STS CRITERIA UNDER THE NEW EUROPEAN REGULATORY FRAMEWORK FOR SECURITISATION
Since the global financial crisis of 2007-2008, the securitisation market has been struggling to recover. Volumes have decreased and regulatory burden for issuers and investors has frozen the market. In an attempt to revitalise the economy through the diversification of funding sources and to promote further integration of the EU capital markets, Regulators issued a new European regulatory framework for securitisations. Under this new regulatory framework, securitisation deals should be considered of “high quality” and therefore have less penalising risk weights if their underlying exposures and the cash flows resulting from them are characterised as simple, if they are transparent with regards to the level of information disclosed to investors and if they have standardised and thus comparable structures.
While there are still remaining areas of ambiguity, in this report, Moody’s Analytics will try to address some of the main concerns of the market and dig deeper into the criteria set within the STS requirements.