EBA Publishes Guidelines on STS Criteria for On-Balance-Sheet Securitisations

The European Banking Authority (EBA) published its Final Report on the Guidelines on STS criteria for on-balance-sheet securitisation and amending Guidelines EBA/GL/2018/08 and EBA/GL/2018/09 on the STS criteria for ABCP and non-ABCP securitisation on 27 May, following a three-month public consultation, which ran from April to June of 2023.

The guidelines aim to provide a single point of consistent interpretation of the STS criteria and ensure a common understanding of them by originators, original lenders, securitisation special purpose entities (SSPEs), investors, competent authorities and third-party verification agents verifying STS compliance in accordance with Article 28 of Regulation (EU) 2017/2402 throughout the EU.

Clarification on Criteria Relating to Transparency

Chapter 6 of the report focusses on the ‘Criteria relating to transparency, with relation to data on historical default and loss performance.

It clarifies that, “for the purposes of Article 26d(1) of Regulation (EU) 2017/2402, where the originator cannot provide data in line with the data requirements contained therein, external data that are publicly available or are provided by a third party, such as a rating agency or another market participant, may be used, provided that all of the other requirements of that article are met.

The term ‘substantially similar exposures’ is also highlighted as referring to exposures that meet certain conditions, one of which being that the most relevant factors determining the expected performance of the underlying exposures must be similar.

EDW’S Experience with Proxy Data on ‘Substantially Similar Exposures’ for STS Compliance

European DataWarehouse (EDW) has already been supporting originators who do not have ‘substantially similar exposures’ on their balance sheets or have less than 5 years of historical data, by leveraging its loan-level database of 1800+ ABS transactions.

EDW compiles the required set of performance data that includes dynamic delinquencies and static default and loss information as required by the Article 22(1) of Regulation (EU) 2017/2402 for non-ABCP securitisations and can offer originators Proxy Data on ‘Substantially Similar Exposures’ in their STS process for on-balance-sheet securitisations as per the new EBA guidelines for Article 26d(1).

EDW’s securitisation repository includes data spanning a time series of more than 10 years, from over 10 counties, and across all major asset classes and can be filtered based on characteristics such as:

  • Type of mortgage (owner occupied, buy to let)
  • Loan or lease (for Auto ABS)
  • Short term or long-term consumer loans
  • Secured or unsecured SME loans
  • Amortising or interest only

Via a five-step data optimisation process, EDW can provide originators with Proxy Data containing static and dynamic historical default and loss performance data for substantially similar exposures to those being securitised for a period of at least five years in a format that major STS verification agents have already accepted.

Please contact the EDW team via enquiries@eurodw.eu for more information.