What changed between the draft committee report and the plenary report

Added:(5) To provide for more risk sensitivity in the securitisation framework, while maintaining a prudent regulatory treatment, it is necessary to adjust, under the SEC-IRBA approach, the formula for the (p) factor to reduce the floor and to reduce the scaling factor, and to introduce a cap to the (p) factor▌. For the same reason, under the SEC-SA approach, it is necessary to reduce the (p) factor for senior securitisation positions. Changes to the (p) factor for non-senior securitisation positions should not occur▌ to prevent undercapitalisation of these positions. Changes to the (p) factor for positions of investors in non-STS securitisations ▌should be minimal as those positions do not feature reduced agency and model risks.

Removed:Regulation (EU) No 575/2013

Added:(6) Senior securitisation positions are resilient if the securitisation satisfies a set of eligibility criteria at the origination date▌. This set of eligibility criteria ensures the protection of the senior securitisation position and mitigates agency and model risks. Such resilient securitisation positions should benefit from additional reductions to the risk weight floors and to the (p) factor, compared with positions that do not satisfy the eligibility criteria.▌

Removed:Article 1 – paragraph 1 – point 3 – point c, Article 243 – paragraph 3 – point f – introductory part: (f) at the origination date, the attachment point of the senior securitisation position is determined as follows:

Added:(7) Because of the changes to the risk weight floor for senior securitisation positions and to the (p) factor under the SEC-IRBA and SEC-SA approaches, the risk weights in the look-up tables under SEC-ERBA should be recalibrated accordingly.

Removed:The classification should be made at the time of structuring or at the beginning of the transaction's term. A continuous reassessment during the life of the transaction could lead to significant volatility in the capital requirements of the senior tranche, thereby substantially reducing the incentive to make use of this category.

Added:(8) Changes to the framework for significant risk transfer (SRT) should be introduced to address limitations identified in that framework in relation to the current mechanical tests measuring the significance of the risk transferred through securitisation, specific structural features of securitisation transactions that may be detrimental to complying with the SRT requirements, and processes applied by competent authorities to assess SRT, and to make that framework more consistent and predictable. The predictability of the SRT supervisory assessments should be increased by laying down the main elements of the SRT assessment in Regulation (EU) No 575/2013, including the broad design of the new SRT test. The way in which the technical details of the test should be implemented, the requirements for the structural features of the transactions, and the principles of the assessment process should all be specified in regulatory technical standards developed by the European Banking Authority (EBA).

Removed:Regulation (EU) No 575/2013

Added:(9) A new principle-based approach test should be introduced to replace the existing mechanical tests, to measure the significance of the risk transferred through securitisation. Competent authorities should in individual cases be able to increase the minimum amount of transferred unexpected losses under the principal-based approach (PBA). Given its very limited use, the current permission-based approach, where the SRT is achieved through a permission granted by the competent authority, should be removed and should no longer be allowed. To further streamline the SRT assessment, and to increase transparency and predictability for originators, a new requirement should be introduced for originators to submit a self-assessment to demonstrate that the requirements related to the SRT are met, including in stress conditions. As part of the self-assessment, originators should develop a cash-flow model analysis to provide evidence on the resilience of the SRT.

Removed:Article 1 – paragraph 1 – point 3 – point c, Article 243 – paragraph 3 – point f – indent 1: A >= 1.1 * KA, when using SEC-SA, or

Added:(10) To increase the efficiency of the SRT supervisory assessments, the principles of SRT supervisory assessments should be harmonised at Union level. EBA should specify such principles in the regulatory technical standards, which should also include high-level principles for a fast-track process for qualifying securitisations.

Removed:The proposed 1.5 * K(A) threshold for senior tranche resilience is overly conservative and may prevent high-quality synthetic securitisations from qualifying.

Added:(11) Targeted amendments should be introduced in specific provisions of Regulation (EU) No 575/2013 to improve technical consistency and provide further clarifications on the rationale underlying certain provisions of the current framework. To ensure the consistent interpretation of Article 254(2) by the competent authorities and credit institutions across the Union, it should also be specified that that Article is aimed at avoiding the mandatory use of SEC-ERBA in relation to transactions for which the rating is capped due to the sovereign ceiling – and not the risk profile of the transactions – is the prevalent driver in determining the risk weights under that approach.

Removed:Regulation (EU) No 575/2013

Added:(11a) To ensure a smooth transition for existing market participants, securitisations that were issued before the date of application of this Regulation should continue to be governed by the rules in force at the time of their inception. However, to allow for flexibility and to avoid a fragmented prudential treatment, institutions should be granted the option to voluntarily apply the new framework to these outstanding transactions if they deem it beneficial.

Removed:Article 1 – paragraph 1 – point 3 – point c, Article 243 – paragraph 4 – introductory part: 4. A senior securitisation position in a non-STS securitisation shall be eligible for the treatment set out in Article 259(1b) and Article 261(1b), where the securitisation is a traditional securitisation, including ABCP positions, or a synthetic securitisation fulfilling the following requirements at the origination date:

Added:(11b) Public financing through the issuance of government bonds denominated in the domestic currency of another Member State has been necessary to support public measures to fight the consequences of the severe, double economic shock caused by the COVID-19 pandemic and Russia’s war of aggression against Ukraine. These consequences are still perceptible and adequate public financing may remain necessary. The concerned Member States should also have sufficient time to regularise the level of public financing that has been necessary to address these exceptional situations. Therefore, to avoid unnecessary constraints on institutions investing in such bonds, it is appropriate to prolong the transitional arrangements for exposures to central governments and central banks of non-euro Member States, where those exposures are denominated and funded in euro, with respect to the treatment of such exposures under the credit risk framework and under the large exposure limits.

