On 12 December 2022, the three European Supervisory Authorities (“EBA,” “EIOPA” and “ESMA”) published a joint advice on the review of the securitisation prudential framework.
The advice consists of two parts:
Review of the Securitisation Prudential Framework for Banks
The ESAs make the following recommendations in respect of the securitisation prudential framework for banks:
As regards the liquidity framework for banks, the ESAs consider that the current framework should be kept as it currently stands. The advice concludes that re-calibrating the securitisation capital framework for banks would not be a solution that would ensure the revival of the securitisation market and that any changes to the capital framework may have a limited impact because investor demand may remain subdued in the foreseeable future.
Review of the Securitisation Framework in Solvency II Applicable to (Re)Insurers
The advice notes that relatively few EU insurers/reinsurers invest in securitisations and that the change in capital weightings for STS securitisations effected in 2019 has only marginally increased investment by EU insurers/reinsurers in securitisations. The advice concludes that there is insufficient evidence to conclude that the current Solvency II capital framework is not fit for purpose and, as such, no changes are proposed.