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A securitisation may involve transactions that provide implicit support to that securitisation. Is the institution obliged to notify the supervisory authority of such transactions?
Yes, the institution is obliged to notify the competent authority of such transactions.
Pursuant to Section 248(1) of Regulation (EU) No 575/2013, "A sponsor institution, or an originator institution which in respect of a securitisation has made use of Article 245(1) and (2) in the calculation of risk-weighted exposure amounts or has sold instruments from its trading book to the effect that it is no longer required to hold own funds for the risks of those instruments shall not, with a view to reducing potential or actual losses to investors, provide support to the securitisation beyond its contractual obligations."
The Regulation also stipulates that transactions providing support to a securitisation, regardless of whether this is part of the contractual commitments, must be notified to the competent authorities.
The scope of this notification is specified in the EBA Guidelines on implicit support for securitisation transactions (EBA/GL/2016/08), which also describe the concept of market-oriented conditions and when a transaction is not set up to provide support.
The notification obligation applies equally to significant institutions (SIs) under direct ECB supervision and to less significant institutions (LSIs) supervised by DNB in cooperation with the ECB.
When notifying the competent authorities, SIs are required to use the guidance document published by the ECB on its website on 28 July 2017.
LSIs must address notifications to their account supervisor. In doing so, they must consider the following:
- LSIs must notify DNB of each transaction separately.
- Notifications must be made in writing, within 15 business days following the execution of the transaction.
- The Annex to the ECB guidance document lists the information that must be submitted as part of the notification.
Once we have been notified of the transaction, we may invite you for an informal supervisory meeting to discuss the transaction's specific characteristics.
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