NBB Circular NBB_2018_03: EBA Guidelines on Implicit Support to Securitisation Transactions

NBB_2018_03 – 29 January 2018 Circular – Page 1/3 14 Berlaimont Boulevard – BE-1000 Brussels tel. +32 2 221 37 40 – fax + 32 2 221 31 04 company number: 0203.201.340 RPM Brussels www.bnb.be

Circular
Brussels, 29 January 2018
Reference: NBB_2018_03 your contact:
Joachim KELLER tel. +32 2 221 52 59 – fax +32 2 221 31 04 joachim.keller@nbb.be

EBA Guidelines on Implicit Support to Securitisation Transactions

Scope
This circular applies to less significant Belgian credit institutions as defined by Council Regulation (EU) No 1024/2013 and to Belgian broker-dealers as well as to Belgian parent financial holding companies and parent mixed financial holding companies of a less significant Belgian credit institution and/or a Belgian broker-dealer. 1,2

Summary/Objectives
This circular aims to implement the guidelines of the European Banking Authority (EBA) of 24 November 2016 on implicit support to securitisation transactions.

1 Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions.
2 The present guidelines were applied to significant credit institutions by the European Central Bank communication of 28 July 2017.
(https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.2017_guidance_on_implicit_support.fr.pdf?1a446c46aadef19d536831aa8bf45602).

Circular – Page 2/3 NBB_2018_03 – 29 January 2018

Madam,
Sir,

This circular aims to implement the guidelines of the European Banking Authority (hereinafter EBA) of 24 November 2016 on implicit support to securitisation transactions. It reproduces, in its annex and in its entirety, the text drawn up by the EBA in French. The annex is also available on the website of the National Bank of Belgium.

Article 248 of Regulation (EU) No 575/20131 (hereinafter CRR) provides that a sponsor institution or an originator institution which, for a securitisation, has recourse to Article 245 of the CRR in the calculation of risk-weighted exposure amounts, or has sold instruments from its trading book with the consequence that it is no longer required to hold capital to cover risks related to these instruments, does not provide support to the securitisation beyond its contractual obligations with the aim of reducing potential or actual losses for investors. An operation is not considered to constitute support where it is carried out under normal competitive conditions and does not compromise the significant risk transfer in the case of an originator institution.

The originator or sponsor institution providing support for a given securitisation is subject to a capital requirement calculated on the basis of all securitised exposures, as if they had not been securitised.

When carrying out an operation that it is not contractually obliged to conclude or that it should not conclude under specific terms in accordance with the documentation regarding ongoing securitisations, any sponsor or originator institution or, subject to the provisions of point 25 of these guidelines, any entity related to an originator institution, must submit said operation to its internal credit approval and review procedures and notify its execution to the National Bank.

An operation carried out outside the contractual framework must be considered as constituting support if it is not carried out under normal competitive conditions. Such normal competitive conditions are met if the terms of the operation are such that they correspond to those of a commercial operation carried out between parties having no link between them and acting independently, concluding the operation according to their own will and acting in their own interests, and not on the basis of considerations foreign and not directly related to the operation in question.

The relevant factors for establishing whether the operation is not structured with the aim of providing support are mentioned in Article 248, paragraph 1 of the CRR and specified in points 20 to 24 of these guidelines. These are the following factors: repurchase price, the institution's situation in terms of capital and liquidity before and after the repurchase, performance of the securitised exposures, performance of the securitisation positions and the impact of the support on the losses that the originator should bear compared to investors.

Originator institutions are also required to demonstrate that the envisaged operation respects the conditions for significant risk transfer. The factors to be taken into account must include the level of credit risk of the originator institution after the execution of the operation and the impact of the operation on the originator institution's situation in terms of capital and liquidity.

Sponsor institutions and originator institutions are requested to notify in writing any non-contractual operation to the National Bank, no later than 15 working days following the execution of the operation. The originator institution or, as the case may be, the sponsor institution, claiming that the operation does not constitute implicit support, must adequately establish that this operation satisfies the relevant conditions set out in these guidelines. When the operation is

NBB_2018_03 – 29 January 2018 Circular – Page 3/3 performed by a related entity to an originator institution referred to in i) or ii) of point a) of point 25 of these guidelines, the originator institution concerned is requested to provide documentation on the type of link existing between said originator institution and this entity and, where applicable, on the financing, support or instructions given to this entity, or the agreements concluded with this entity for the purpose of carrying out the operation in question.

A copy of this is sent to the commissioner(s), approved auditor(s) of your institution.

Please accept, Madam, Sir, our distinguished salutations.

Jan Smets
Governor

Annex: 1