After five months of intense negotiations, the Maltese EU Council presidency team, co-chaired by GANADO Advocates lawyer Nicholas Curmi, has concluded a successful deal with the European Parliament on the new STS/CRR legislative package that sets out criteria for ‘simple, transparent and standardised’ securitised products.
The agreement, reached on May 30th, marks a significant legislative development intended to kick-start a stagnant European securitisation market by broadening investment opportunities for institutional investors and creating additional sources of finance for SMEs and start-ups. Following the technical finalisation of text (expected during June), both Council and Parliament will be respectively called upon to approve and adopt the agreement.
The new regulatory framework agreed upon promotes a risk-sensitive, transparent and prudential treatment of STS securitisations, whilst ensuring an appropriate capital treatment of securitisation instruments. As recommended by the European Banking Authority and the European Commission, the agreement contains an obligation for originators of securitised assets to retain a minimum of 5% of the risk of the securitised portfolio, which remains in line with existing European and global ‘skin in the game’ standards.
In a statement issued late on Tuesday night, the European Commission welcomed this agreement as an essential step towards a fully functioning Capital Markets Union by the end of 2019.