A Securitization Regulation Checker is designed to guide the user through the complex STS requirements to assess whether STS treatment applies to a transaction.
Securitization Regulation Checker ensures a consistent approach in checking standard requirements against the information provided by a financial institution, fund or law firm, minimizing the potential for human error.
As the user inserts information about the timeframe of the securitization, the location of the parties and the material details of the transaction, the tool assesses the eligibility under the STS guidelines and further guides the user through an assessment of main requirements such as the risk retention and credit granting criteria.
The tool outputs the required ESMA submission forms and auto-populates these to streamline an otherwise burdensome submission process. This not only saves time for the submitting party but also for ESMA officials during the assessment, processing and issuance of the final STS label.
Background
On January 17, 2018, two EU Regulations establishing a new framework for European securitization entered into force.
Regulation (EU) 2017/2402 (the Securitization Regulation) introduces a new framework for STS securitizations and Regulation (EU) 2017/2401 (the securitization Prudential Regulation) sets out the framework under which certain institutional investors benefit from favorable regulatory capital treatment for STS securitizations.
Challenges determining STS eligibility
Assessing the eligibility of a transaction under these regulations and submitting the paperwork to ESMA involves complex and time-consuming processes. These constrain both parties when submitting information, as well as the officiating authority’s resources.
Check compliance with Securitization Regulation
First, each securitization needs to comply with the Securitization Regulation, in terms of transparency, due diligence, and risk retention overall requirements.
Assess STS eligibility criteria
Next, parties need to determine whether the STS eligibility requirement is met. There are various requirements in this regard, from ensuring that underlying assets meet predetermined, unambiguous and clearly documented eligibility criteria, and that there are exposures with defined periodic payment streams, to currency and interest rate risk being hedged.
Notify the regulators and ESMA
Once the STS requirements are assessed, parties need to notify the regulators and ESMA, in some cases providing third party certification, which may not always be substantial enough to determine the eligibility.
Automatically assess eligibility requirements
A Securitization Regulation Checker makes the assessment and submission processes much faster and more transparent as users are guided through an interactive questionnaire that quickly provides eligibility criteria information and removes the need for manual or guesswork.
Our tool supports data privacy automation, by automatically assessing the eligibility criteria and required supporting forms and documentation, while checking provided user information against financial data sources to streamline the final eligibility assessment.
A Securitization Regulation Checker can be integrated with financial databases to verify information and can be embedded in any client portal or website.
Leveraging BRYTER’s no-code app builder, the tool provides an individual eligibility score for each assessment against custom criteria and auto-generates reports to track and process any identified red flags.
To see how BRYTER can be used to create your own workflow automation tools, book a demo with one of our experts. Otherwise, read our No-Code and Legal-Operations guides to find out how to streamline your processes.
Benefits
Automated & Consistent
A Securitization Regulation Checker assesses the STS eligibility of a transaction and determines all required information and supporting documentation. It ensures consistency, in accordance with EU regulations, in the way a securitization is assessed, submitted and processed.
Faster Execution
Law firms save significant resources when advising on STS eligibility and preparing the required documentation.
Risk profiles
A Securitization Regulation Checker generates an eligibility score for each individual transaction against pre-determined criteria and helps trouble-shoot any identified risks.
How it works
Insert transaction information
The user is guided through an interactive questionnaire which automatically determines the required information and documentation for the assessment.
Assess eligibility
The rule-based logic of the tool auto-assesses STS eligibility under the applicable EU regulations using sophisticated risk scoring and generates a full summary of the assessment to streamline the final decision.
Identify risks
A Securitization Regulation Checker integrates with internal and official databases to confirm input data as the user provides that information. A dashboard tracks all transaction assessments and eligibility scores to process identified red flags faster.