(5)is to minimise legal risks related to unperfected transfers in the context of an assignment of the underlying exposures, by specifying a minimum set of events subsequent to closing that should trigger the perfection of the transfer of the underlying exposures. 8 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION

(6), which requires the seller to provide the representations and warranties confirming to the seller’s best knowledge that the transferred exposures are neither encumbered nor otherwise in a condition that could potentially adversely affect the enforceability of the transfer of title, is to ensure that the underlying exposures are beyond the reach not only of the seller, but equally of its creditors, and to allocate the commercial risk of the encumbrance of the underlying exposures to the seller. To facilitate consistent interpretation of these criteria, the following aspects should be clarified: (a) how to substantiate the confidence of third parties with respect to compliance with Article 20

(1): it is understood that this should be achieved by providing a legal opinion. While the guidance does not explicitly require the provision of a legal opinion in all cases, the guidance expects a legal opinion to be provided as a general rule, and omission to be an exception; (b) the triggers to effect the perfection of the transfer if assignments are perfected at a later stage than at the closing of the transaction. Eligibility criteria for the underlying exposures, active portfolio management (Article 24

(7)) The objective of this criterion in Article 24

(7)is to ensure that the selection and transfer of the underlying exposures in the ABCP transaction is done in a manner which facilitates in a clear and consistent fashion the identification of which exposures are selected for/transferred into the ABCP transaction, and enable the investors to assess the credit risk of the asset pool prior to their investment decisions. Consistently with this objective, the active portfolio management of the underlying exposures in the ABCP transaction should be prohibited, given that it adds a layer of complexity and increases the agency risk arising in the ABCP transaction by making the ABCP transaction’s performance dependent on both the performance of the underlying exposures and the performance of the management of the transaction. The payments of STS ABCP transactions should depend exclusively on the performance of the underlying exposures. Revolving periods and other structural mechanisms resulting in the inclusion of exposures into the ABCP transaction after the closing of the transaction may introduce the risk that exposures of lesser quality can be transferred into the pool. For this reason it should be ensured that any exposure transferred into the ABCP transaction after the closing meets the eligibility criteria, which are no less strict than those used to structure the initial pool of exposures of the ABCP transaction. To facilitate consistent interpretation of this criterion, the following aspects should be clarified: (a) the purpose of the requirement on the portfolio management, and the provision of examples of techniques which should not be regarded as active portfolio management: this criterion should be considered without prejudice to the existing 9 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION requirements with respect to the similarity of the underwriting standards in the Delegated Regulation further specifying which underlying exposures are deemed to be homogeneous in accordance with Articles 20

(8)and 24

(15)of Regulation (EU) 2017/2402, which requires that all the underlying exposures in a securitisation be underwritten according to similar underwriting standards; (

1. b)interpretation of the term ‘clear’ eligibility criteria; (
2. c)clarification with respect to the eligibility criteria that need to be met with respect to the exposures transferred to the SSPE after the closing. No resecuritisation at ABCP transaction level (Article 24

(8)) The objective of this criterion is to prohibit that STS ABCP transactions may qualify as a resecuritisation. This is a lesson learnt from the financial crisis, when resecuritisations were structured into highly leveraged structures in which notes of lower credit quality could be repackaged and credit enhanced, resulting in transactions whereby small changes in the credit performance of the underlying assets had severe impacts on the credit quality of the resecuritisation bonds. The modelling of the credit risk arising in these bonds proved very difficult, also due to high levels of correlations arising in the resulting structures. To facilitate consistent interpretationconsistent interpretation of this criterion, a specific clarification should be provided for ABCP transactions where the tranching (always required for a securitisation according to Article 2

(1)) within the ABCP transaction (which is always a securitisation according to Article 2

(8)) is achieved by the purchase of a senior note, consistently with the examples of transactions provided in recital 16 of Regulation (EU) 2017/2402. It is understood that, in such a case, issuance of junior and senior notes together with the purchase of the single senior note by the purchasing entity of the ABCP programme constitutes the ABCP transaction within the ABCP programme. No exposures in default and to credit-impaired debtors/guarantors (Article 24

