REPORT on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards adjustments to the securitisation framework to support the economic recovery in response to the COVID-19 pandemic
10.11.2020 - (COM(2020)0283 – C9‑0208/2020 – 2020/0156(COD)) - ***I
Committee on Economic and Monetary Affairs
Rapporteur: Othmar Karas
DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION
on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards adjustments to the securitisation framework to support the economic recovery in response to the COVID-19 pandemic
(COM(2020)0283 – C9‑0208/2020 – 2020/0156(COD))
(Ordinary legislative procedure: first reading)
The European Parliament,
– having regard to the Commission proposal to Parliament and the Council (COM(2020)0283),
– having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C9‑0208/2020),
– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,
– having regard to the opinion of the European Central Bank of 23 September 2020[1],
– having regard to the opinion of the European Economic and Social Committee of 29 October 2020[2],
– having regard to Rule 59 of its Rules of Procedure,
– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0213/2020),
1. Adopts its position at first reading hereinafter set out;
2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;
3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.
Amendment 1
AMENDMENTS BY THE EUROPEAN PARLIAMENT[*]
to the Commission proposal
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Proposal for a
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
amending Regulation (EU) No 575/2013 as regards adjustments to the securitisation framework to support the economic recovery in response to the COVID-19 pandemic
(Text with EEA relevance)
THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,
Having regard to the proposal from the European Commission,
After transmission of the draft legislative act to the national parliaments,
Having regard to the opinion of the European Central Bank of 23 September 2020[3],
Having regard to the opinion of the European Economic and Social Committee of 29 October 2020[4],
Acting in accordance with the ordinary legislative procedure,
Whereas:
(1) The COVID-19 pandemic is severely affecting people, companies, health systems and the economies of Member States. The Commission, in its Communication to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions of 27 March 2020 entitled ‘Europe's moment: Repair and Prepare for the Next Generation’ stressed that liquidity and access to finance will be a continued challenge in the months to come. It is therefore crucial to support the recovery from the severe economic shock caused by the COVID-19 pandemic by introducing targeted amendments to existing pieces of financial legislation. This package of measures is adopted under the label “Capital Markets Recovery Package”.
(2) Credit institutions and investment firms (‘institutions’) will have a key role in contributing to the recovery. At the same time, they are likely to be impacted by the deteriorating economic situation. Competent authorities have provided temporary capital, liquidity and operational relief to institutions to ensure that institutions can continue to fulfil their role in funding the real economy in a more challenging environment. For the same purpose, the European Parliament and the Council have already adopted certain targeted adjustments to Regulations (EU) No 575/2013 and (EU) 2019/876 in response to the COVID-19 crisis.
(3) Securitisations are an important component of well-functioning financial markets since they contribute to diversifying institutions' funding sources and releasing regulatory capital that can be reallocated to support further lending. Furthermore, securitisations provide institutions and other market participants with 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.
(4) It is important to reinforce the capacity of institutions to provide the necessary flow of funding to the real economy in the aftermath of the COVID-19 pandemic, while ensuring that adequate prudential safeguards are in place to preserve financial stability. Targeted changes to Regulation (EU) No 575/2013 as regards the securitisation framework should contribute to the achievement of those objectives and enhance the coherence and complementarity of that framework with the various measures taken at Union and national level to address the COVID-19 pandemic.
(5) The final elements of the Basel III framework published on 7 December 2017 impose, in case of securitisation exposures, a minimum credit rating requirement only upon a limited set of protection providers, namely to entities that are not sovereign entities, public sector entities, institutions or other prudentially regulated financial institutions. It is therefore necessary to amend Article 249(3) of Regulation (EU) No 575/2013 to align it with the Basel III framework in order to enhance the effectiveness of national public guarantee schemes in assisting institutions’ strategies to securitise non-performing exposures (NPEs) in the aftermath of the COVID-19 pandemic. In order to be consistent with the Basel III framework, an unregulated provider of unfunded credit protection is required to have credit quality step 2 at inception and credit quality step 3 thereafter.
