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.
The Securitisation Regulation refers to transactions where the credit risk associated with an exposure or a pool of exposures is tranched, and all of the following characteristics are met:
- payments in the transaction or scheme are dependent upon the performance of the exposure or of the pool of exposures;
- the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme;
- 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, ABCP transactions and ABCP programme.
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).
ESMA FINAL REPORTS AND OPINIONS
As further explained in the applicable news item (16 July 2018), ESMA published Final Reports containing technical standards relating to:
- The information and format that the originators and sponsors of securitisation products must adhere to when notifying ESMA that a securitisation transaction meets the STS criteria (‘STS notification’); and
- The information to be provided to the competent authorities in the application for the authorisation of a third party assessing the compliance of securitisations with the STS criteria.
In addition, as further explained in the news item (22 August 2018), ESMA published a Final Report on technical standards relating to disclosure requirements for securitisations, including a number of disclosure templates discussed below. More recently, as further explained in the news item (31 January 2019), ESMA published an Opinion containing revisions to the securitisation disclosure RTS/ITS, following a letter from the European Commission received on 14 December 2018, as well as a first set of Question and Answers (Q&As).
Elsewhere, as further explained in the news item of 13 November 2018, ESMA published a Final Report on securitisation repository technical standards (application requirements and operational standards and access conditions), as well as Final Technical Advice to the European Commission on ESMA’s fees for registering and supervising securitisation repositories.
Finally, as explained in the news item of 8 January 2019, ESMA published a Final Report containing technical standards relating to how competent authorities (CAs) and the ESAs should cooperate with each other in the supervision of securitisation transactions.
ESMA's opinion on amendments to its draft securitisation disclosure technical standards, includes 15 reporting templates.
These are available here below using a format that may, in ESMA’s view, assist stakeholders in their analysis of ESMA’s draft technical standards. To further facilitate stakeholders’ analyses, the templates include references to the European Central Bank (ECB) loan-level asset-backed securities 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 emphasize that the templates below have been provided only for convenience and that the official versions of the templates are contained in the respective annexes to the Final Report.
The XML schema for these templates shall be made available in the coming months.
STS NOTIFICATION TEMPLATES
On 16 July 2018, ESMA published its final report on STS notification (RTS/ITS). 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 securitisations, ABCP securitisation or ABCP programme) established in the draft technical standards.
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.