(9))

(9)is to ensure that STS ABCP transactions are not characterised by underlying exposures whose credit risk has already been affected by certain negative events such as disputes with credit-impaired debtors or guarantors, debt- restructuring processes or default events as identified by the EU prudential regulation. Risk analysis and due diligence assessments by investors become more complex whenever the ABCP transaction includes exposures subject to certain ongoing negative credit risk developments. For the same reasons, STS ABCP transactions should not include underlying exposures to credit impaired debtors or guarantors that have an adverse credit history. In addition, significant risk of default normally rises as rating grades or other scores are assigned that indicate highly speculative credit quality and high likelihood of default, i.e. the possibility that the debtor or guarantor is not able to meet its obligations becomes a real possibility. Such exposures to credit-impaired debtors or guarantors should therefore also not be eligible for STS purposes. 10 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION To facilitate consistent interpretationconsistent interpretation of this criterion, the following aspects should be further clarified: (a) interpretation of the term ‘exposures in default’: given the differences in interpretation of the term ‘default’, the interpretation of this criterion should refer to additional guidance on this term provided in the existing delegated regulations and guidelines developed by the EBA, while taking into account the limitation of the scope of application of that additional guidance to institutions. (b) interpretation of the term ‘exposures to a credit-impaired debtor or guarantor’: the interpretation should also take into account the interpretation provided in Recital 26 of Regulation (EU) 2017/2402, according to which the circumstances specified in points (a) to (c) of Article 24

(9)of that Regulation are understood as specific situations of credit-impairedness to which exposures in an STS ABCP transaction may not be exposed. Consequently, other possible circumstances of credit-impairedness that are not captured in points (

1. a)to (
2. c)should be outside the scope of this requirement. Moreover, taking into account the role of the guarantor as a risk bearer, it should be clarified that the requirement to exclude ‘exposures to a credit-impaired debtor or guarantor’ is not meant to exclude (
3. i)exposures to a credit-impaired debtor when it has a guarantor that is not credit-impaired; or (
4. ii)exposures to a non-credit-impaired debtor when there is a credit-impaired guarantor. (
5. c)interpretation of the term ‘to the best knowledge of’: the interpretation should follow the wording of recital 26 of Regulation (EU) 2017/2402, according to which an originator or original lender is not required to take all legally possible steps to determine the debtor’s credit status but is only required to take those steps that the originator/original lender usually takes within its activities in terms of origination, servicing, risk management and use of information that is received from third parties. This should not require the originator or original lender to check publicly available information to check entries in at least one credit registry, where an originator or original lender does not conduct such checks within its regular activities in terms of origination, servicing, risk management and use of information received from third parties, but rather relies, for example, on other information that may include credit assessments provided by third parties. Such clarification is important because corporates that are not subject to EU financial sector regulation and that are acting as sellers with respect to STS ABCP transactions may not always check entries in credit registries and in line with the best knowledge standard should not be obliged to perform additional checks at origination of any exposure exclusively for the purposes of later fulfilling this criterion in terms of any credit-impaired debtors or guarantors; (
6. d)interpretation of the criterion with respect to the debtors and guarantors found on the credit registry: it is important to interpret this requirement in a narrow sense to ensure that the existence of a debtor or guarantor on the credit registry of persons 11 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION with adverse credit history should not automatically exclude exposure to that debtor/guarantor, from compliance with this criterion. It is understood that this criterion should relate only to debtors and guarantors that are, at the time of origination of the exposure, considered as entities with adverse credit history. Existence on a credit registry at the time of origination of the exposure for reasons that can be reasonably ignored for the purposes of the credit risk assessment ( for example due to missed payments which have been resolved in the next two payment periods) should not be captured by this requirement. Therefore, this criterion should not automatically exclude from the STS framework exposures to all entities that are on the credit registries, taking into account that this would unintentionally exclude a significant number of entities given that different practices exist across EU jurisdictions with respect to entry requirements of such credit registries, and the fact that credit registries in some jurisdictions may contain both positive and negative information about the clients; (
7. e)interpretation of the term ‘significantly higher risk of contractually agreed payments not being made for comparable exposures’: the term should be interpreted with a similar meaning to the requirement aiming to prevent adverse selection of assets referred to in Article 6

