CSSF Circular 20/756 on Application of EBA Guidelines on Determination of Weighted Average Maturity

CIRCULAR CSSF 20/756 1/4 Circular CSSF 20/756 CIRCULAR 20/756 ON THE ADOPTION OF THE GUIDELINES OF THE EUROPEAN BANKING AUTHORITY ON THE DETERMINATION OF THE WEIGHTED AVERAGE MATURITY (WAM) OF THE CONTRACTUAL PAYMENTS DUE UNDER THE TRANCHE IN ACCORDANCE WITH POINT (A) OF ARTICLE 257(1) OF REGULATION (EU) NO 575/2013 (EBA/GL/2020/04)

CIRCULAR CSSF 20/756 2/4 Ladies and Gentlemen, The purpose of this circular is to inform you that the CSSF, in its capacity as competent authority, complies with1 and applies the Guidelines of the European Banking Authority (EBA) on the determination of the weighted average maturity of the contractual payments due under the tranche in accordance with point (a) of Article 257(1) of Regulation (EU) No 575/20132 (EBA/GL/2020/04) (the Guidelines). Consequently, the CSSF has integrated the Guidelines into its administrative practice and regulatory approach with a view to promoting supervisory convergence in this field at European level. All institutions measuring the tranche maturity in accordance with point (a) of Article 257(1) of Regulation (EU) No 575/2013 shall duly comply with them. 1 “Significant supervised entities” as defined in Article 2, point 16 of Regulation (EU) No 468/2014 of the European Central Bank (ECB) of 16 April 2014 (SSM Framework Regulation) shall refer to the relevant ECB rules (if any). 2 Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms Circular CSSF 20/756 Re: Application of the Guidelines of the European Banking Authority on the determination of the weighted average maturity (WAM) of the contractual payments due under the tranche in accordance with point (a) of Article 257(1) of Regulation (EU) No 575/2013 (EBA/GL/2020/04). Luxembourg, 9 November 2020 To all credit institutions and CRR investment firms incorporated under Luxembourg law and to Luxembourg branches of credit institutions and of CRR investment firms having their registered office in a third country

CIRCULAR CSSF 20/756 3/4 The Guidelines The calculation of risk-weighted exposure amounts of securitisation positions is subject to the requirements laid down in Chapter 5 of Part Three of Regulation (EU) No 575/2013 (the CRR). Chapter 5 introduces notably a hierarchy of methods and common parameters for the calculation of risk-weighted exposure amounts of securitisation positions. When determining their credit risk mitigation for securitisation positions subject to the Standardised Approach, institutions may measure the maturity of a tranche (MT) in accordance with the methods laid down in Article 257 CRR. In accordance with the mandate in Article 257(4) CRR, the Guidelines specify the methodology for measuring the weighted average maturity of the contractual payments due under the tranche referred to in point (a) of Article 257(1) of Regulation (EU) No 575/2013. The Guidelines are available on the EBA's website. Scope of application The present circular shall apply to all credit institutions, to CRR investment firms incorporated under Luxembourg law and to Luxembourg branches of credit institutions and of CRR investment firms having their registered office in a third country in case they opt for the use of the weighted average maturity approach instead of the final legal maturity approach when calculating the risk-weighted exposure amounts for the specific purpose of determining the capital requirement of a securitisation position. Date of application This circular shall apply with immediate effect. Yours faithfully, COMMISSION de SURVEILLANCE du SECTEUR FINANCIER Claude WAMPACH Marco ZWICK Jean-Pierre FABER Director Françoise KAUTHEN Claude MARX Director Director General

CIRCULAR CSSF 20/756 4 / 4 Commission de Surveillance du Secteur Financier 283, route d’Arlon L-2991 Luxembourg (+352) 26 25 1

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