[ParlTrack]

Marco VALLI, Marco ZANNI

(1) Securitisations are a~~n important constituent part of well-functioning financial markets insofar as they contribute to~~ complex financial risk transfer arrangement for off-balance-sheet credits and are used for diversifying institutions'’ funding sources and releasing regulatory capital which can then be reallocated to support further lending. Furthermore, securitisations ~~provide~~are an important source of profitability for financial intermediaries, offering institutions and other market participants withe possibility of additional investment opportunities, thus allowing portfolio diversification and facilitating the flow of funding to businesses and individuals both within Member States and on a cross- border basis throughout the Union. These benefits, however, should be weighed against their potential costs~~. As seen during the first phase of financial crisis starting in the summer of 2007, unsound practices in~~ for the community, in terms of greater systemic risks, property bubbles resulting from excessive extension of housing credit, and inefficient capital allocations. As seen during the first phase of financial crisis starting in the summer of 2007, the change to a new “originate-to-distribute” (OTD) banking model for lending practices and the unsound practices associated with the speculative use of securitisation ~~markets~~ resulted in significant threats to the integrity and stability of the financial system, namely due to excessive leverage, the market being more interconnected, opaque and complex structures that made pricing problematic, mechanistic reliance on external ratings issued by agencies with conflicts of interest or misalignment between the interests of investors and originators (“agency risks”).

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Recital 3

(3) Consistent with the objectives of Regulation [Securitisation Regulation], the regulatory capital requirements laid down in Regulation (EU) No 575/2013 for institutions originating, sponsoring or investing in securitisations should be amended to reflect adequately the specific features of STS securitisations that have underlying loans to small and medium- sized enterprises (SMEs) as exposure and address the shortcomings of the framework which became apparent during the financial crisis, namely its mechanistic reliance on external ratings, excessively low risk weights for highly rated securitisation tranches and, conversely, excessively high risk weights for low-rated tranches, and insufficient risk sensitivity. On 11 December 2014 the Basel Committee for Banking Supervision ("BCBS") published its “Revisions to the securitisation framework” (the “Revised Basel Framework”) setting out various changes to the regulatory capital standards for securitisations to address specifically those shortcomings. The amendments to Regulation (EU) No 575/2013 should take into account the provisions of the Revised Basel Framework.

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Recital 4

(4) Capital requirements for positions in a securitisation under Regulation (EU) No 575/2013 should be subject to the same calculation methods for all institutions. In the first instance and to remove any form of mechanistic reliance on external ratings, an institution should use its own calculation of regulatory capital requirements where the institution has permission to use the Internal Ratings- Based Approach (the "IRB") in relation to exposures of the same type as those underlying the securitisation and is able to calculate regulatory capital requirementsd to limit variability owing to internal models and regulatory arbitrage, an institution should only use the STS Securitisation Standardised Approach (the “SEC-SA”) which should rely on a supervisory-provided formula and which uses as an input the capital requirements that would be calculated under the Standardised Approach to credit risk (“SA”) in relation to the underlying exposures as if thesey had not been securitised (~~"Kirb"), in each case subject to certain pre-defined input~~“Ksa”). The use of the method based on internal ratings (“IRB”) should therefore be excluded, as well as (the ~~"SEC- IRBA"). A~~ Securitisation External Ratings-Based Approach (~~the "~~SEC- ERBA") ~~should then be available to institutions that may not use the SEC- IRBA~~ in relation to their positions in a ~~given~~n STS securitisation~~. As part of the SEC- ERBA, capital requirements should be assigned to securitisation tranches on the basis~~, in line with the objectives of the ongoing revision by the Basel Committee on the gradual elimination of the~~ir ex~~ Internal rRating. When the first two approaches are not available or the use of the SEC-ERBA would result in incommensurate regulatory capital requirements relative to the credit risks embedded in the underlying exposures, institutions should be able to apply the Securitisation Standardised Approach (the "SEC-SA") which should rely on a supervisory-provided formula using as an input the capital requirements that would be calculated unders-Based Approach to measuring credit risk. To reduce the complexity of the regulatory framework and to aid comparability, it is important to assess the extension of the approach based on using solely the Sstandardised ~~Approach to credit risk (the "SA") in relation to the underlying exposures if these had not been securitised ("Ksa")~~method to all securitisations.

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Recital 5

(5) Agency and model risks are more prevalent for securitisations than for other financial assets and give rise to some degree of uncertainty in the calculation of capital requirements for securitisations even after all appropriate risk drivers have been taken into account. In order to capture those risks adequately, Regulation (EU) No 575/2013 should be amended to provide for a minimum 15% risk weight floor for all securitisation positions. Re- securitisations, however, ~~are more complex and riskier and, accordingly, positions within them should be subject to a more conservative regulatory capital calculation and a 100% risk weight floor~~should be banned, given their higher level of complexity and risk.