Change 2

Changed:(12) Regulation (EU) No 575/2013 should therefore be amended accordingly.

Change 3

Removed:Article 1 – paragraph 1 – point 3 – point c, Article 243 – paragraph 4 – point a – introductory part: deleted

Added:(13) Since the objective of this Regulation cannot be sufficiently achieved by the Member States and, by reason of its scale and effects, can 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 that objective.

Removed:Regulation (EU) No 575/2013

Added:(14) By 5 years after the entry into force, the Commission, after consulting EBA, should consider whether a more fundamental change to the risk weight formulae and functions should be introduced in the medium/long-term to make it possible, in a comprehensive manner, to allow for more risk sensitivity, to achieve more proportionate levels of capital non-neutrality, to mitigate cliff effects, and to address the structural limitations of the current framework,

Removed:Article 1 – paragraph 1 – point 3 – point c, Article 243 – paragraph 4 – point a – point 3 – indent 1: A >= 1.1 * KA, when using SEC-SA, or

Added:HAVE ADOPTED THIS REGULATION:

Change 4

Changed:Regulation (EU) No 575/2013 is amended as follows:

Change 5

Removed:Article 1 – paragraph 1 – point 3 – point c, Article 243 – paragraph 4 – point a – point 5: deleted

Added:(1) in Article 238(2), the following subparagraph is added:

Removed:Regulation (EU) No 575/2013

Added:‘A positive incentive shall be considered to be present in time call options only when contractual clauses at origination include terms in respect of which it can be expected that such terms have been included in the transaction documentation to increase the advantageousness of exercising the time call option.’;

Removed:Article 1 – paragraph 1 – point 3 – point c, Article 243 – paragraph 4 – point b: deleted / (deleted) / (deleted) / (deleted) / (deleted) / (deleted) / (deleted)

Added:(2) Article 242 is amended as follows:

Removed:Regulation (EU) No 575/2013

Added:▌

Removed:Article 1 – paragraph 1 – point 3 – point c, Article 243 – paragraph 4 – point c: deleted / (deleted) / (deleted) / (deleted) / (deleted) / (deleted)

Added:(b) point (18) is deleted;

Removed:Regulation (EU) No 575/2013

Added:(3) Article 243 is amended as follows:

Removed:Article 1 – paragraph 1 – point 4, Article 244 – paragraph 7 – subparagraph 1 a (new): The objective of those regulatory technical standards shall be to enhance clarity and predictability in the assessment of significant credit risk transfer, while maintaining proportionality and operational efficiency for supervised entities. When developing those draft regulatory technical standards, EBA shall ensure that, in all cases, those standards do not result in a material increase in the supervisory burden for credit institutions.

Added:(a) the title of the Article is replaced by the following:

Removed:The significant risk transfer (SRT) test should streamline and clarify the process without increasing supervisory burden, avoiding additional complexity or uncertainty.

Added:‘Article 243

Removed:Regulation (EU) No 575/2013

Added:Criteria for differentiated capital treatment’;

Removed:Article 1 – paragraph 1 – point 9 – point b, Article 259 – paragraph 1 – subparagraph 4 – indent 1: p = min (0.5, max [0.25; 0.7 *(A + B*(1/N) + C*KIRB + D*LGD + E*MT)]) for a senior securitisation position, or

Added:(b) in paragraph 2, point (b) is amended as follows:

Removed:Regulation (EU) No 575/2013

Added:(1) point (ii) is replaced by the following:

Removed:Article 1 – paragraph 1 – point 9 – point c, Article 259 – paragraph 1a – introductory part: 1a. The risk-weighted exposure amount for a synthetic senior securitisation position calculated in accordance with paragraph 1 shall be subject to a floor calculated as follows:

Added:‘(ii) 60 % on an individual exposure basis where the exposure is a loan secured by a commercial mortgage;’;

Removed:Regulation (EU) No 575/2013

Added:(2) point (iii) is replaced by the following:

Removed:Article 1 – paragraph 1 – point 9 – point c, Article 259 – paragraph 1a – indent 1: Floor = min (15%; max (12%; 12% *KIRB*12.5))

Added:‘(iii) 130 % on an individual exposure basis where the exposure is a project finance exposure during the pre-operational phase;’;

Removed:The formula for the risk weight floor for the senior tranche should include a cap in order to ensure that targeted portfolios are not penalised relative to the current framework.

Added:(ba) in paragraph 2, the following subparagraph is added:

Removed:Regulation (EU) No 575/2013

Added:‘In the case of trade receivables, point (a) of the first subparagraph shall not apply where the credit risk of those trade receivables is fully covered by eligible credit protection in accordance with Chapter 4, provided that the protection provider is an institution, an investment firm, an insurance undertaking or a reinsurance undertaking.’;

Removed:Article 1 – paragraph 1 – point 9 – point c, Article 259 – paragraph 1b – introductory part: 1b. The risk-weighted exposure amount for a synthetic senior securitisation position calculated in accordance with paragraph 1 and compliant with the criteria referred to in Article 243(4), or for a traditional senior securitisation position, shall be subject to a floor calculated as follows:

Added:(c) the following paragraphs 3, 4 and 5 are added:

Removed:Regulation (EU) No 575/2013