(2)of Regulation (EU) 2017/2402Regulation (EU) 2017/2402, and further specified in Article 16

(2)of the Delegated Regulation specifying in greater detail the risk retention requirement in accordance with Article 6

(7)of Regulation (EU) 2017/2402Regulation (EU) 2017/2402 7, given that in both cases the requirement: (

1. i)aims to prevent adverse selection of underlying exposures; and (
2. ii)relates to the comparison of the credit quality of exposures transferred to the SSPE and comparable exposures that remain on the originator’s balance sheet. To facilitate the interpretation, a list is given of examples of how to achieve compliance with the requirement. At least one payment made (Article 24

(10)) STS ABCP transactions should minimise the extent to which investors are required to analyse and assess fraud and operational risk. At least one payment should therefore be made by each underlying borrower at the time of transfer, since this reduces the likelihood of the loan being subject to fraud or operational issues, unless in the case of revolving ABCP transactions, in which the distribution of securitised exposures is subject to constant changes because the ABCP transaction relates to exposures payable in a single instalment or with an initial legal maturity of an exposure of below one year. To facilitate consistent interpretation of this criterion, its scope the types of payments and the term ‘maturity’ referred to therein should be further clarified. 7 Final draft regulatory technical standards that specify in greater detail the risk retention requirement: https://www.eba.europa.eu/regulation-and-policy/securitisation-and-covered-bonds/rts-on-risk-retention 12 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION No predominant dependence on the sale of assets (Article 24

(11)) Dependence of the repayment of holders of the securitisation positions on the sale of assets securing the underlying exposures increases the liquidity risks, market risks and maturity transformation risks to which the ABCP transaction is exposed. It also makes the credit risk of the ABCP transaction more difficult for such parties to model and assess. The objective of this criterion is to ensure that the repayment of the principal balance of exposures at the contract maturity – and therefore repayment of the holders of the securitisation positions – is not intended to be predominantly reliant on the sale of assets securing the underlying exposures, unless the value of the assets is guaranteed or fully mitigated by a repurchase obligation. To facilitate consistent interpretation of this criterion, the following aspects should be further clarified: (

1. a)the term ‘predominant dependence’ on the sale of assets securing the underlying exposures should be further interpreted: (
2. i)when assessing whether the repayment of the holders of the securitisation positions is or is not predominantly dependent on the sale of assets, the following three aspects should be taken into account: (
3. i)the principle balance at contract maturity of underlying exposures that depend on the sale of assets securing those underlying exposures to repay the balance; (
4. ii)the distribution of maturities of such exposures across the life of the transaction, which aims to reduce the risk of correlated defaults due to idiosyncratic shocks; and (iii) the concentration limits to single obligors, which aims to promote sufficient distribution in the sale dates and other characteristics that may affect the sale of the underlying exposures. (
5. ii)no types of ABCP transactions should be excluded ex ante from compliance with this criterion and from STS ABCP transactions, as long as they meet all the requirements specified in the guidance. For example, this criterion does not aim to exclude leasing transactions from STS ABCP transactions, provided they comply with the guidance provided and all other applicable STS requirements. With respect to the exemption provided in the second subparagraph of Article 24

(11)of Regulation (EU) 2017/2402, it should be ensured that the entity providing the guarantee or the repurchase obligation of the assets securing the underlying exposures is not an empty-shell or insolvent entity, so that it has sufficient loss absorbency to exercise the guarantee of the repurchase of the assets. 13 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION Appropriate mitigation of interest-rate and currency risks at ABCP transaction level (Article 24

