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Securitisation

Securitisation

ESMA regulates securitisation activities, principally by setting out reporting requirements, laying down the contents of the STS notification and maintaining a list of STS securitisations, supervision of securitisation repositories and facilitating cooperation in supervision between competent authorities. The Securitisation Regulation is the main piece of EU legislation in this area. 

BACKGROUND

The Securitisation Regulation refers to transactions or scheme where the credit risk associated with an exposure or a pool of exposures is tranched, and all of the following characteristics are met:

  1. payments in the transaction or scheme are dependent upon the performance of the exposure or of the pool of exposures;
  2. the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme;
  3. the transaction or scheme does not create specialised lending exposures (i.e. those possessing all of the characteristics listed in Article 147(8) of Regulation (EU) No 575/2013).

SECURITISATION REGULATION OVERVIEW

The Securitisation Regulation establishes a general framework for securitisation and creates a specific framework for simple, transparent and standardised (STS) securitisation. The Regulation was published in the Official Journal of the European Union on 28 December 2017 and is a cornerstone of the EU’s efforts to establish a capital markets union, by creating a single market for investment services and activities and to ensure a high degree of harmonised protection for investors in financial instruments.

The Securitisation Regulation confers a number of tasks upon ESMA, including to design reporting requirements for a number of features of securitisations, such as details of their underlying exposures, of the securitisation instrument structure, and of the performance of the transaction. In addition, securitisations seeking to be considered as STS must fulfil additional criteria and notify ESMA of their fulfilment of these criteria on the basis of notification templates established by ESMA for non-ABCP transactions, ABCP transactions and ABCP programmes.

From 1 January 2019, ESMA must maintain a list of securitisations meeting these STS criteria on its website, in addition to providing the STS notifications. Elsewhere, ESMA has been designated as the supervisor of securitisation repositories, in a similar manner to its supervision of trade repositories under EMIR and SFTR. In close cooperation with EBA and EIOPA, ESMA is also tasked with the responsibility of specifying the general cooperation obligation and information to be exchanged between competent authorities and the European Supervisory Authorities (EBA, EIOPA, ESMA).  

DISCLOSURE REQUIREMENTS AND TEMPLATES

On 3 September 2020, the following two technical standards on disclosure requirements under the Securitisation Regulation were published in the Official Journal of the European Union:

·         Commission delegated regulation supplementing Regulation (EU) 2017/2402 with regard to regulatory technical standards specifying the information and the details of a securitisation to be made available by the originator, sponsor and SSPE (hereinafter: the disclosure RTS); and

·         Commission implementing regulation laying down implementing technical standards with regard to the format and standardised templates for making available the information and details of a securitisation by the originator, sponsor and SSPE (hereinafter: the disclosure ITS).

These technical standards will enter into force on 23 September 2020. As of that date, the transitional provision allowing for the use of the so-called “CRA 3” reporting templates will cease to apply (see Article 43(8) of the Securitisation Regulation).

​The disclosure technical standards include 15 reporting templates. These are available below using a format that may, in ESMA’s view, assist stakeholders in their analysis of the technical standards. To further facilitate stakeholders’ analyses, the templates include references to the European Central Bank (ECB) asset-backed securities loan-level data template fields, where available. These references have been produced on a best-effort basis, and do not form part of ESMA’s draft technical standards. ESMA therefore makes no claim or commitment as regards the final accuracy of such mapping between the draft templates and the ECB’s templates. In addition, ESMA wishes to emphasise that the templates below have been provided only for convenience and that the official versions of the templates are contained in the respective annexes available on the European Commission's website.

Annex 2: Underlying exposures - residential real estate

Annex 3: Underlying exposures - commercial real estate

Annex 4: Underlying exposures - corporate

Annex 5: Underlying exposures - automobile

Annex 6: Underlying exposures - consumer

Annex 7: Underlying exposures - credit cards

Annex 8: Underlying exposures - leasing

Annex 9: Underlying exposures - esoteric

Annex 10: Underlying exposures - add-on non-performing exposures

Annex 11: Underlying exposures - ABCP

Annex 12: Investor report - Non-ABCP securitisation

Annex 13: Investor report - ABCP securitisation

Annex 14: Inside information or significant event information - Non-ABCP securitisation

Annex 15: Inside information or significant event information - ABCP securitisation

REPORTING INSTRUCTIONS, XML SCHEMA AND VALIDATION

The XML schema for these templates and accompanying technical reporting instructions and validation rules are available below. Reporting entities may choose to use either version 1.1.0 or version 1.2.0 of the XML schema and validation rules until 1 February 2021. As of that date, only version 1.2.0 will be admissible.

Current Version: Version 1.2.0 published on 19 August 2020

​​Technical reporting instructions

XML schema and validation rules​ [ERRATUM – file updated 14h15 on 20/08/2020] 

Previous Versions: 

Version 1.1.0 of the XML schema and validation rules and technical reporting instructions were published on 20 December 2019.

Version 1.0.0 of the XML schema and validation rules was published on 17 July 2019.

STS SECURITISATION

For a securitisation to be considered STS, it must fulfil the STS requirements set out in Articles 19 to 22 or Articles 23 to 26 of the Securitisation Regulation. In addition, ESMA needs to be notified of how a securitisation transaction fulfils these STS requirements by using the different STS notification templates (non-ABCP transactions, ABCP transactions or ABCP programmes) established in the technical standards.