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Recital 8

(8) As pointed out by the European Banking Authority (the "EBA") in its "Report on Qualifying Securitisations" of June 201510, empirical evidence on defaults and losses shows that STS securitisations exhibited better performance than other securitisations during the financial crisis, reflecting the use of simple and transparent structures and robust execution practices in STS securitisation which reduce credit, operational and agency risks. ~~It is therefore appropriate to amend Regulation (EU) No 575/2013 to provide for an appropriately risk-sensitive calibration for STS securitisa~~There would, however, be no justification for weakening an essential protective measure against potential errors in measuring risk, through the impositions in the manner recommended by the EBA in its Report ~~which involves, in particular, a lower risk weight~~of an even lower minimum risk weight floor, for some types of STS securitisations; it is therefore appropriate to maintain the minimum floor of 105% for ~~senior positions~~this type of securitisation too. _________________ 10 Cfr.https://www.eba.europa.eu/documents/ 10180/950548/EBA+report+on+qualifying +securitisation.pdf.

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Recital 10

(10) Only consequential changes should be made to the remainder of the regulatory capital requirements for securitisations in Regulation (EU) No 575/2013 insofar as necessary to reflect the new ~~hierar~~approachy of ~~approaches~~the standardised method and the special provisions for STS securitisations guaranteed by loans to SMEs. In particular, the provisions related to the recognition of significant risk transfer ~~and the requirements on external credit assessments should continue to apply in substantially the same terms as they do currently. However,~~should be modified to reflect a more prudent approach. Part Five of Regulation (EU) No 575/2013 should be deleted in its entirety with the exception of the requirement to hold additional risk weights which should be imposed on institutions found in breach of the provisions in Chapter 2 of Regulation [Securitisation Regulation].

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Recital 11

(11) In the light of the ongoing debate within the BCBS on the convenience of recalibrating the Revised Basel Framework to reflect the specific features of STS securitisations, the Commission should be empowered to adopt a delegated act to make further amendments to the regulatory capital requirements for securitisation in Regulation (EU) No 575/2013 to take account of the outcome of such discussions.deleted

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Recital 12

(12) It is appropriate for the amendments to Regulation (EU) No 575/2013 provided for in this Regulation to apply to securitisations issued on or after the date of application of this Regulation and to securitisations outstanding as of that date. However, for legal certainty purposes and to mitigate transitional costs in as much as possible, institutions should be allowed to grandfather all outstanding securitisation positions that they hold on that date for a period ending on [31 December 2019]. If an institution makes use of this option, outstanding securitisations should continue to be subject to the regulatory capital requirements set out in Regulation (EU) No 575/2013 in the version that applied prior to the date of application of this Regulation,.

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation 575/2013
Article 243, paragraph 1

(1) Positions in an ABCP programme shall not qualify as positions in an STS securitisation for the purposes of Articles 260, 262 and 264 ~~where the following requirements are met:~~;

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 243, paragraph 1, point a

(a) for all transactions within the ABCP programme, the underlying exposures at origination meet the conditions for being assigned, under the Standardised Approach and taking into account any eligible credit risk mitigation, a risk weight equal to or smaller than 75% on an individual exposure basis where the exposure is a retail exposure or 100% for any other exposures;deleted

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 243, paragraph 1, point b

(b) the aggregate exposure value of all exposures to a single obligor at ABCP programme level does not exceed 1% of the aggregate exposure value of all exposures within the ABCP programme at the time the exposures were added to the ABCP programme. For the purposes of this calculation, loans or leases to a group of connected clients as referred to in Article 4(1) point (39) shall be considered as exposures to a single obligor. In the case of trade receivables, point (b) shall not apply where the credit risk of those trade receivables is fully covered by eligible credit protection in accordance with Chapter 4, provided that in that case the protection provider is an institution, an insurance undertaking or a reinsurance undertaking. For the purposes of this subparagraph, only the portion of the trade receivables remaining after taking into account the effect of any purchase price discount shall be used to determine whether they are fully covered.deleted

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

(a a) the underlying exposures are commercial loans, leasing and credit facilities granted to small and medium- sized enterprises (SMEs) for the financing of expenditure in capital accounts or of commercial activities;

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

(e) where point (c)(i) applies, no loan in the pool of underlying exposures shall have a loan-to-value ratio higher than 1080%, measured in accordance with paragraph 1(d)(i) of Article 129 and paragraph 1 of Article 229.