(12)) The objective of this criterion is to reduce any payment risk arising from different interest rate and currency profiles of assets and liabilities at the level of an ABCP transaction. Mitigating or hedging interest rate and currency risks arising in the transaction enhances the simplicity of the transaction since it helps parties directly exposed to the credit risk of an ABCP transaction to model those risks and their impact on the credit risk of the securitisation investment by. It should be clarified that hedging (through derivative instruments) is only one possible way of addressing the risks mentioned. Whichever measure is applied for the risk mitigation, it should however be subject to specific conditions, so that it can be considered to appropriately mitigate the risks mentioned. One of these conditions aims to prohibit that derivatives, that do not serve the purpose of hedging interest-rate or currency risk from being included in the pool of underlying exposures or entered into by the SSPE, given that derivatives add to the complexity of the ABCP transaction and of the risk and due diligence analysis to be carried out by the parties directly exposed to the credit risk of an ABCP transaction. Derivatives hedging interest-rate or currency risk enhance the simplicity of the transaction since hedged transactions do not require those parties to engage in the modelling of currency and interest rate risks. To facilitate consistent interpretation of this criterion, the following aspects should be clarified: (a) conditions that the measures should comply with so that they can be considered to appropriately mitigate the interest-rate and currency risks; (b) clarification with respect to the scope of derivatives that should and should not be captured by this criterion; (c) clarification of the term ‘common standards in international finance’. Remedies and actions related to delinquency and default of a debtor (Article 24

(13)) Parties directly exposed to the credit risk of an ABCP transaction should be in a position to know, when they receive the transaction documentation, what procedures and remedies are planned in the event that adverse credit events affect the underlying exposures of the ABCP transaction. Transparency of remedies and procedures, in this respect, allows those parties to model the credit risk of the underlying exposures with less uncertainty. In addition, clear, timely and transparent information on the characteristics of the waterfall determining the payment priorities is necessary for those parties to correctly price the securitisation position. 14 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION To facilitate consistent interpretation of this criterion, the following aspects should be further clarified: (a) the terms ‘in clear and consistent terms’ and ‘clearly specify’; (b) application of the requirement to report changes in the priorities of payments. Data on historical default and loss performance (Article 24

(14)) The objective is to provide potential investors with sufficient information on an asset class to conduct appropriate due diligence and to provide access to a sufficiently rich data set to enable a more accurate calculation of expected loss in different stress scenarios. This data is necessary for potential investors at ABCP transaction level to carry out proper risk analysis and due diligence, and they contribute to building confidence and reducing uncertainty regarding the market behaviour of the underlying asset class. New asset classes entering the securitisation market, for which a sufficient track record of performance has not yet been built up, may not be considered transparent in that they cannot ensure that potential investors at ABCP transaction level have appropriate tools and knowledge to carry out proper risk analysis. To facilitate consistent interpretation of this criterion, the following aspects should be further clarified: (a) its application to external data; (b) the term ‘substantially similar exposures’. Homogeneity, obligations of the underlying exposures, periodic payment streams, no transferable securities (Article 24

(15)) The criterion on homogeneity as specified in the first subparagraph of Article 24

(15)has been further clarified in the Delegated Regulation further specifying which underlying exposures are deemed to be homogeneous in accordance with Articles 20

(8)and 24

(15)of Regulation (EU) 2017/2402. The objective of the limits on the remaining weighted average life of the pool of underlying exposures and the residual maturity of individual exposures within that pool is to constrain the degree of maturity mismatches between the maturity of the underlying exposures and the securities issued by the ABCP programme – the latter predominantly having an original maturity of one year or less, pursuant to the definition of an ABCP programme provided in point

(7)of Article 2 of Regulation (EU) 2017/2402 and to thereby constrain the liquidity risks inherent in the ABCP programme and covered by the full support of the sponsor. The objective of the criterion specified in the second sentence in the fourth subparagraph of Article 24

