12 June 2012

EBA: Consultation paper on RTS on the concept of Gain on Sale associated with future margin income in a securitisation context

These Regulatory Technical Standards (RTS) will be part of the single rulebook aimed at enhancing regulatory harmonisation in Europe. The consultation runs until 12 August, 2012. A public hearing will take place on 28 June.

The objective of these draft RTS is to specify further the concept and the treatment of a gain on sale, meaning any increase (or part of the increase) in equity under the applicable accounting standard arising from future margin income in the context of a securitisation transaction.

The draft Capital Requirements Regulation (CRR), article 29, establishes, as a general principle, that institutions shall exclude from their own funds increases in equity resulting from the sale of the assets being transferred in a securitisation transaction. This includes increases associated with future margin income that result in a gain on sale for an institution. This principle was already included in the Directive 2006/48, the so called CRD II.

The concept of gain on sale is mainly relevant for financial institutions using the US GAAP as accounting standard.

The proposed consultation paper is based on the draft Capital Requirements Regulation (CRR) as proposed by the European Commission on 20 July, 2011. As the text is still being discussed by the EU legislator (European Parliament and Council), the proposed RTS may be amended after the consultation to take into account the final CRR text.

These RTS, together with all the standards related to own funds requirements, have to be submitted to the EU Commission by 1 January, 2013. Separate consultations on some remaining RTS on Own Funds will follow in the second half of 2012.

Press release

Full consultation paper

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