European Parliament Votes on STS Securitization and CRR Legislation

The European Parliament voted (457-160) yesterday, in favor of the "simple, transparent, and standardized" (STS) securitization regulation and in favor (458-159) of the Capital Requirements Regulation, according to a PCS article.

The new legislation, while laying solid foundations for a new securitization market, still requires some additional construction to fulfill its potential, PCS explains. According to PCS, the STS criteria remains vague, in part, and will only acquire solidity after the European Banking Authority sets forth guidelines and recommendations regarding their interpretation. Second, without a change to the Solvency II securitization calibrations for insurance companies, the only benefits of STS are for bank investors (and, to some extent, money market funds). The article goes on to explain that the industry will have to turn to the Commission for Solvency II amendments, rumored to being prepared, and changes to the Liquidity Cover Ratio rules would also be very helpful.

European Parliament Vice President Dombrovskis noted in his recent remarks that "by defining criteria for STS, we can revitalize European markets for securitization in a sustainable way. There is broad consensus among regulators, supervisors, and companies, that this would benefit the European economy. It would free up more lending for investment, and help manage risk in the banking sector."

SFIG previously submitted comments to the European Commission regarding the framework for STS securitization, which can be found here.

If you would like to join SFIG's High Quality Securitization Task Force, please contact

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