(15)is to ensure that the underlying exposures contain valid and binding obligations of the debtor, including rights to payments or to any other income from assets supporting such 15 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION payments that result in a periodic and well defined stream of payments to parties directly exposed to the credit risk of the ABCP transaction. The objective of the criterion specified in the fourth sentence of the fourth subparagraph is – inter alia - that the underlying exposures do not include transferable securities, as they may add to the complexity of the transaction and to the complexity of the risk and due diligence analysis to be carried out by parties directly exposed to the credit risk of the ABCP transaction. To facilitate consistent interpretation of this criterion, a clarification should be provided with respect to: (a) the calculation of weighted average life; (b) the term ‘contractually binding and enforceable obligations’; (c) a non-exhaustive list of examples of exposures that should be considered to have defined periodic payment streams. The individual examples are without prejudice to applicable requirements, such as the requirement with respect to the defaulted exposures in accordance with Article 20

(11)of Regulation (EU) 2017/2402 and the requirement with respect to the residual value in accordance with Article 20

(13)of that Regulation. Referenced interest payments (Article 24

(16)) The objective of this criterion is to prevent STS ABCP transactions from making reference to interest rates that cannot be observed in the commonly accepted market practice. The credit risk and cash flow analysis which parties directly exposed to the credit risk of the ABCP transaction must be able to carry out should not involve atypical, complex or complicated rates or variables which cannot be modelled on the basis of market experience and practice. To facilitate consistent interpretation of this criterion, the following aspects should be further clarified: (a) the scope of the criterion by specifying the common types and examples of interest rates captured by this criterion; (b) the term ‘complex formulae or derivatives’. Requirements in case of the seller’s default or an acceleration event (Article 24

(17)) The objective of this criterion is to prevent parties directly exposed to the credit risk of the ABCP transaction from being subjected to unexpected repayment profiles, following the seller’s default or an acceleration event. 16 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION STS ABCP transactions should be such that the required risk analysis and due diligence to be conducted by parties directly exposed to the credit risk of the ABCP transaction does not have to factor in complex structures of the payment priority that are difficult to model, nor should those parties be exposed to complex changes in such structures throughout the life of the ABCP transaction. Therefore, it should be ensured that junior liabilities should not have payment preference over senior liabilities which are due and payable. In addition, taking into account market risk on the underlying collateral constitutes an element of complexity in the risk and due diligence analysis to be carried out by parties directly exposed to the credit risk of the ABCP transaction, the objective is also to ensure that the performance of STS ABCP transactions does not rely, due to contractual triggers, on the automatic liquidation at market price of the underlying collateral. To facilitate consistent interpretation of this requirement, the scope and operational functioning of conditions specified under letters (a), (b), and (c) should be specified further. Underwriting standards (Article 24

(18))

(18)is to prevent ‘cherry picking’ and to ensure that the exposures that are to be securitised do not belong to exposure types that are outside the ordinary business of the seller, i.e. exposure types in which the seller may have less expertise and/or interest at stake. This criterion is focused on disclosure of changes to the underwriting standards and aims to help the sponsor and other parties directly exposed to the credit risk of the ABCP transaction assess the underwriting standards pursuant to which the exposures transferred into the ABCP transaction have been originated. The criterion also aims to ensure that the seller has an established performance history for similar credit claims or receivables to those being securitised and for an appropriately long period of time. To facilitate consistent interpretation of this criterion, the following aspects should be further clarified: (a) the term ‘similar exposures’, with reference to requirements specified in the Delegated Regulation further specifying which underlying exposures are deemed to be homogeneous in accordance with Articles 20

(8)and 24

(15)of Regulation (EU) 2017/2402; (

1. b)the term ‘no less stringent underwriting standards’: independently of the guidance provided in these guidelines, it is understood that in the spirit of restricting the ‘originate-to-distribute’ model of underwriting, where similar exposures exist on the seller’s balance sheet, the underwriting standards that have been applied to the securitised exposures should also have been applied to similar exposures that have 17 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION not been securitized, i.e. the underwriting standards should have been applied not solely to securitised exposures; (
2. c)clarification of the requirement to disclose material changes from prior underwriting standards: the guidance clarifies that this requirement should be forward looking only, referring to material changes to the underwriting standards after the closing of the transaction. The guidance clarifies the interactions with the requirement for similarity of the underwriting standards set out in the Delegated Regulation further specifying which underlying exposures are deemed to be homogeneous in accordance with Articles 20