(6) The current Union prudential framework for securitisation is designed on the basis of the most common features of typical securitisation transactions, i.e. performing loans. In its “Opinion on the Regulatory Treatment of Non-Performing Exposure Securitisations”[5] of 23 October 2019, the European Banking Authority (EBA) pointed out that the current prudential framework for securitisation set out in Regulation (EU) No 575/2013, when applied to securitisations of NPEs, leads to disproportionate capital requirements because the securitisation Internal Ratings Based Approach (SEC-IRBA) and the securitisation Standardised Approach (SEC-SA), is not consistent with the specific risk drivers of NPEs. A specific treatment for the securitisation of NPEs should therefore be introduced building on the EBA Opinion and taking due account of the Union specificities of the NPE securitisation market and the market for NPEs as well as of the developments in the international standards for exposures to NPE securitisations. To allow for the due assessment of the relevant Basel standard once it is published, the Commission should be mandated to review the prudential treatment of NPE securitisations.
(6a) Since the market for NPEs is very likely to grow and change quite substantially as a result of the COVID-19 crisis, it is deemed appropriate to continue monitoring closely the NPE securitisation market and to reassess the framework in the light of a potentially larger pool of data. Therefore, a mandate should be included in Article 519aa for the EBA to monitor the NPE securitisation market and to submit a report to the European Parliament and the Commission on the convenience of reviewing the regulatory capital treatment of NPE securitisations, having regard to the state of the NPE securitisation market, in particular, and the market for NPEs, in general, following the COVID-19 crisis.
(7) As pointed out by the EBA in its “Report on STS framework for synthetic securitisation” of 6 May 2020, it is necessary to introduce a specific framework for simple, transparent and standardised (STS) on-balance sheet securitisation. Given the lower agency risk and modelling risk of a STS on-balance-sheet securitisation compared with a non-STS on-balance-sheet synthetic securitisation, a fitting risk-sensitive calibration for STS on-balance-sheet securitisations as recommended by the EBA in its report building on the current preferential regulatory treatment of senior tranches of SME portfolios should be introduced. The greater recourse to the STS on-balance-sheet securitisation promoted by the more risk sensitive treatment of the senior tranche of such securitisations will free up regulatory capital and ultimately further expand the lending capacity of institutions in a prudentially sound manner. Also, a grandfathering rule should be applied to outstanding senior positions in synthetic on-balance sheet securitisations to which originator institutions have applied the current Article 270 before the entry into force of this Regulation.
(7a) In the context of the economic recovery from the COVID-19 crisis and for the purpose of preserving financial stability, it is essential that end-users can effectively hedge their risks to protect the robustness of their balance-sheets. The Final Report of the High-Level Forum on the Capital Markets Union noted that an overly conservative Standardised Approach for Counterparty Credit Risk (SA-CCR) might have a detrimental impact on the availability and cost of financial hedges to end-users. In that regard, the Commission should review by ...[ 30 June 2021] the application of the SA-CCR approach while taking due account of the specificities of the European banking sector and economy, the international level-playing-field and any developments in international standards and fora.
(7b) In close cooperation with the European Systemtic Risk Board (ESRB), the Commission should, as part of the upcoming implementation of the Basel III framework, produce a report by ...[31 December 2021] to duly assess the preferential regulatory treatment of exposures in the form of units or shares in Collective Investment Undertakings (CIUs) with an underlying portfolio consisting of sovereign bonds of euro area Member States, whose relative weight for each Member State’s bonds equals the relative weight of each Member State’s capital contribution to the European Central Bank (ECB) taking into account the European Parliament's position on the Sovereign Bond-backed Securities Regulation adopted on 23 March 2019.
▌
(9) Since the objectives of this Regulation, namely to maximise the capacity of institutions to lend and to absorb losses related to the COVID-19 pandemic, while still ensuring their continued resilience, cannot be sufficiently achieved by the Member States but can rather, by reason of their scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.