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation 575/2013
Article 244 – paragraph 2 – point a

(a) the risk-weighted exposure amounts of the mezzanine securitisation positions held by the originator institution in the securitisation do not exceed 540% of the risk-weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 244 – paragraph 2 – point b

(b) the originator does not hold more than 210% of the exposure value of the first loss tranche in the securitisation, provided that the following conditions are met:

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 244 – paragraph 3

(3) By derogation from paragraph 2, competent authorities may allow originator institutions to recognise significant credit transfer in relation to a securitisation where the originator institution demonstrates in each case that the reduction in own fund requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties. Permission may only be granted if the institution meets the following conditions: (a) the institution has adequate internal risk management policies and methodologies to assess the transfer of credit risk; (b) the institution has also recognised the transfer of credit risk to third parties in each case for the purposes of the institution's internal risk management and its internal capital allocation.deleted

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 244 – paragraph 4

~~(4) In addition to the requirements set out in paragraphs 1 to 3, the following conditions shall be met: (a) reflects the economic substance of the securitisation; (b) constitute payment oblig~~deleted the transaction documentation~~s of~~ the originator institution; (c) placed beyond the reach of the originator institution and its creditors in a manner that meets the requirement set out in Article 6(2)(a) of the [Securitisation Regulation]; (d) retain control over the underlying exposures. It shall be considered that control is retained over the underlying exposures where the originator has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is otherwise required to re-assume transferred risk. The originator institution's retention of servicing rights or obligations in respect of the underlying exposures does not necessarily constitute control of the exposures; (e) does not contain terms or conditions that: i) alter the underlying exposures to improve the average quality of the pool; ii) holders of positions or otherwise enhance the positions in the securitisation in response to a deterioration in the credit quality of the underlying exposures; (f) documentation makes it clear that the originator or the sponsor may only purchase or repurchase securitisation positions or repurchase, restructure or substitute the underlying exposures beyond their contractual obligations where such arrangements are executed in accordance with prevailing market conditions and the parties to them act in their own interest as free and independent parties (arm's length); (g) a clean-up call option shall also meet the following conditions: i) of the originator institusecuritisation positions do not the underlying exposures are the originator institution does not the securitisation documentation require the originator institution to increase the yield payable to where applicable, the transaction it can be exercised at the discretion; ii) or less of the original value of the underlying exposures remains unamortised; iii) allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to provide credit enhancement; (h) received an opinion from a qualified legal counsel confirming that the securitisation complies with the conditions set out in points (b) to (g) of this paragraph.t may only be exercised when 10% it is not structured to avoid the originator institution has

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 245 – paragraph 2 – point a

(a) the risk-weighted exposure amounts of the mezzanine securitisation positions held by the originator institution in the securitisation do not exceed 540% of the risk-weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 245 – paragraph 2 – point b

(b) the originator institution does not hold more than 210% of the exposure value of the first loss tranche in the securitisation, provided that the following conditions are met:

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 250 – title

Article 250 IBan on implicit support

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation 575/2013
Article 254 a (new)

Article 254 a Application of the standardised approach for STS securitisations (1) Institutions shall use the standardised approach for STS securitisations (SEC-SA) under Article 264 to calculate the risk-weighted exposure amounts in relation to the positions in an STS securitisation. (2) Institutions may not use the Internal Ratings-Based Approach (SEC- IRBA) or the External Ratings-Based Approach (SEC-ERBA) for STS securitisation.

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 260

Treatment of STS securitisations under Under the SEC-IRBA, the risk weight for position in an STS securitisation shall be calculated in accordance with Article 259, subject to the following modifications: risk weight floor for senior securitisation positions = 10% p = max [0.3; 0.5ˑ (A + Bˑ(1/N) + Cˑ KIRB + D*LGD + EˑMT)]Article 260 deleted the SEC-IRBA

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 262

Article 262 Treatment of STS securitisations under SEC-ERBA (1) Under the SEC-ERBA, the risk weight for a position in an STS securitisation shall be calculated in accordance with Article 261, subject to the modifications laid down in this Article. (2) For exposures with short-term credit assessments or when a rating based on a short- term credit assessment may be inferred in accordance with Article 261(7), the following risk weights shall apply: Table 3 Credit Quality Step 1 2 3 All other ratings Risk Weight 10% 35% 70% 1.250% (3) For exposures with long-term credit assessments or when a rating based on a long- term credit assessment may be inferred in accordance with Article 261(7), risk weights shall be determined in accordance with Table 4, adjusted for tranche maturity (MT) in accordance with Article 257 and Article 261(4) and for tranche thickness for non-senior tranches in accordance with Article 261(5): Table 4 Credit Quality Senior tranche Non-senior (thin) tranche Step Tranche maturity (MT) Tranche maturity (MT) ≤ 1 year ≤ 5 years ≤ 1 year ≤5 years 1 10% 15% 15% 50% 2 10% 20% 15% 55% 3 15% 25% 20% 75% 4 20% 30% 25% 90% 5 25% 35% 40% 105% 6 35% 45% 55% 120% 7 40% 45% 80% 140% 8 55% 65% 120% 185% 9 65% 75% 155% 220% 10 85% 100% 235% 300% 11 105% 120% 355% 440% 12 120% 135% 470% 580% 13 150% 170% 570% 650% 14 210% 235% 755% 800% 15 260% 285% 880% 880% 16 320% 355% 950% 950% 17 395% 430% 1.250% 1.250% All other 1.250% 1.250% 1.250% 1.250% deleted

