ECB Fast-Track Assessments for Capital Operations and Securitizations

Pursuant to EU banking regulation, credit institutions are required to obtain prior approval from the ECB before repurchasing shares or other capital instruments ("capital operations"), as such transactions reduce their loss-absorbing capacity. The ECB therefore verifies that these transactions comply with all applicable regulatory requirements.

With respect to securitizations, EU banking rules provide that capital requirements for securitized exposures may be reduced only where the ECB has determined that the securitization results in the transfer of a significant amount of risk to third parties. The ECB sets out the requirements in its Guide on the notification of significant risk transfer and implicit support for securitizations (the "ECB SRT Guide").

Under the fast-track assessment, institutions may obtain an accelerated decision from the ECB when applying to reduce own funds through the repurchase of shares or other capital instruments, or to benefit from reduced capital requirements following an SRT, provided that the relevant capital or securitization transaction meets all applicable regulatory conditions.

CONDITIONS FOR CAPITAL OPERATIONS FAST TRACK

Capital Instruments

These may qualify for a fast-track assessment if the respective buyback of capital instruments other than shares impacts the bank's capital ratio by less than 100 basis points, and if the bank's capital is estimated to continue exceeding capital requirements and guidance for at least three years.

Shares

Share buybacks face additional conditions. The bank must be scored medium- or low-risk in its capital adequacy assessment, it must retain a sufficient portion of its profits, and it must demonstrate the ability to meet its capital requirements and guidance under severe financial stress.

CONDITIONS FOR SECURITIZATIONS FAST TRACK

The fast track is available for test-based transactions under Articles 244(2) and 245(2) of Regulation (EU) No 575/2013 ("CRR"), replacing the regular process at the originator's discretion where criteria are met. The ECB in principle will accept an SRT notification for a securitization under the fast-track process, where set criteria are met.

Fast track is available:

• Where the notional amount of the securitization does not exceed €8 billion at origination;
• A capital reduction achieved by the Significant Institution ("SI") at origination does not lead to capital reduction in terms of Common Equity Tier 1 ("CET1") capital ratio of more than 25 basis points (consolidated);
• The effective number of exposures N is at least 100; and
• The aggregated exposure value of all exposures to a single obligor does not exceed 2% of the exposure values of the aggregated exposure values of the pool of underlying exposures (groups of connected clients counted as one).

The pool composition has to meet additional criteria. It must:

• Comprise banking book credit exposures with defined periodic cash flows and exclude transferable securities other than unlisted corporate bonds;
• Exclude exposures in default at selection;
• Ensure interim protection payments within six months if workouts are unfinished; and
• Structure premiums contingent on the outstanding protected tranche with no guarantees, rebates, loss-avoidance mechanisms, or risk-contingent premium step-ups.

The securitization must meet CRR minimum criteria, including the eligibility rules for credit protection, as provided for in the CRR provisions governing effective credit risk mitigation, guarantees, and credit derivatives.

Synthetic Transactions

For synthetic transactions, an independent verification agent is appointed (name may follow) or, if not required, a compliant internal audit self-assessment is used.

Traditional (True Sale) Transactions

For traditional securitizations, the interest-rate and currency risks arising from the securitization are appropriately mitigated. Further, at least 15% of each of the tranches that are neither risk-weighted at 1,250% nor deducted from CET1 items is sold to external investors to demonstrate that the tranches have been correctly priced.

Regulatory Capital Treatment. Securitizations eligible for the fast track include those with underlying portfolios covered by internal ratings-based approach ("IRBA")-models subject to supervisory measures in the form of limitations reflected in absolute add-ons or relative multiplier to probability of default and loss-given default ("LGD"), directly impacting capital requirements and the securitization internal ratings-based approach risk weights.

Eligibility requires a conservatively calibrated approach agreed with the ECB before notification in situations where measures take the form of LGD floors to foundation levels, risk-weighted asset ("RWA") add-ons, RWA floors (e.g., standardized levels), or self-imposed add-ons formalized by ECB decision.

In all IRBA cases, the originator must embed supervisory measures in a more conservative model and report it in the fast-track template.

Exceptions. Certain transactions are excluded from the fast track, including:

• Those from originators without SRT issuance in the last five years at consolidated level;
• Deals with ramp-up periods, full pro-rata amortization, and hybrid amortization lacking clear contractual triggers for irrevocable switches to sequential priority with both backward- and forward-looking triggers;
• Securitizations with more than 35% of bullet loans in the initial pool of securitized exposures in terms of notional amount; and
• Portfolios with certain leveraged/highly leveraged exposures.

PROCESS AND TIMELINE

Capital Operations

The ECB introduced a streamlined process for banks to apply for a reduction of own funds, and will provide immediate feedback on completeness and fast-track eligibility, with the Joint Supervisory Team reviewing the application and requesting additional information if necessary. A new, standardized application template will simplify the process for banks, ensuring that all required information is submitted in a clear and structured manner through a dedicated portal. The fast-track process will be operational starting in the first quarter of 2026.

Securitizations

The fast-track submission comprises: a signed standardized template evidencing SRT through embedded tests; necessary legal and accounting opinions tailored to traditional or synthetic structures; and a concise summary explaining key structural terms, call triggers, amortization triggers, credit-linked note use of proceeds where relevant, cost of capital methodology for synthetics, and currency risk management.

The ECB has to be informed about the relevant intention one month before closing, while the actual fast-track notification should be submitted no later than 10 working days before closing. Positive feedback, stating that no elements were identified warranting objection, is then expected within eight working days of the date of submission. Post-closing, final documentation must be submitted within one month, including any updates to the fast-track template as executed.

The ECB has indicated that supervisory scrutiny will intensify through data-driven monitoring and ex-post checks, with potential objections and future fast-track exclusion where information is inaccurate or governance is weak.