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New EBA rules for on-balance-sheet securitizations? We have your STS compliance covered

The European Banking Authority (EBA) recently published its final guidelines on the simple, transparent and standardised (STS) criteria for on-balance sheet securitisations under Article 26a(2) of the Securitisation Regulation. These guidelines amend EBA/GL/2018/08 and EBA/GL/2018/09 concerning the STS criteria for ABCP and non-ABCP securitizations. While the guidelines aim to harmonize the interpretation of STS criteria across the EU and ensure a common understanding by all the parties involved, a key challenge for originators lies in meeting transparency requirements, particularly regarding historical default and loss performance data.

In particular, chapter 6 (“Criteria relating to transparency”) of the report offers some clarification. It allows originators to leverage external data from reputable sources such as rating agencies or market participants when they lack the necessary internal data on historical performance. This opens the door for institutions to achieve STS compliance even if their on-balance sheet exposures don’t perfectly match the securitized exposures. 

A critical aspect remains: identifying “substantially similar exposures” as defined by the EBA. According to Article 26d(1) of Regulation (EU) 2017/2402, these are exposures where key performance factors closely resemble the securitized pool, and their performance is not expected to be significantly worse. 

How CARDO AI empowers you to achieve STS compliance

Our Market Intelligence tool is designed to address the specific challenges associated with limited historical data or a lack of perfectly matching on-balance sheet exposures:

  • Extensive loan-level database: Leverage our comprehensive database of over 1,800 ABS transactions to obtain proxy data and portfolio proxies. These can then be used to simulate and benchmark your reference portfolios, effectively creating a strong foundation for demonstrating substantially similar exposures.
  • Data granularity and customization: Market Intelligence offers over 30 different metrics that can be further customized using more than 20 filters and grouping options. This allows you to tailor the data to your specific needs and create highly relevant benchmarks.
  • Metrics:
    • Note-specific: Analyze clean-up calls, attachment points, and over-collateralization.
    • General market performance: Gain insights into WAM (Weighted Average Maturity), WALA (Weighted Average Loan Age), WAC (Weighted Average Coupon), and more.
    • Performance: Track CDR (Cumulative Default Rate), Delinquency Rate, Pay Rate, CPR (Cumulative Prepayment Rate), and Recovery Rate.
    • Risk: Utilize Transition Matrix and Behavioral Matrix for in-depth risk assessment.
  • Asset class and geographic coverage: Our platform covers a wide range of asset classes, including RMBS (Residential Mortgage-Backed Securities), SME (Small and Medium Enterprises), Consumer loans, Auto loans, and Auto lease. Additionally, it provides data for all major European countries and the UK.
  • Customizable filters and grouping: Refine your analysis by filtering based on factors like interest rate type, employment status, loan purpose, car manufacturer, origination year, and more.

CARDO AI’s Market Intelligence platform offers the data and tools to pinpoint suitable proxy exposures with matching performance factors. This ensures smooth regulatory adherence while enhancing the credibility of your securitization processes.