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation 575/2013
Article 264 – paragraph 2

risk weight floor for senior securitisation positions = 105%

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation 575/2013
Article 269

(1) securitisation, institutions shall apply the SEC-SA in accordance with Article 263, with the following changes: (a) W = 0 for any exposure to a securitisation tranche within the underlying pool of exposures; (b) p = 1.5; (c) the resulting risk weight shall be subject to a floor risk weight of 100%. (2) securitisation exposures shall be calculated in accordance with Subsection 2. (3) requirements set out in Subsection 4 shall not be applied to re-securitisation positions. (4) exposures consists in a mix of securitisation tranches and other types of assets, the KA parameter shall be determined as the nominal exposure weighted-average of the KA calculated individually for each subset of exposures.Article 269 deleted Re-securitisations For a position in a re- KSA for the underlying The maximum capital Where the pool of underlying

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7 Regulation (EU) No 575/2013

Article 269 RBan on re-securitisation~~s (1) s~~ Securitisation~~, institu~~ transactions shall ~~apply the SEC-SA in accordance with Article 263, with the following changes: (a) W = 0 for any exposure to a securitisation tranche within the~~not have other securitisation positions as underlying ~~pool of~~ exposures; (b) p = 1.5; (c) the resulting risk weight shall be subject to a floor risk weight of 100%. (2) securitisation exposures shall be calculated in accordance with Subsection 2. (3) The maximum capital requirements set out in Subsection 4 shall not be applied to re-securitisation positions. (4) exposures consists in a mix of securitisation tranches and other types of assets, the KA parameter shall be determined as the nominal exposure weighted-average of the KA calculated individually for each subset of exposures.. For a position in a re- KSA for the underlying Where the pool of underlying

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation 575/2013
Article 270 – point c

(c) the securitisation is backed by a pool of exposures to undertakings, provided that at least 8100% of those in terms of portfolio balance qualify as SMEs as defined in Art 501 at the time of issuance of the securitisation;

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 1 – paragraph 1 – point 7

Regulation (EU) No 575/2013
Article 270 – point e

(e) the guarantor or counter-guarantor, as applicable, is the central government or the central bank of a Member State, or a multilateral development bank ~~or an international organisation~~, provided that the exposures to the guarantor or counter- guarantor qualify for a 0% risk weight under Chapter Two of Part Three.

2016/09/06
Committee: ECON

Marco VALLI, Marco ZANNI

Proposal for a regulation
Article 2 a (new)

Article 2 a Auditing No later than... [18 months from the date of entry into force of this Regulation], the Commission, following consultation with the EBA, ESMA, ESRB and the ECB, shall publish an audit report on the effectiveness and suitability of this regulation from a macroprudential and economic perspective. In particular, the report will focus on evaluating the following points: a) whether the amendments presented in this Regulation lead to the accumulation of significant leverage and an increase in pro-cyclicality; b) the impact on the stability of the financial system and on the increase of systemic risk, with particular attention to the potential creation of speculative bubbles on the property market and increased interconnection between financial institutions; c) what measures are necessary to reduce and counter the negative effects of securitisations on financial stability, including the introduction of a maximum limit on exposure in securitisations as a share of total assets; d) the effects on the stability of lending transactions and the ability to provide a sustainable funding channel to the real economy, with particular attention on small and medium-sized enterprises; e) whether it is appropriate to extend the use of the standardised approach as the single methodology for calculating risk weights to non-STS securitisations as well, gradually eliminating the Internal Ratings-Based Approach (SEC-IRBA) and the External Ratings-Based Approach (SEC-ERBA). The results of the review shall be presented to the European Parliament and to the Council, accompanied if necessary by appropriate proposals for a new legislative proposal.

2016/09/06
Committee: ECON

Activities of Marco VALLI related to 2015/0225(COD)

Shadow reports (1)

Amendments (29)

ParlTrack - 2011-2024