The European Banking Authority has published its proposal for developing a simple, transparent and standardized (STS) framework for synthetic securitization.
This proposal, which is limited to balance-sheet securitization, includes a list of criteria to be considered when labeling synthetic securitization as STS. Among the regulator’s proposed criteria are requirements on simplicity, standardization and transparency similar to those applied to traditional securitization.
The proposal also outlines the merits and demerits of a potential differentiated capital treatment for STS synthetic securitization.
Additional details are available here.
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