(10) Regulation (EU) No 575/2013 should therefore be amended accordingly,
HAVE ADOPTED THIS REGULATION:
Article 1
Amendments to Regulation (EU) No 575/2013
Regulation (EU) No 575/2013 is amended as follows:
(-1) in Article 242, the following point is inserted:
“(19a) ‘synthetic excess spread’ means a synthetic excess spread as defined in point (28) of Article 2 of Regulation (EU) 2017/2402.”;
(-1a) Article 248 is amended as follows:
(a) in paragraph 1, the following point is added:
"(da) The exposure value of a synthetic excess spread shall include, as applicable, the following:
(i) any income from the securitised exposures already recognised by the originator institution in its income statement under the applicable accounting framework that the originator institution has contractually designated to the transaction as synthetic excess spread;
(ii) any synthetic excess spread contractually designated by the originator institution in any previous periods that is still available to absorb losses;
(iii) any synthetic excess spread contractually designated by the originator for the current period that is still available to absorb losses;
(iv) any synthetic excess spread contractually designated by the originator for future periods.
For the purposes of the first subparagraph, any amount that is provided as collateral or credit enhancement in relation to the synthetic securitisation and that is already subject to an own funds requirement in accordance with the provisions of this Chapter shall not be included in the exposure value."
(b) the following paragraph is added:
"3a. EBA shall develop draft regulatory technical standards to specify how originator institutions shall determine the exposure value referred to in point (da) of paragraph 1.
EBA shall submit those draft regulatory technical standards to the Commission by ... [six months after the date of entry into force of this amending Regulation].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010."
(1) in Article 249(3), the first subparagraph is replaced by the following:
“By way of derogation from paragraph 2 of this Article, the eligible providers of unfunded credit protection listed in point (g) of Article 201(1) shall have been assigned a credit assessment by a recognised ECAI which is credit quality step 2 or above at the time the credit protection was first recognised and credit quality step 3 or above thereafter.”;
(1a) in Article 256, the following paragraph is added:
"5a. For the purposes of calculating the attachment points (A) and detachment points (D) of a synthetic securitisation, the originator institution of the securitisation shall treat the exposure value of the securitisation position corresponding to synthetic excess spread referred to in point (da) of Article 248 as a tranche, and adjust the attachment points (A) and detachment points (D) of the other tranches it retains by adding that exposure value to the outstanding balance of the pool of underlying exposures in the securitisation. Institutions other than the originator institution shall not make this adjustment."
(2) the following Article is inserted:
“Article 269a
Treatment of non-performing exposures (NPE) securitisations
1. The risk weight for a position in an NPE securitisation shall be calculated in accordance with Article 254, subject to a floor of 100%.
2. By way of derogation from paragraph 1, institutions shall assign the following risk weights to the senior tranche of a qualifying traditional NPE securitisation subject to a 50 % risk-weight floor and a 100 % risk-weight ceiling:
(a) where the SEC-IRBA or the SEC-SA must be used in accordance with Article 254, the risk weight that results from Article 259 or Article 261, respectively;
(b) where the SEC-ERBA must be used in accordance with Article 254, the risk weight that results from Article 263.
3. Institutions that pursuant to Chapter 3 of this Title are not permitted to use own estimates of LGD and conversion factors with respect to the exposures of the pool shall not be permitted to use the SEC-IRBA for the calculation of risk weighted exposures amounts for a position in an NPE securitisation.
4. For the purpose of Article 268(1), expected losses associated with positions in a qualifying traditional NPE securitisation shall be included after deduction of the non-refundable purchase price discount ▌ and, where applicable, any additional specific credit risk adjustments.
4a. For the purposes of Article 267, where the institution uses the IRB approach, expected losses and exposure values associated with positions in a qualifying traditional NPE securitisation shall be included after deduction of the non‑refundable purchase price discount.
5. For the purposes of this Article, the non‑refundable purchase price discount shall be calculated as the difference between the amount in point (a) and the amount in point (b):
(a) the outstanding amount of the underlying exposures of the NPE securitisation;
(b) the sum of the sale price of the tranches or, where applicable, parts of tranches of the NPE securitisation sold to third party investors, and the outstanding value of the tranches or, where applicable, parts of tranches of that securitisation retained by the originator.
Where a discount is structured in such a way that it can be refunded in whole or in part to the originator, such discount shall be treated as refundable and shall not count as a non‑refundable purchase price discount for the purposes of this Article.
