The three European Supervisory Authorities (EBA, EIOPA, and ESMA – ESAs) today published a joint advice in response to the European Commission’s October 2021 call for advice on the review of the prudential securitization framework. The ESAs welcome the current review as an opportunity to assess the performance of the current framework and support the objective of reviving the EU securitization market.

The targeted proposals in the advice aimed at improving the consistency and risk sensitivity of the capital framework for banks whereas the liquidity framework for banks and the prudential framework for (re)insurers should be maintained as it currently stands. However, the ESAs believe that re-calibrating the securitization prudential framework would not be a solution that in itself would ensure the revival of the securitization market.

The advice consists of two parts: the assessment of the recent performance and appropriateness of the rules on capital and liquidity requirements for banks and the review of the securitization capital framework applicable to (re)insurers.

Additional Remarks

The ESAs stress that further analytical work should be conducted to gain a holistic understanding of the relevant factors driving the securitization market, some of which lie outside the scope of the prudential framework, including the current monetary policy environment and the role of the due diligence and transparency requirements.

For that purpose, it is recommended that the ESAs conduct further monitoring work on additional data as it becomes available.

In addition, ESMA has started the revision process of the disclosure templates for securitization transactions and will assess, as a part of this, whether greater proportionality can be introduced into the templates.

Background and legal basis

As part of the capital markets union action plan, the EU Commission is currently engaged in a process of reviewing the EU securitization framework and, in that context, has addressed a call for advice to the Joint Committee of the ESAs in October 2021. The call seeks advice on the performance of the rules on capital requirements for banks and (re)insurers and liquidity requirements for banks relative to the framework’s original objective of contributing to the revival of the EU securitization market on a prudent basis.