EBA · 2019_4786 Final Q&A

Treatment of securitisation Class A notes guaranteed by a Member State

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
416
Topic
Liquidity risk
Submitted by
Credit institution
Submitted
2019-06-18
Answered
2020-11-20
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Pursuant to specific national decree, an originator of NPLs under a securitisation transaction complying with certain requirements may request the government to guarantee the payments of interest and principal on the senior tranche of asset-backed securities. Where senior noteholders of a securitisation benefit from this unconditional, irrevocable and first-demand guarantee from a Member State, what is the expected treatment in the LCR for securitisation notes with respect to Articles 10 and 13? Do we have to consider that article 13 prevails to any other article when qualifying the eligibility for a securitisation?

Background

Securitisations are not assumed to be part of assets that are not eligible for LCR following general requirements laid down in Article 7(4) as for assets issued by a credit institutions which shall respect specific conditions. Moreover, Article 10(1)(c)(i) of  the Delegated Regulation (EU) 2015/61 offers the opportunity to consider “Assets […] guaranteed by […] the central government of a Member State” as level 1 assets. Guaranteed assets are not referring to any kind of specific assets. Nonetheless, a specific section through the Article 13 is dedicated to securitisations’ eligibility.

Answer

NPL securitisations explicitly guaranteed by the central government of a Member State can qualify as level 1 liquid assets in the LCR in accordance with Article 10(1)(c)(i) of Delegated Regulation (EU) 2015/61 (LCR DA) subject to compliance with the general and operational requirements as envisaged in Articles 7 and 8 where applicable on exposures guaranteed by the central government of a Member State. For example, securitisations issued by a credit institution or by a securitisation special purpose entity with which the credit institution has close links are not HQLA eligible, following paragraphs 3 and 4 of Article 7 of the LCR DA.

Original source: European Banking Authority, Q&A ID 2019_4786

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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