 (Requirements for simple, transparent and standardized non-ABCP securitisations)
      • Article 19 (simple, transparent and standardized securitization)
      • Article 20 (requirements related to simplicity)
      • Article 21 (requirements related to standardization)
      • Article 22 (requirements related to transparency)
    • SECTION 2 (Requirements for simple, transparent and standardized ABCP securitization)
      • Article 23 (simple, transparent and standardized ABCP securitization)
      • Article 24 (Transaction Level Requirements)
      • Article 25 (Sponsor of an ABCP program)
      • Article 26 (requirements at program level)
    • SECTION 3 (STS notification)
      • Article 27 (STS reporting requirements)
      • Article 28 (verification of compliance with the STS criteria by third parties)
  • CHAPTER 5 (supervision)
    • Article 29 (designation of competent authorities)
    • Article 30 (powers of the competent authorities)
    • Article 31 (Macro-prudential supervision of the securitization market)
    • Article 32 (Administrative Sanctions and Corrective Actions)
    • Article 33 (exercise of the power to impose administrative sanctions and remedial measures)
    • Article 34 (criminal penalties)
    • Article 35 (notification requirements)
    • Article 36 (cooperation between the competent authorities and the European supervisory authorities)
    • Article 37 (Publication of administrative sanctions)
  • CHAPTER 6 (Amendments)
    • Article 38 (amendment of Directive 2009/65 / EC)
    • Article 39 (amendment of Directive 2009/138 / EC)
    • Article 40 (amendment of Regulation (EC) No. 1060/2009)
    • Article 41 (amendment of Directive 2011/61 / EU)
    • Article 42 (amendment to Regulation (EU) No. 648/2012)
    • Article 43 (transitional provisions)
    • Article 44 (reports)
    • Article 45 (synthetic securitisations)
    • Article 46 (review)
    • Article 47 (exercise of the delegation)
    • Article 48 (entry into force)

STS securitisations

The European Banking Authority (EBA) stated in its report that simple, transparent and standardized securitisations (STS securitisations) performed better than other securitisations during the financial crisis. It was derived from this and stipulated in the Securitization Ordinance and the Amendment Ordinance (EU) 2017/4201 that these STS securitisations have lower credit risks, operational risks and agency risks.

A new form of simple, transparent and standardized securitization (STS securitization) was therefore introduced in Chapter 4 of the Securitization Ordinance. STS securitisations can therefore only be true sale securitisations.

In order to prevent circumvention or defuse the provisions of this new STS-securitisations has been tried this closely defined in the regulation and introduce a strong, risk-based supervisory framework and must originator, sponsor or SPVs, the STS-securitisations are involved in one of the EU Member States established be

Re-securitization

In order to minimize the major dangers for the financial markets caused by the global financial crisis , which were mainly caused by such securitisations , a general ban on re-securitization was standardized in the Securitization Ordinance, with few exceptions.

Securitisations that were issued before January 1, 2019 are generally exempt from the ban on re-securitization.

Special duties of care

Comprehensive due diligence obligations, some of which have to be evaluated again and again , apply to originators, sponsors or original lenders and institutional investors when purchasing securitisations (see Articles 5 and 9 of the Securitization Ordinance). This is intended to protect end investors and also serve to increase confidence in the securitization market.

In the case of securitisations that were not issued in one of the EU member states , particular attention must be paid to compliance with the due diligence obligations under the securitization regulation. This especially with regard to risk retention requirements (Article 6 Securitization Ordinance). See also the amending ordinance on supervisory requirements for credit institutions and investment firms.

What effects this will have on the Union's internal market and capital markets union cannot yet be foreseen. In particular, it is worth mentioning that non-compliance with the due diligence obligations under Article 5 of the Securitization Ordinance does not result in a sanction (see Article 32). The Union legislature has left it to the Union Member States (see Article 34 Securitization Regulation) to determine sanctions - or not. So has z. B. the German legislator the regulations in individual laws, so z. B. in the Banking Act (KWG), in the Insurance Supervision Act (VAG) etc. implemented. The Austrian legislator has laid down corresponding regulations in its own law, the STS Securitization Execution Act.

Risk deductible

In the Securitization Ordinance, it was stipulated that the 5% risk deductible, which had to be kept in accordance with Article 405 Capital Adequacy Ordinance, may not be outsourced to a special purpose vehicle.

The material net portion of the deductible must not be divided between different types of carriers and must not be the subject of measures to reduce or hedge credit risks.

Lending Policies

Stricter lending guidelines in connection with securitisations are intended to prevent grievances such as those that led to the global economic crisis in 2007 ( subprime crisis ). The careless and negligent granting of loans to debtors who are not creditworthy, only to then securitize these loans and sell them on on the secondary market (originate-to-distribute practices, also KVV strategies lending-securitization-sale ), should be prohibited or prevented. As a result, the risks from the securitization were deliberately sold to third parties as part of this securitization strategy, who did not understand the underlying lending business itself and were therefore unable to assess the risk (these buyers were primarily institutional investors).

To this end, the Securitization Ordinance now calls for extensive openness (transparency) so that the buyers of the securitization (investors) can assess the real risk.

