As you may be aware, regulators have recently been focusing on the issue of "Significant Risk Transfer" ("SRT") within securitisation transactions (with the European Banking Authority (EBA) having issued a set of Guidelines on SRT - summarised in Edition 11 of this SCM Briefing - and a more recent EBA Consultation Paper on "implicit support", which also touches on the issue of SRT - see under Key Developments for more detail on the EBA's proposed Guidelines on implicit support).  The European Central Bank's (ECB) Supervisory Board has issued a document entitled Public Guidance on the Recognition of Significant Risk Transfer (in the form of a Letter from the ECB Supervisory Board to the management of significant banks), which is aimed at banks supervised within the auspices of the "Single Supervisory Mechanism" (SSM), which is the Eurozone-wide, ECB-regulated bank supervisory framework that represents the first step towards "Banking Union" (as such, UK-based institutions are not technically within its scope).  The Guidance first highlights those parts of the Capital Requirements Regulation (CRR) that are relevant for SRT (principally Articles 243 and 244, and 245, 247 and 248) and notes that the EBA Guidelines on SRT provide guidance on the recognition process.  It then makes clear that the Guidance is aimed at originator institutions, which should follow it with respect to all securitisation transactions for which they intend either: (i) to directly recognise SRT where the transaction structure results in the transfer of significant credit risk (under Article 243(2) or 244(2) CRR); or (ii) to apply for "permission" to consider that significant credit risk has been transferred where the reduction in "own funds" achieved by the securitisation is justified by the level of risk transfer (under Article 243(4) or 244(4) CRR).  In both cases, the originator should notify the ECB (in electronic form) of their intentions at least three months in advance of the expected closing date of the transaction, and in the case of (i), must attach to their notification a declaration confirming that they take full responsibility for the transaction meeting the relevant CRR conditions.  Where the transaction is similar to previous transactions already completed by the same originator, the originator is "invited" to indicate how the new transaction is similar to, or different from, a previous transaction.  Originators must also provide the ECB with detailed information about the transaction (as set out in point A of Annex 1 of the Guidance), and provide it with the final version of all relevant transaction documents no later than 15 days after closing.  In the case of transactions intended to achieve (ii) above, the ECB will make an individual decision in each case, and the conditions for SRT must be met on a continuous basis over the life of the transaction.  All originators should meet Paragraph 12 of the EBA Guidelines at all times (relating to governance procedures and internal policies around SRT being in place) and it is "recommended" that other information (listed at points B and C of Annex A) is provided on a quarterly basis, and supplemented by other information such as investor reports.  Finally, the Guidance notes that an informal dialogue on the specific features of any instrument may take place between the originator and the ECB (although that dialogue will not represent implicit or explicit approval of any transaction.  The ECB Guidance is helpful (and will be updated from time to time to reflect developments), but it is clear that originator banks subject to the SSM are increasingly having to comply with more onerous requirements in practice than those that are set out in the legislative framework. 

Useful links:

European Central Bank Public Guidance on the Recognition of Significant Risk Transfer