The EBA decides not to make dedicated framework for green securitisation

The European Banking Authority (EBA) has stated it would be premature to establish a dedicated framework for green securitisation.

This comes from its latest report, which analyses the recent developments and challenges of introducing sustainability in the EU securitisation market.

The EU sustainable market is in its early stage of developments and the application of sustainability requirements in securitisation appears to require further clarification, it said.

In the report, it examines how sustainability could be introduced in the specific context of securitisation market and to support its sound development.

There are three core aspects explored by the report. The first is whether and how the EU regulations on sustainable finance, including the EU Green Bond Standard, the EU Taxonomy and Sustainable Finance Disclosure Regulations could be applied to securitisation.

Secondly, it examines the relevance of a dedicated regulatory framework for sustainable securitisation. Finally, it explores the nature and content of sustainability-related disclosures for securitisation products.

Through its analysis, it believed it would be premature to create a dedicated framework for green securitisation. Instead, it believes the upcoming EU Green Bond Standard should be applied to securitisation, as long as changes are made.

To that extent, the regulator suggests the regulatory requirements apply at the originator level. This would allow a securitisation that is not backed by a portfolio of green assets to meet the EU GBS requirements, provided that the originator commits to using all the proceeds from the green bond to generate new green assets.

The EBA sees these changes will allow the sustainable securitisation market to develop and to play a role in financing the transition towards a greener EU economy.

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