5a. For the purposes of this Article:
(a) ‘NPE securitisation’ means an NPE securitisation as defined in point (24) of Article 2 of Regulation (EU) 2017/2402;
(b) ‘qualifying traditional NPE securitisation’ means a traditional NPE securitisation where the underlying exposures have been transferred to the SSPE with a non‑refundable purchase price discount of at least 50 % on the outstanding balance of those exposures.”;
(3) Article 270 is replaced by the following:
“Article 270
Senior positions in STS on-balance-sheet securitisation
An originator institution may calculate the risk-weighted exposure amounts in respect of a securitisation position of an STS on-balance-sheet securitisation as referred to in Article 26a(1) of Regulation (EU) 2017/2402 in accordance with Articles 260, 262 or 264 of this Regulation, as applicable, where both of the following conditions are met in respect of that position:
(a) the securitisation meets the requirements set out in Article 243(2);
(b) the position qualifies as the senior securitisation position;
(ba) the credit risk associated with the positions not retained by the originator institution is transferred through a guarantee or a counter-guarantee meeting the requirements for unfunded credit protection set out in Chapter 4 for the Standardised Approach to credit risk.”;
(3a) in Article 430, the following paragraph is inserted:
“1a. For the purposes of point (a) of paragraph 1, when institutions report on own funds requirements on securitisations, the information they report shall also include the exposure value of NPE securitisations benefitting from the treatment set out in Article 269a, the exposure value of synthetic securitisations they originate, and the breakdown of the assets underlying those synthetic securitisations by asset class.”
▌
(4a) the following Article is inserted:
“Article 494ba
Grandfathering for securitisation positions
By way of derogation from Article 270, an originator institution may calculate the risk-weighted exposure amounts of a securitisation in accordance with Articles 260, 262 or 264 where both of the following conditions are met:
(a) the securitisation was issued before ...[date of entry into force of this amending Regulation];
(b) the securitisation met, on ...[day before date of entry into force of this amending Regulation], the conditions laid down in Article 270 as applicable at that date.”
(4b) in Article 501c the introductory part is replaced by the following:
“EBA, after consulting the ESRB, shall assess, on the basis of available data and the findings of the Commission High-Level Expert Group on Sustainable Finance, whether a dedicated prudential treatment of exposures related to assets, including securitisations, or activities associated substantially with environmental and/or social objectives would be justified. In particular, EBA shall assess:”
(4c) in Article 519a the following point is added:
“(da) how environmental sustainability criteria could be integrated in the securitisation framework, including for exposures to NPE securitisations.”
(4d) the following Article is inserted:
“Article 519aa
NPE securitisations
1. By ... [31 December 2020], the Commission shall review the prudential treatment of NPE securitisations pursuant to Article 269a to take account of developments in the international standards for exposures to NPE securitisation and shall submit a legislative proposal, where appropriate, to the European Parliament and the Council.
2. EBA shall monitor the application of Article 269a and shall evaluate the regulatory capital treatment of NPE securitisations having regard to the state of the NPE securitisation market, in particular, and the market for NPEs, in general, and submit a report on its findings to the Commission by ... [12 months after the date of entry into force of this amending Regulation].
The Commission shall, on the basis of the EBA report, submit a report to the European Parliament and the Council on the application of Article 269a together with a legislative proposal, where appropriate, by ... [18 months after the date of entry into force of this amending Regulation].”
(4e) the following Article is inserted:
“Article 519ba
CIUs with an underlying portfolio of euro area sovereign bonds
In close cooperation with the ESRB, the Commission shall, as part of the upcoming implementation of the Basel III framework, produce a report by ... [31 December 2021] to duly assess a preferential regulatory treatment of exposures in the form of units or shares in Collective Investment Undertakings (CIUs) with an underlying portfolio consisting of sovereign bonds of euro area Member States, whose relative weights for each Member States’ bonds equals the relative weight of each Member States’ capital contribution to the ECB taking into account the European Parliament's position on the Sovereign Bond-backed Securities Regulation adopted on 23 March 2019.”
