Elderlake Partners

07 · Securitisation & crypto

Art 242–270a · 501d CRR · Reg 2017/2402

Purpose & history

The machine that manufactured AAA

Pre-2008 securitisation ran on ratings arbitrage: originate-to-distribute pushed underwriting risk off the originator, tranching plus agency models manufactured AAA paper from subprime pools, and resecuritisation (CDO²) squared the error. When house-price correlation turned out higher than the models assumed, the AAA cliff-edge losses landed on holders whose capital charges had been near zero. The 2014 revised framework rebuilt the capital side — less mechanistic ratings reliance, the SEC-IRBA/-SA/-ERBA hierarchy, floors, and the p-factor as an explicit surcharge for tranching's model risk. The EU added the market-structure side in the 2017 Securitisation Regulation: risk retention, transparency, due diligence, and the STS label buying calibration relief for simplicity.

The standing tension: post-crisis calibration is widely argued to have over-corrected, and reviving EU securitisation is now industrial policy. The June 2025 Commission package proposes lower p-factors and lighter due diligence — in legislative process, worth tracking rather than assuming.

Crypto: the bridge rule

Art 501d is a transitional, not a framework: 250% for tokenised traditional assets and ARTs referencing traditional assets, 1250% for everything unbacked, pending a permanent BCBS SCO60-based regime. MiCA governs conduct; CRR prices the balance sheet.

The lineage

2006
Issuance peak; CDO² and negative-basis trades at maximum.
2008
The AAA cliff: correlation was real, the ratings were not.
2014
BCBS revised securitisation framework: hierarchy, floors, p-factor.
2017/19
EU Securitisation Regulation + CRR calibration: retention, transparency, STS.
2021
NPE securitisation amendments; synthetic STS.
2025
CRR3: halved p-factors inside the output floor (transitional, to 2032); Art 501d crypto bridge. June: Commission revival package proposed.

Requirements

Originators & investors both carry duties

Significant risk transferQuantitative tests plus supervisory assessment before derecognising RWA; SRT notification files, call features and excess spread scrutinised — the ECB's SRT process is a project per transaction.
Risk retention5% net economic interest, one of the five permitted forms, held for life — verified by investors, not just promised by originators.
Investor due diligence (Art 5 SecReg)Documented pre-investment analysis of the pool, structure and retention; ongoing monitoring — holding the position is itself a compliance obligation.
Data capability for the hierarchySEC-IRBA requires KIRB on the pool (loan-level data + an approved model); without it, SEC-SA needs KSA and delinquency W per pool, per quarter.
STS verificationCriteria self-assessed, third-party verifiers used in practice, ESMA notification — mislabelled STS unwinds the capital relief retroactively.
ReportingESMA disclosure templates (loan-level), investor reports; for crypto: Art 501d exposure reporting and aggregate monitoring.

Calculations

Where capital sits in the structure

Senior 16–100% · RW ≈ 44%
Mezz 8–16% · ≈ 790%
Junior 0–8% · 1250%
Exponential decay above KA; the 15% floor waits below
Just above KA — near-deduction, fading fast
D ≤ KA = 8% → the tranche is the pool's expected capital

Non-STS, p = 1, pool KA = 8%. Attachment/detachment on the vertical axis.

SEC-SA — the numbers behind the picture Pool avg RW 100%, W = 0 → KSA = KA = 8% · p = 1
Junior 0–8%: RW = 1250%
Mezz 8–16%: RW ≈ 790%
Senior 16–100%: RW ≈ 44% (floor 15% not binding)
Total capital ≈ KA × (1+p) = 16% of the pool — tranching doubles it.
STS (p = 0.5): total 12% · in the S-TREA (p = 0.5 / STS 0.25): less still — the transitional at work.
Crypto — Art 501d €10m unbacked exposure → RWA = 10 × 1250% = €125m; capital ≈ the full exposure — deduction by another name. Tokenised bund: €10m × 250% = €25m.

Changes & sources

CRR2 → CRR3

AreaChange
FrameworkHierarchy unchanged (2019 architecture)
Output floor interactionp halved in S-TREA: 0.5 non-STS / 0.25 STS — transitional to 2032
CryptoArt 501d transitional weights; disclosure & limits

Where the law lives

Art 242–270a CRR; Securitisation Regulation 2017/2402 (retention, transparency, STS); EBA SRT report and STS GL; ESMA disclosure ITS. Crypto: Art 501d CRR, MiCA, BCBS SCO60 pending transposition.

Open items

  • The June 2025 Commission securitisation package — p-factors, due diligence, LCR treatment — in legislative process; calibration may move mid-decade.
  • Permanent crypto regime: SCO60 transposition will replace Art 501d; group exposure limits sharpen.

Independent analysis by Elderlake Partners, as at August 2026. Not legal, accounting or supervisory advice.