European Banking Authority consults on its STS framework for synthetic securitization
The European Banking Authority has launched a public consultation on its proposals for a simple, transparent and standardized (STS) framework for synthetic securitization.
The consultation paper examines the rationale of the STS synthetic product and assesses positive and negative implications of its possible creation and label as “STS.”
The proposed STS criteria for balance sheet synthetic include requirements on simplicity, standardization and transparency similar to those applied to traditional securitization.
In addition, the criteria are expected to meet a number of synthetic-specific requirements, such as those: i) on mitigating counterparty credit risk; and ii) addressing various structural features of the securitization transaction.
Stakeholders are to provide comments by November 25, 2019.