Article 2
Entry into force
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Done at …,
For the European Parliament For the Council
The President The President
PROCEDURE – COMMITTEE RESPONSIBLE
Title |
Amending Regulation (EU) No 575/2013 as regards adjustments to the securitisation framework to support the economic recovery in response to the COVID-19 pandemic |
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References |
COM(2020)0283 – C9-0208/2020 – 2020/0156(COD) |
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Date submitted to Parliament |
27.7.2020 |
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Committee responsible Date announced in plenary |
ECON 14.9.2020 |
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Rapporteurs Date appointed |
Othmar Karas 7.9.2020 |
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Date adopted |
10.11.2020 |
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Result of final vote |
+: –: 0: |
36 23 0 |
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Members present for the final vote |
Gunnar Beck, Marek Belka, Isabel Benjumea Benjumea, Stefan Berger, Gilles Boyer, Francesca Donato, Derk Jan Eppink, Engin Eroglu, Markus Ferber, Jonás Fernández, Frances Fitzgerald, José Manuel García-Margallo y Marfil, Luis Garicano, Sven Giegold, Valentino Grant, Claude Gruffat, José Gusmão, Enikő Győri, Eero Heinäluoma, Danuta Maria Hübner, Stasys Jakeliūnas, Othmar Karas, Billy Kelleher, Ondřej Kovařík, Georgios Kyrtsos, Aurore Lalucq, Philippe Lamberts, Aušra Maldeikienė, Pedro Marques, Costas Mavrides, Jörg Meuthen, Csaba Molnár, Siegfried Mureşan, Caroline Nagtegaal, Luděk Niedermayer, Lefteris Nikolaou-Alavanos, Piernicola Pedicini, Lídia Pereira, Kira Marie Peter-Hansen, Sirpa Pietikäinen, Dragoș Pîslaru, Evelyn Regner, Antonio Maria Rinaldi, Alfred Sant, Ralf Seekatz, Pedro Silva Pereira, Paul Tang, Cristian Terheş, Irene Tinagli, Ernest Urtasun, Inese Vaidere, Johan Van Overtveldt, Stéphanie Yon-Courtin, Marco Zanni, Roberts Zīle |
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Substitutes present for the final vote |
Gerolf Annemans, Chris MacManus, Mick Wallace |
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Substitutes under Rule 209(7) present for the final vote |
Dietmar Köster |
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Date tabled |
10.11.2020 |
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FINAL VOTE BY ROLL CALL IN COMMITTEE RESPONSIBLE
36 |
+ |
PPE |
Isabel Benjumea Benjumea, Stefan Berger, Markus Ferber, Frances Fitzgerald, José Manuel García‑Margallo y Marfil, Enikő Győri, Danuta Maria Hübner, Othmar Karas, Georgios Kyrtsos, Aušra Maldeikienė, Siegfried Mureşan, Luděk Niedermayer, Lídia Pereira, Sirpa Pietikäinen, Ralf Seekatz, Inese Vaidere |
Renew |
Gilles Boyer, Engin Eroglu, Luis Garicano, Billy Kelleher, Ondřej Kovařík, Caroline Nagtegaal, Dragoș Pîslaru, Stéphanie Yon‑Courtin |
S&D |
Marek Belka, Jonás Fernández, Eero Heinäluoma, Dietmar Köster, Pedro Marques, Costas Mavrides, Csaba Molnár, Evelyn Regner, Alfred Sant, Pedro Silva Pereira, Paul Tang, Irene Tinagli |
23 |
- |
ECR |
Derk Jan Eppink, Cristian Terheş, Johan Van Overtveldt, Roberts Zīle |
GUE/NGL |
José Gusmão, Chris MacManus, Mick Wallace |
ID |
Gerolf Annemans, Gunnar Beck, Francesca Donato, Valentino Grant, Jörg Meuthen, Antonio Maria Rinaldi, Marco Zanni |
NI |
Lefteris Nikolaou‑Alavanos, Piernicola Pedicini |
S&D |
Aurore Lalucq |
Verts/ALE |
Sven Giegold, Claude Gruffat, Stasys Jakeliūnas, Philippe Lamberts, Kira Marie Peter‑Hansen, Ernest Urtasun |
0 |
0 |
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Key to symbols:
+ : in favour
- : against
0 : abstention
- [1] OJ C … / Not yet published in the Official Journal.
- [2] OJ C … / Not yet published in the Official Journal.
- [*] Amendments: new or amended text is highlighted in bold italics; deletions are indicated by the symbol ▌.
- [3] Not yet published in the Official Journal.
- [4] Not yet published in the Official Journal.
- [5] https://eba.europa.eu/risk-analysis-and-data/npls