Ref. Ares(2017)3025174 - 16/06/2017
Legislative procedures on simple, transparent and standardised securitisations and
the Capital Requirements Regulation – 2015/0226 (COD) and 2015/0225 (COD)
Upcoming trilogue negotiations – Concerns of European automotive industry
The Verband der Automobilindustrie (VDA), the Comité des Constructeurs Français
d’Automobiles (CCFA) and the Banken der Automobilwirtschaft (BDA) have continuously
followed and commented the legislative work of the European Commission, the European
Council and the European Parliament on the regulations proposed for simple, transparent
and standardised securitisations (STS) as well as amending the Capital Requirements
Regulation (CRR). After the Committee of economic and monetary affairs of the European
Parliament has voted on both proposals by the end of last year we are following the trilogue
negotiations. We are still concerned that some of the provisions proposed would significantly
harm the European securitisation market. Our main points are:
1. The definition of the term “originator” will exclude all leasing companies from the
securitisation market (Art. 2a par. 1 and 2 STS, Parliament).
Delete Parliament’s proposal.
2. The proposal to increase the risk retention from 5 % to 10 % will shrink the
securitisation market (Art. 4 par. 1 STS, Parliament).
Adopt Commission’s proposal.
3. The proposal to delegate the interpretation of the STS-requirements to ESMA will
cause legal uncertainty for market participants (Art. 7 par. 1b STS and Art. 8 par. 9b
STS, Parliament).
Delete Parliament’s proposal.
4. The proposals for non-impaired exposures do not reflect market practice and will
virtually exclude all Auto ABS (Art. 8 par. 7 STS, Commission, Council).
Adopt Parliament’s proposal with our amendments.
5. Without any legally binding confirmation of conformity no originator will notify a
transaction as “STS” (Art. 14 STS, Commission, Council, Parliament).
Adopt our proposal.
6. The aggregate exposure value to single obligors will exclude securitisations of
wholesale transactions (Art. 243 par. 2 (b) CRR, Commission, Council, Parliament).
Adopt Commission’s proposal with our amendments.
7. A double-accounting of specific provisions and purchase price discounts will
substantially increase the originator's capital requirements (Art. 244 par. 1 (b) CRR,
Commission, Council, Parliament).
Adopt Commission´s proposal with our amendments.
8. An increase of risk weights from 7 % to 10 % will shrink the securitisation market (Art.
260, 262 CRR, Commission, Council, Parliament).
Adopt our proposal.
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Please find the explanations to these main points below. Additionally we have attached a
detailed assessment of the proposals and reports provided by the Commission, the Council
and the Parliament including our favourable approaches and concrete amendments.
1. Leasing companies and all other real economy companies will be excluded from
the securitisation market and lose an important refinancing instrument
(
Art. 2a par. 1 and 2, Parliament)
Art. 2a par. 2 as proposed by the Parliament only permits credit institutions, insurance
undertakings, investment firms or companies which qualify as financial institutions
pursuant to the CRR to act as originators and securitise their assets. This would have a
significant negative impact on the automotive industry as assets deriving from other
business than lending or financial leasing, such as operate leasing or hire-purchase,
would not be permitted to be securitised. Hence, leasing companies, which are currently
highly active on the securitisation market, would be excluded from exactly that market.
According to the requirements of the CRR the originator must hold a material net
economic interest of 5% (risk retention, cf. Art. 405 CRR) which is part of the transaction
and thus a "securitisation position". As a result each originator would also be an investor
pursuant to the proposed Art. 2 par. 11 STS. However, according to the Article 2a par.1
as proposed by the Parliament only "institutional investors" can act as investors. Real
economy companies, including leasing companies, do not fall under the scope of
institutional investors, though. As a result they would be de facto banned from the
securitisation market only because they comply with current provisions of the CRR,
although they are considered as eligible investors in complex investments under
European legislation.
Delete Art. 2a par. 1 and 2 STS as proposed by the Parliament or amend the
provision as proposed in our detailed assessment.
2. An increase of the risk retention from 5% to 10% will substantially decrease the
volume of securitisations in the EU.
(
Art. 4 par. 1, 1a, 2 and 6 STS, Parliament)
The current risk retention provisions together with the credit enhancement mechanisms in
the transactions are sufficient to ensure a real economic interest of the originator in the
assets securitised and to protect the investor widely from potential losses. If the
Parliament´s proposal to enhance the retention to 10 % would enter into force, the
amount of securitisable receivables would decrease. Such an amendment would
contradict the goal to foster and promote the securitisation market in Europe.
Moreover, such substantial increased retention by way of retaining the first loss would
result in the originator to deduct such piece in its nominal amount from its regulatory
capital, so that the originator would incur an additional capital charge from such
transaction rather than freeing regulatory capital to that it could grant additional loans to
the real economy.
Adhere to Article 4 as originally proposed by the EU-Commission.
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3. A delegation to ESMA to interpret the STS-Requirements will cause legal
uncertainty for market participants
(
Art. 7 par. 1b STS and Art. 8 par. 9b STS, Parliament)
Art. 7 par 1b and Art. 8 par. 9b authorise ESMA to specify guidelines and
recommendations on the harmonised interpretation and application of requirements in
general and for homogeneous assets in particular. A delegation of the determination of
definitions is problematic as it causes problems after a regulation became already into
effect. The legislative should specify clear regulatory provisions in which ESMA is
allowed to act.
Delete Art. 7 par. 1b and 8 par. 9b, that have been proposed by the Parliament and
keep the legislative power at the European institutions. If further specifications are
required, use delegated acts.