Securitization register

Securitization registers are legal entities (not trusts ) that collect and store records on securitisations centrally and check them for completeness and coherence. A securitization register must be established in a Union member state. The securitization registers are being introduced by the Securitization Ordinance. These are intended to create the necessary transparency and contain information relevant to investors so that investors have a single, supervised source of the data they need to exercise their due diligence. These securitization registers are authorized and monitored by the European Financial Supervisory Authority (European Securities and Markets Authority, ESMA).

Alternatively, if certain criteria are met (Article 7 Securitization Ordinance), this information can also be published on a separate website.

Private securitisations do not have to be entered in the securitization register.

Private securitisations

Private securitisations are usually “tailor-made” securitisations. This enables parties to enter into securitization transactions “without providing the market and competitors with sensitive commercial information about the business (e.g. that a particular company needs funding to expand its production or that an investment firm is entering a new market as part of its strategy would like to disclose) and / or about the underlying assets (e.g. about the nature of the commercial claims of an industrial company) ”. Since in these cases the investors are in direct contact with the originator and / or the sponsor and receive the necessary information for the exercise of their duties of care directly from them, private securitisations are exempt from the requirement regarding the securitization register.

Web links

Individual evidence

  1. ↑ Long title: Regulation (EU) 2017/2402 of the European Parliament and of the Council of December 12, 2017 laying down a general framework for securitisations and creating a specific framework for simple, transparent and standardized securitization and amending Directives 2009/65 / EG, 2009/138 / EG, 2011/61 / EU and the regulations (EG) No. 1060/2009 and (EU) No. 648/2012.
  2. ↑ Recital 2 of the Securitization Regulation.
  3. ↑ See: Recitals 1 and 2 of the amending regulation (EU) 2017/4201 amending the capital adequacy regulation on prudential requirements for credit institutions and investment firms.
  4. ↑ Recital 1 of the Securitization Regulation.
  5. ↑ Recital 3 of the Securitization Regulation.
  6. ↑ See: Recital 1 of the amending regulation (EU) 2017/4201 to amend the regulation (EU) No. 575/2013 (capital adequacy regulation) on supervisory requirements for credit institutions and investment firms and ABS market in Germany - quality with potential use , website: true-sale- international.de with an overview of the securitization market in Germany from 2006 to 2018. Last accessed on May 18, 2019.
  7. ↑ Securitization , website: pwc.lu, last accessed on May 19, 2019.
  8. ↑ Also: called private investors or private customers . For the term see: Article 4 Paragraph 1 No. 11 Directive 2014/65 / EU on markets in financial instruments (Financial Market Directive ).
  9. ↑ See also Recital 15 of the Securitization Ordinance: "Securitization instruments are generally not suitable for retail investors within the meaning of Directive 2014/65 / EU".
  10. ↑ See also Daniel Gritsch: Securitization Regulation - everything new from 1.1.2019? In: Journal for Financial Market Law . LexisNexis, ISSN  1996-2401 , p. 117.
  11. ↑ See: Article 2 no. 11 and 12 and Article 3 of the Securitization Regulation and recitals 15 and 46 of the Securitization Regulation.
  12. ↑ recital 5 of the securitization regulation: s imple, t ransparent and s tandardised .
  13. ↑ See: Recital 8 of the amending regulation (EU) 2017/4201 amending regulation (EU) No. 575/2013 (capital adequacy regulation) on prudential requirements for credit institutions and investment firms.
  14. ↑ Recital 22 of the Securitization Ordinance: "In the context of a true sale securitization, ownership of the underlying risk positions is transferred or de facto assigned to an issuer who is a special purpose vehicle for securitization".
  15. ↑ See also: Recital 5 of the Securitization Regulation.
  16. ↑ Article 4 and Article 18 last subparagraph of the Securitization Regulation.
  17. ↑ See Article 8 and Recital 8 of the Securitization Regulation as well as Recital 1 of the Amendment Regulation (EU) 2017/4201 amending Regulation (EU) No. 575/2013 (Capital Adequacy Regulation) on prudential requirements for credit institutions and investment firms.
  18. ↑ See Article 8 Securitization Ordinance.
  19. ↑ See: Recitals 9 and 34 of the Securitization Regulation.
  20. ↑ Regulation (EU) 2017/2401 of the European Parliament and of the Council of December 12, 2017 amending Regulation (EU) No. 575/2013 (Capital Adequacy Regulation) on prudential requirements for credit institutions and investment firms, OJ. L 347, p. 1.
  21. ↑ Federal Act on the coming into effect of Regulation (EU) 2017/2402 establishing a general framework for securitisations and creating a specific framework for simple, transparent and standardized securitization, Federal Law Gazette I No. 76/2018.
  22. ↑ Regulation (EU) No. 575/2013.
  23. ↑ a b See Article 6 (1) Securitization Ordinance.
  24. ↑ See Article 9 and Recitals 14 and 28 of the Securitization Regulation.
  25. ↑ See Article 2 no. 23 of the Securitization Ordinance.
  26. ↑ Article 10, Paragraph 2 of the Securitization Ordinance.
  27. ↑ See Articles 10 to 17 and Recitals 12, 13, 44 and 45 of the Securitization Regulation.
  28. ↑ Article 7, Paragraph 2 of the Securitization Ordinance.
  29. ↑ Recital 13 of the Securitization Regulation.