STS Criterion 13. No embedded maturity transformation
Description
No embedded maturity transformation [1]
Content
The underlying exposures should have been underwritten on the basis that their repayment was not intended to be predominantly reliant on the refinancing of such underlying exposures or on the re-sale value of the assets that are being financed by those underlying exposures.
Rationale
In synthetic securitisations, the payments to the protection provided are not dependent on the cash flows from the underlying exposures and it is therefore not necessary to require that the repayment of investors’ securitisation positions is not reliant on refinancing. In the context of defining balance sheet securitisation, it is however important to ensure that the repayment of exposures is not reliant on their refinancing, as this increases the liquidity risks, market risks and maturity transformation risks to which the securitisation is exposed. It also makes the credit risk of the securitisation more difficult for the investors to model and assess.
Issues and Challenges
References
- ↑ EBA STS Framework for Synthetic Securitisation, EBA/DP/2019/01
