European Parliament Votes on Amended STS Securitization

In an effort to revive the European securitization market, the Economic Affairs Committee of the European Parliament voted (44-4) on its compromise text for the draft “simple, transparent and standardized” (STS) securitization legislation this morning, according to a recent PCS article.

This text is an amended version of the original European Commission text and will now be part of a reconciliation process involving the Commission, the Council and Parliament, expected to begin early next year. The result of this negotiation will be the final text to be voted on and become the STS law, according to PCS.

In an attempt to increase banks' lending capacity while keeping risk under control, the plan also envisages lower capital requirements for securities that fall within a new category of STS debt, according to Reuters. Changes to the risk retention rules are also being proposed with the Commission's Director General for Financial Services, Olivier Guersent, stating that he was ready to accept a rate slightly higher than 5 percent, while Parliament member Paul Tang said 10 percent "is not prohibitive."

The official text is expected to be published in the coming days.

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