On 3 September 2020, the following two technical standards on STS notifications were published in the Official Journal of the European Union

·   Commission delegated regulation supplementing Regulation (EU) 2017/2402 of 12 December 2017 and laying down regulatory technical standards specifying the information to be provided in accordance with the STS notification requirements (hereinafter: the RTS on STS notifications); and

·   Commission implementing regulation laying down implementing technical standards with regard to templates for the provision of information in accordance with the STS notification requirements with associated Annexes (hereinafter: the ITS

The two technical standards will enter into force on 23 September 2020. Information on how STS notification templates should be submitted to ESMA can be found in the reporting instructions, including the interim STS notification templates.

 

THIRD-PARTY VERIFIERS

The originator, sponsor or SSPE of a securitisation seeking STS status may use the service of a third party authorised under Article 28 of the Securitisation Regulation to check whether a securitisation complies with the relevant requirements. However, the use of such a service shall not, under any circumstances, affect the liability of the originator, sponsor or SSPE in respect of their legal obligations under this Regulation. A third-party verifying STS compliance must be authorised by a national competent authority. The list of national competent authorities that authorise and supervise third-party verifiers is available in the section entitled “LIST OF COMPETENT AUTHORITIES” below

On 29 May 2019, the Commission Delegated Regulation (EU) 2019/885 of 5 February 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard to regulatory technical standards specifying information to be provided to a competent authority in an application for authorisation of a third party assessing STS compliance (hereinafter: “the TPV RTS”) was published in the Official Journal of the European Union. The TPV RTS is based on a draft submitted to the European Commission by ESMA on 16 July 2018.

SECURITISATION REPOSITORIES

On 3 September 2020, following three technical standards relating to the registration and operational standards of securitisation repositories were published in the Official Journal of the European Union:

·         Commission delegated regulation supplementing Regulation (EU) 2017/2402 with regard to regulatory technical standards on securitisation repository operational standards for data collection, aggregation, comparison, access and verification of completeness and consistency (hereinafter: the RTS on operational standards);

·         Commission implementing regulation laying down implementing technical standards with regard to the format of applications for registration as a securitisation repository or for extension of a registration of a trade repository pursuant to Regulation (EU) 2017/2402  (hereinafter: the ITS on registration); and

·         Commission delegated regulation supplementing Regulation (EU) 2017/2402 with regard to regulatory technical standards specifying the details of the application for registration of a securitisation repository and the details of the simplified application for an extension of registration of a trade repository (hereinafter: the RTS on registration).

The technical standards will enter into force on 23 September 2020. As of that date, ESMA will begin receiving and assessing applications for registration as a securitisation repository. Parties interested in understanding the application process are invited to consult ESMA’s guidance on registering securitisation repositories and regularly consult the dedicated page on ESMA’s website.

Until at least one securitisation repository has been registered by ESMA, information that should normally be made available by reporting entities to securitisation repositories according to the Securitisation Regulation must instead be made available via a website that meets certain conditions (See the fourth sub-paragraph of Article 7(2) of the Securitisation Regulation). ESMA has no powers to supervise any website, nor is ESMA able to provide an assessment of whether any potential website meets the applicable requirements of the Securitisation Regulation.

GUIDELINES ON DATA COMPLETENESS AND CONSISTENCY THRESHOLDS​

On  10 July 2020, following a public consultation, ESMA published its Final Report on the Guidelines on securitisation repository data completeness and consistency thresholds. The purpose of the Guidelines is to provide clarity for market participants and securitisation repositories (SRs) on the accepted levels of ‘No-Data’ options contained in the data submitted by securitisation parties to SRs. The final report provides an overview of the feedback received during the open public consultation as well as ESMA’s response to the feedback, together with the final version of the Guidelines.

COOPERATION ON SUPERVISION

As further explained in the new items (9 January 2019), ESMA published a Final Report containing technical standards relating to how CAs and the ESAs should cooperate with each other in the supervision of securitisation transactions.

Securitisation transactions’ parties (investors, originators, sponsors, original lenders and Securitisation Special Purpose Entity (SSPE)) can be established in different Member States and supervised by different CAs. ESMA’s draft technical standards set out the general cooperation obligations, the information to be exchanged and the common notifications procedures in the event of infringements of the Securitisation Regulation.

LIST OF COMPETENT AUTHORITIES

The list of the competent authorities under the Securitisation Regulation is available here.

Competent authorities are responsible for supervising compliance of institutional investors, originators, SSPEs, original lenders and third parties with their obligations under the Securitisation Regulation in particular:

  • Due diligence requirements (Article 5),
  • Risk retention requirements (Article 6),
  • Transparency requirements (Article 7),
  • Ban on resecuritisation (Article 8),
  • Criteria for credit-granting (Article 9),
  • STS criteria (Articles 18 to 27)
  • Third parties verifying (TPV)’ requirement (Article 28).

This list is updated by ESMA where necessary.

JOINT COMMITTEE SECURITISATION COMMITTEE

In accordance with Article 36(3) of the Securitisation Regulation, a specific securitisation committee, the Joint Committee Securitisation Committee (JCSC) has been established within the framework of the Joint Committee of the European Supervisory Authorities to help competent authorities to be able to closely cooperate in order to carry out their duties. This committee, inter alia, analyses securitisation issues of a cross-sectoral nature.

QUESTIONS AND ANSWERS

Queries relating to securitisation topics should be addressed to the following email address: securitisation@esma.europa.eu If a question relates to policy interpretations, it is recommended to use ESMA’s Questions and Answers tool (available and described here).