(1)

For the purposes of the application of the backward-looking triggers referred to in Article 26c(5), third subparagraph, point (a), of Regulation (EU) 2017/2402, it is necessary to specify the starting point as of which either the increase in the cumulative amount of defaulted exposures or the increase in the cumulative losses is to be measured. As a general rule, the closing date of the transaction should be taken as a starting measuring point. There may, however, be cases where it is not possible to use that closing date of the transaction as a starting measuring point, including where the transaction includes a replenishment period, or a pre-defined period in which the securitised portfolio is built up, after the closing date. It is therefore necessary to lay down specific rules for those cases.

(2)

The detachment point (D) of a tranche determines the point at which the principal of that tranche is completely eroded as a result of losses in the underlying pool. Consequently, when the protected tranche starts bearing losses, the detachment point decreases correspondingly. To prevent that the tranches providing credit enhancement have already been amortised when significant losses occur at the end of the transaction, the additional backward-looking trigger referred to in Article 26c(5), third subparagraph, point (b), of Regulation (EU) 2017/2402 should be linked to a reduction of the detachment point of the most senior protected tranche, so as to guarantee the credit enhancement provided by the most senior protected tranche relative to more senior tranches retained by the originator throughout the life of the transaction. For the same reason, the forward-looking trigger referred to in Article 26c(5), third subparagraph, point (c), of Regulation (EU) 2017/2402 should occur where the expected performance of the pool of underlying exposures is reduced by an increase in the concentration risk in the securitisation over time or, for transactions where concentration risk is less pronounced, by a deterioration of the average credit quality of that pool of underlying exposures over time.

(3)

A highly concentrated pool of underlying exposures increases the risk of major losses in the securitisation. Since concentration risk is more prevalent in pools of underlying exposures which have a low granularity, it is necessary to lay down a threshold for the minimum granularity of the pool of underlying exposures measured by the effective number of exposures in the pool. Where the concentration risk is less prevalent, the forward-looking trigger should be subject to the average credit quality of the underlying portfolio. To set that trigger, the credit quality of the underlying portfolio should be measured since origination of the securitisation.

(4)

Since it is not possible to provide for a one-size-fits-all calibration that would be applicable to all transactions, given the variety in the types of underlying portfolios and structures in on-balance-sheet securitisations, it is necessary to set out criteria for setting the levels of the performance-related triggers referred to in Article 26c(5), third subparagraph, of Regulation (EU) 2017/2402. To ensure that there is no significant risk that tranches providing credit enhancement amortise to an extent that there would not be sufficient protection to absorb significant losses occurring at the end of the transaction, those criteria should be set in a prudent manner. For that purpose, the parties to the securitisation should test the effectiveness of the backward-looking triggers in a back-loaded loss distribution scenario taking into account the losses expected over the entire maturity of the transaction at its closing date.

(5)

In order not to interfere with existing contracts concluded before the specification of the mandatory performance-related triggers and the criteria for their calibration, it is necessary to provide for a transitional regime for outstanding STS on-balance-sheet securitisations.

(6)

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority.

(7)

The European Banking Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (2),