Regulation 2017/2402, securitizations & Solvency II

The EU Regulation 2017/2402 (also referred to as the “STS Regulation”), applied as of 1 January 2019, identifies a set of qualifying criteria for securitization transactions to obtain the STS label. However, once qualified as a STS securitization, there are consequences regarding the applicable capital requirements under a Solvency II framework.

In addition, the risk-based Solvency II capital requirements have been impacted and recalibrated. The Delegated Regulation 2018/1221 of 1 June 2018 amended the Delegated Regulation 2015/35 in regards to the calculation of regulatory capital requirements for simple, transparent and standardized (STS) and non-STS securitizations held by insurance and reinsurance undertakings.
The full regulatory text is available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018R1221&from=EN.

In this context, securitization positions will fall under three major categories that should determine the related regulatory capital treatment:

• Senior STS securitization positions
  • for which a credit assessment by designated ECAI is available
  • for which no credit assessment by designated ECAI is available 
• Non-Senior STS securitization positions
  • for which a credit assessment by designated ECAI is available
  • for which no credit assessment by designated ECAI is available
• Other securitizations not qualifying as STS positions

In order to obtain an STS designation, the given position needs to abide by the general rules of the STS Regulation 2017/2402 (and thus its given transparency, risk retention and due diligence requirements). It must also obtain STS recognition through direct notification to their regulator and ESMA in accordance with a prescribed template. ESMA will insert the STS notification on a dedicated register* accessible at the following link: https://www.esma.europa.eu/policy-activities/securitisation/simple-transparent-and-standardised-sts-securitisation.

(*) For the time being, due to the novelty of this requirement, the register is still empty, but shall be populated in due course.

Please also ascertain the seniority of your securitization position by retrieving this prospectus related information through direct consultation of the prospectus and/or issue-related documentation, or by asking your custodian as the case may be.