EBA: EU banks’ balance sheets could get a boost from STS rules

Author: Olly Jackson | Published: 9 Oct 2018

Capital relief transactions, instrumental in helping to improve European banks’ balance sheets since the financial crisis, could be included as safe, transparent and secure (STS) transactions under the new Securitisation Regulation in 2019. This could be 'very positive’ for a banking sector set for greater capital requirements soon.

A European Banking Authority (EBA) spokesperson told IFLR that the EBA will assess next year whether synthetic securitisations could potentially be classified as STS securitisations, and, therefore, reduce the capital requirements for banks retaining the senior tranche. 

"With the introduction of the Basel III rules in the EU and increased capital requirements due to IFRS 9, it's very likely banks will use synthetic securitisations more often going forward to transfer credit risk out of the balance sheet and reduce capital," they said.

The assessment will look at both prudential issues, historical data and performance, and also the ability to harmonise synthetic...