4. Impractical non-impairment requirements will exclude all Auto-ABS
(
Art. 8 par. 7 (a) to (c) STS, Commission, Council, Parliament)
Originators ensure at the time of selection of the assets that these assets are performing.
However, they cannot know about prior agreements of debtors about debt dismissals or
reschedules with other creditors as such information is not publicly available from any
credit bureau or public debt register. External data is particularly in retail business only
analysed at the time of origination. Taking into account the high granularity of Auto-ABS,
the additional obligations of Art. 8 par. 7 (a) and (b) STS as proposed by the Commission
and aggravated by the Council would not add any value to the selection, impossible to
fulfil for the originator.
The terms “significantly higher” and “average debtor” pursuant to Art. 8 par. 7 (c) STS as
proposed by The Commission, the Council and the Parliament are unclear, will entail
different credit qualities of ABS pools in the EU and would impede the development of a
single STS securitisation market. Both terms could be interpreted differently throughout
the EU.
Adopt the Parliament’s proposal for Art. 8 par. 7 (a) and (b) STS with our
amendments proposed in our detailed assessment. Amend Art. 8 par. 7 (c) STS as
proposed in our detailed assessment.
5. Without any legally binding confirmation of conformity no originator will notify a
transaction as “STS”
(
Art. 14 STS, Commission, Council, Parliament).
The framework for simple, transparent and standardised securitisation will only have a
supporting effect on the European securitisation market if all market participants have the
same understanding what STS eligibility means. The criteria are not self-explanatory and
might be subject of a differing interpretation by national authorities and the ESAs. An
instrument to ensure a sufficient level of trust would be a legally binding confirmation that
the respective securitisation is indeed STS – especially as in case of non-compliance
with the criteria the regulator could impose high sanctions on the originator (10% of the
annual turnover). The Council and the Parliament tried to implement the concept of an
STS confirmation by introducing a new Art. 14 par. 1a. However, as proposed by Council
and Parliament the third party will never bear any responsibility in case of a wrong
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decision. The originator who depends on the STS confirmation and trusts the assessment
of the third party will be penalised instead in case where a confirmed STS securitisation
turns out to be STS ineligible. Such provision would miss its goal. No originator would
ever notify its transactions as “STS”.
Introduce a right to request a legally binding confirmation from a competent
authority or a third party as proposed in our detailed assessment.
6. The aggregate exposure value to single obligors will exclude securitisations of
wholesale transactions
(Art: 243 par. 2 (b) CRR, Commission, Council, Parliament)
Car dealers have to finance the cars they exhibit in their showrooms. Depending on the
brand and volume they are selling, the value of their outstanding debt may well exceed
1% of the overall exposure. The credit line or dealer floorplan is an essential precondition
for the car dealers to run a profitable business. Therefore, a distinction should be made
between retail and wholesale transactions. In our view the threshold for wholesale
transactions need to be set at 8% to allow dealer groups to obtain funding through ABS.
Amend Art. 243 par. 2 (b) as proposed in our detailed assessment.
7. A double accounting of specific provisions and purchase price discounts will
substantially increase the originator's capital requirements
(
Art. 244 par. 1 (b) CRR, Commission, Council, Parliament)
In transactions where a significant risk transfer has been recognised but where the SSPE
has still to be included in commercial consolidation according to IFRS 10, the specific
provisions from the underlying securitised exposures cannot be released and are still
available on the group level to absorb the losses. The same would apply for discounts on
the purchase price of securitised exposures that are frequently made to provide
additional credit enhancement to investors.
If in addition a risk weight of 1,250% would be allocated to retain securitisation positions
(e.g. to comply with retention rules under Art. 405 CRR) this would result in a double-
counting of the specific provisions and purchase price discounts and thereby substantially
increase the originator's capital requirements unintentionally.
Amend Art. 244 par. 1 (b) as proposed in our detailed assessment.
8. An increase of risk weights from 7 % to 10 % will shrink the securitisation market
(
Art. 260, 262 CRR, Commission, Council, Parliament).
A reduction of the floor risk weight to 10 % for qualifying securitisations in the IRB
approach means an increase of the floor from 7% to 10% compared to the current
situation. This sends the wrong signal and risks undermining the STS initiative. The
increase of the floor capital requirement was intended to address model risks and
structural risks, yet these risks are significantly reduced in the case of STS
securitisations. An increase of the risk weights from 7% to 10% is likely to result in
increased financing costs for the industry, with a resultant effect on the real economy.
Thus the 7% risk weight for qualifying securitisations should be maintained.
Amend Art. 260 and 262 CRR as proposed in our detailed assessment.
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Berlin – Cologne – Paris, 25 January 2017
Banken der Automobilwirtschaft, Gut Maarhausen, Eiler Straße 3 K1, 51107 Köln, Germany
Comité des Constructeurs Français d’Automobiles, 2, rue de Presbourg, 75008 Paris, France
Verband der Automobilindustrie e.V., Behrenstraße 35, 10117 Berlin, Germany
Supported by:
Banque PSA Finance,
75 avenue de la Grande Armée, 75116 Paris, France
BMW Bank GmbH, Heidemannstr. 164, 80939 München, Germany
Mercedes-Benz Bank AG, Siemensstr. 7, 70469 Stuttgart, Germany
Opel Bank GmbH, Mainzer Straße 190, 65428 Rüsselsheim, Germany
RCI Banque, 14 avenue du Pavé Neuf, 93168 Noisy le Grand, France
Volkswagen Financial Services AG, Gifhorner Str. 57, 38112 Braunschweig, Germany
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