European Secured Notes: EBA assessment published

On 24 July 2018, the European Banking Authority (EBA) published a report setting out the outcome of its assessment of the European Commission’s call for advice on European Secured Notes (ESNs). The report makes 5 recommendations on key aspects for consideration by the European Commission when structuring the legislative framework for ESNs: Small and medium-sized enterprise (SME) ESNs could be structured as a dual recourse instrument, however, in contract to covered bonds backed by real estate, the cover assets of ESNs would probably not be secured by a real estate-underlying security. Based exclusively on the performance of the underlying assets, no preferential risk weight treatment could be justified for SME ESNs. However, taking into account the structural and cover assets enhancements proposed in Recommendation 1, a differentiated risk weight requirement compared with unsecured exposures to institutions could be considered. The EBA considers that a dual recourse…

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