(8)and 24

(15)of Regulation (EU) 2017/2402, which requires that all the underlying exposures in securitisation be underwritten according to similar underwriting standards; (

1. d)identification of criteria based on which the expertise of the seller should be determined: (
2. i)when assessing whether the seller has the required expertise, some general principles should be set out against which the expertise should be assessed. The general principles have been designed to allow a robust qualitative assessment of the expertise. One of these principles is regulatory authorisation: this is to allow more flexibility in such qualitative assessment of the expertise if the seller is a prudentially regulated institution which holds regulatory authorisations or permissions that are relevant to origination of similar exposures. The regulatory authorisation in itself should, however, not be a guarantee that the seller has the required expertise; (
3. ii)irrespective of such general principles, specific criteria should be developed, based on specifying a minimum period for an entity to perform the business of originating similar exposures, compliance with which would enable the entity to always be considered to have a sufficient expertise. Such expertise should be assessed at the group level, so that possible restructuring at the entity level would not automatically lead to non-compliance with the expertise criterion. It is not the intention of such specific criteria to form an impediment to the entry of new participants to the market. Such entities should also be eligible for compliance with the expertise criterion, as long as their management body and senior staff with managerial responsibility for origination of similar exposures have sufficient experience over a minimum specified period; (iii) it is expected that information on the assessment of the expertise should be provided in sufficient detail in the STS notification. 18 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION Triggers for termination of the revolving period in case of revolving ABCP transactions (Article 24

(19)) The objective of this criterion is to ensure that, in the presence of a revolving period mechanism, parties directly exposed to the credit risk of the ABCP transaction are sufficiently protected from the risk that principal amounts may not be fully repaid. In all such transactions, irrespective of the nature of the revolving mechanism, such parties should be protected by a minimum set of triggers for termination of the revolving period that should be included in the documentation of the ABCP transaction. In order to facilitate the consistent interpretation of this criterion, interactions of this criterion with the criterion under Article 26

(7)(c) about an insolvency-related event with regard to the servicer, should be further clarified. Transaction documentation (Article 24

(20)) The objective of this criterion is to help provide full transparency to parties directly exposed to the credit risk of the ABCP transaction, assist those parties in the conduct of their due diligence and prevent them from being subject to unexpected disruptions in cash flow collections and servicing, as well as to provide them with certainty about the replacement of certain counterparties involved in the securitisation transaction. To facilitate consistent interpretation of this criterion, clarification should be provided about the requirement specified in Article 24

(20)(d) which requires the transaction documentation to clearly specify how the sponsor meets the requirements of Article 25

(3): it is understood that, for the purpose of compliance with this requirement, the sponsor should not be required to provide any details on the content of the demonstration referred to in Article 25

(3). 19 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION 2.3 Background and rationale for the programme-level criteria Limited temporary non-compliance with certain STS transaction-level criteria (Article 26

(1)) The objective of Article 26

(1)is to provide a level of assurance that the data on and reporting of the ABCP transactions within an ABCP programme are accurate and that all such ABCP transactions meet the STS criteria at transaction level in accordance with Article 24, by ensuring that an independent external entity, not affected by any potential conflict of interest, checks the data to be disclosed to the investors. There may however be some constraints with respect to checking the compliance of all of the underlying exposures with some STS criteria applicable at the level of individual ABCP transactions referred to in that article (i.e. STS criteria specified in paragraphs 9, 10 and 11 of Article 24), as such a checking process may be (i) overly burdensome (because this may be very time-consuming); (ii) not possible due to incomplete data; (iii) not relevant when relating to a very small fraction of the underlying exposures or; (iv) such compliance may change over time due to the dynamics of the status of the underlying exposures. Consequently, the second subparagraph of Article 26

