Commission begins legislating NPL, synthetic STS

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By Tom Brown
27 Jul 2020

The European Commission has included measures to improve the regulatory framework for non-performing loan securitizations in its latest coronavirus response package, while also beginning the classification of synthetic securitizations to qualify for the ‘simple, transparent and standardised’ (STS) designation.

The Commission has followed advice from the EBA in allowing some excess spread to be used in synthetic securitizations. Excess spread is the interest gained on a portfolio which softens principal losses.

Monday’s proposals represent the winning out of an argument that has persisted for years — that ...

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