Proportional protection reviewed

Category: Capital Relief Trades ABS


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EU policymakers are currently negotiating an amendment to Article 234 of the CRR that would allow banks to treat first-loss protection as proportional protection. If successful, the move is expected to boost mortgage significant risk transfer issuance.

According to Article 234 of the CRR, loan-level insurance protection for synthetic securitisations that is tranched first-loss protection must apply Chapter Five of the securitisation framework, which is designed for portfolios rather than individual loans.

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