(1)allows for partial non-compliance with the aforementioned criteria and allows up to 5% of the aggregated amount of exposures funded by the ABCP programme to be temporarily non-compliant, without being detrimental to retaining STS status at ABCP programme level. It is understood that the 5% amount of exposures that are allowed to be temporarily noncompliant should include each exposure that is non-compliant with one, some or all of paragraphs 9, 10 and 11. In other words, it is not the intention of the requirement to ensure that only exposures that are simultaneously in breach of paragraphs 9, 10 and 11 can count towards the 5% amount of exposures. To facilitate consistent interpretation of this criterion, the following aspects should be clarified: (a) the method of calculating the percentage of the aggregate exposure amount of incompliant exposures; (b) the clarification of the term ‘temporary non-compliance with the requirement of Article 24

(9),

(10)or

(11)’; (

1. c)the sample of the underlying exposures subject to external verification; (
2. d)the scope and minimum frequency of the external verification: it is assumed that the external verification for ABCP should cover only the requirements of paragraphs 9, 10 and 11 of Article 24, since the third subparagraph exclusively refers to the exemption clause in the second subparagraph (‘For the purpose of the second subparagraph of this paragraph…’); (
3. e)the parties eligible to execute the external verification; 20 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION (
4. f)some additional clarifications with respect to this criterion, including on the method for increasing the accuracy of the verification. Remaining weighted average life (Article 26

(2)) While one of the objectives of Article 24

(15)is to reduce the risk of maturity transformation for the parties directly exposed to the credit risk of an ABCP transaction, the requirement of Article 26

(2)puts an additional limit to the risk of maturity transformation at ABCP programme level. Whereas the weighted average life (WAL) of individual ABCP transactions may be as long as three and a half years according to Article 24

(15), the overall WAL at ABCP programme level may not surpass two years. To ensure consistent interpretation of this requirement, the term ‘remaining weighted average life of the underlying exposures of an ABCP programme’, and how to calcule it, should be clarified. Full support by the sponsor (Article 26

(3))

(3)is to ensure the full support of an ABCP programme by a sponsor in accordance with Article 25

(2). This requirement is without prejudice to the definition of a ‘fully-supported ABCP programme’ provided in point

(21)of Article 2. The requirement is considered to be sufficiently clear and straightforward. No further guidance is considered necessary. No resecuritisation at ABCP programme level (Article 26

(4)) While Regulation (EU) 2017/2402 introduces the ban on resecuritisation, it allows for specific derogations from that ban, including for fully supported ABCP programmes, subject to their compliance with two conditions: ‘A fully supported ABCP programme shall not be considered to be a resecuritisation for the purposes of this Article, provided that none of the ABCP transactions within that programme is a resecuritisation and that the credit enhancement does not establish a second layer of tranching at the programme level.’ Therefore, if the underlying ABCP transactions are no resecuritisations and the credit enhancement of the ABCP programme does not establish a second layer of tranching at the programme level, such an ABCP programme should not be considered to be a resecuritisation. Such a ban on resecuritisation (as well as derogation for some fully supported ABCP programmes) is established both generally (in Article 8 of Regulation (EU) 2017/2402), and for STS purposes (in Article 24

(5)in conjunction with Article 26

(1), and Article 26

(4)). Additional guidance is provided by recital 8, which states that ‘This Regulation introduces a ban on resecuritisation, subject to … clarifications as to whether asset-backed commercial paper (ABCP) programmes are considered to be resecuritisations. … In addition, it is important for the financing of the real economy that fully supported ABCP programmes that do not introduce any 21 GUIDELINES ON STS CRITERIA FOR ABCP SECURITISATION re-tranching [i.e. that are not ‘establishing a second layer of tranching’] on top of the transactions funded by the programme remain outside the scope of the ban on resecuritisation.’ In order to facilitate consistent interpretation of this criterion, it should be clarified further which credit enhancements do not establish such a second layer of tranching at the programme level. The interpretation is based on the BCBS „Revisions to the securitisation framework’(July 2016), paragraph 5, which identifies cases where there exist two distinct tranching mechanisms, that could economically be reduced to one single tranching mechanism (i.e. to one layer of tranching). The sub-section ‘Examples’ provides examples of credit enhancements that should and should not be considered compliant with the criterion in Article 26