November 10, 2014 Alert - SFIG to Advocate on High Quality Securitizations
The European Banking Authority (“EBA”) has launched a public consultation on its discussion paper regarding simple, standard and transparent securitizations, with comments due January 14, 2015. Although this is a European initiative, the concept of creating a two-track securitization market comprised of (1) high quality securitizations that enjoy preferential treatment and (2) securitizations that do not meet the criteria to qualify as high quality securitizations (i.e. everything else) is gaining momentum and has clear implications for the US and global markets. It is also worth bearing in mind that this appears to be gaining significant political momentum in Europe. SFIG is creating, therefore, the High Quality Securitization (“HQS”) Task Force to focus on this issue.

The Task Force’s first initiative will be to respond to the EBA paper, and SFIG has engaged Lewis Cohen, Partner at Hogan Lovells, to serve as drafting counsel. As you consider the EBA paper, it is worth recalling that, in July, we provided comments on the European Central Bank (“ECB”) and Bank of England’s (“BoE”) discussion paper, The Case for a Better Functioning Securitization Market in the European Union. The theme of high quality securitizations was very much present in that consultation paper as well. We provided the following key recommendations in our comments to the BoE/ECB paper:

  • Keep the “qualifying” securitization definition at a principles level to preserve flexibility in the European market, allowing the development of new types of high-quality securitizations that meet the needs of lenders to the real economy;

  • When seeking to leverage the benefits of standardization to build market confidence and liquidity, consider reliance on industry participants to develop consensus-based standards that present realistic requirements and provide proportionate value to investors;

  • Provide market participants with certainty early on as to a qualification certification; and

  • Reduce the potential pressure placed on cross-border securitization markets from non-aligned regulatory structures by coordinating EU regulatory initiatives with non-EU counterparts in other key jurisdictions.


Members who participated in developing the BoE/ECB comment letter, as well those interested in advocacy on regulatory capital and liquidity topics, are strongly encouraged to engage in the HQS Task Force. The HQS Task Force will meet in the coming weeks to begin formulating its views, and members who would like to participate should please email Amanda Bateman.
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