The European Banking Authority (EBA) published a Report which analyses the recent developments and challenges of introducing sustainability in the EU securitisation market. The EU sustainable market is still at an early stage of development and the application of sustainability requirements in securitisation appears to require further clarification. The Report examines how sustainability could be introduced in the specific context of securitisation to foster transparency and credibility in the EU sustainable securitisation market and to support its sound development.

EBA : Developing a Framework for Sustainable Securitisation

In particular, the Report explores the following aspects:

  • whether and how the EU regulations on sustainable finance, including the EU Green Bond Standard (EU GBS), the EU Taxonomy, and the Sustainable Finance Disclosure Regulations could be applied to securitisation;
  • the relevance of a dedicated regulatory framework for sustainable securitisation and;
  • the nature and content of sustainability-related disclosures for securitisation products.  

The EBA’s analysis shows that it would be premature to establish a dedicated framework for green securitisation. Rather, the EBA is of the view that the upcoming EU GBS regulation should also apply to securitisation, provided that some adjustments are made to the standard. In this regard, the EBA recommends that the EU GBS requirements apply at originator level (instead of at the issuer/ securitisation special purpose entity (SSPE) level). This would allow a securitisation that is not backed by a portfolio of green assets to meet the EU GBS requirements, provided that the originator commits to using all the proceeds from the green bond to generate new green assets.

The EBA sees the proposed adjustments as an intermediate step to allow the sustainable securitisation market to develop and to play a role in financing the transition towards a greener EU economy. They are also meant to ensure that securitisation is treated in a consistent manner as other types of asset-backed securities.

The EBA also recommends that the Securitisation Regulation is amended in order to extend voluntary ‘principal adverse impact disclosures’ to non-STS (simple, transparent and standardised) securitisations. It also calls for further EBA work on green synthetic securitisation and social securitisation.

The Report is available here.

EBA : Developing a Framework for Sustainable Securitisation

Source: EBA

This Report has been developed in accordance with Article 45a(1) of the Securitisation Regulation.  Based on the outcome of this Report, the European Commission should submit a report to the European Parliament and the Council on the creation of a sustainable securitisation framework, together with a legislative proposal, if deemed appropriate.

EBA : Developing a Framework for Sustainable Securitisation