Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation ("Securitsation Regulation") came into force on 18 January 2018. It promotes two purposes: first, the harmonisation and consolidation of certain key elements in the European securitisation market across the financial industries and, second, the creation of a specific legal framework for simple, transparent and standardised ("STS") securitisations. The concept of STS securiti- sations has been introduced following the strong request of market participants for a recalibrated risk-weighting regime that distinguishes between "normal" securitisations and securitisations that meet certain quality standards. The Securitisation Regulation will apply to credit institutions, insurance companies and pension funds as well as alternative investment fund managers from 1 January 2019 onwards.
The Securitisation Regulation mandates—one could also say challenges—the three European supervisory authorities, i.e., the European Securities and Markets Authority ("ESMA"), the European Banking Authority ("EBA") and the European Insurance and Occupational Pensions Authority ("EIOPA") with developing regulatory technical standards ("RTS") and implementation technical standards ("ITS") for a number of key areas addressed in the Securitisation Regulation.
So far, the following draft RTS and ITS have been published for consultation and feedback:
- Draft technical standards on disclosure requirements to be fulfilled by originators, sponsors and securitisation special purpose entities in securitisations (ESMA Consultation Paper of 19 December 2017—ESMA33-128-107);
- Draft technical standards on operational standards for securitisation repositories data collection, data aggregation and comparison, data access and procedures to verify completeness and consistency of information (ESMA Consultation Paper of 19 December 2017—ESMA33-128-107);
- Draft technical standards on content and format of the STS notification under the Securitisation Regulation (ESMA Consultation Paper of 19 December 2017—ESMA33-128-33);
- Draft technical standards on third-party firms providing STS verification services under the Securitisation Regulation (ESMA Consultation Paper of 19 December 2017—ESMA33-128-108);
- Draft regulatory technical standards on the homogeneity of the underlying exposures in securitisations under Art. 20(14) and 24(21) of the Securitisation Regulation (EBA Consultation Paper of 15 December 2017—EBA/CP/2017/21) and
- Draft regulatory technical standards specifying the requirements for originators, sponsors and original lenders relating to risk retention pursuant to Article 6(7) of the Securitisation Regulation (EBA Consultation Paper of 15 December 2017—EBA/CP/2017/22).
The consultation and feedback phase for each set of draft technical standards is three months from the date of its pub- lication. On 16 January 2018, EBA and ESMA announced a public hearing scheduled for 19 February 2018 covering the above-listed consultation papers.
In a series of Jones Day White Papers, we will provide an overview of the various consultation papers and the status of the draft technical standards published by the mandated European supervisory authorities.
In this first Jones Day White Paper, we will focus on ESMA's consultation paper ("Consultation Paper") on draft technical standards on disclosure requirements under the Securitisation Regulation (see above) (herein referred to as "Draft Technical Standards").
LEGAL BACKGROUND AND TIMETABLE
The draft regulatory technical standards on disclosure require- ments are based on Articles 7(3) and 17(2) of the Securitisation Regulation. ESMA sees an overlap between Articles 7(3) and 17(2)(a) and concludes that this overlap should be addressed by one set of "combined" draft technical standards. In fact, since Article 17(2)(a) duplicates the wording set out in Article 7(3), it is in the interest of all market participants to have consistent and non-conflicting disclosure and reporting standards. So, ESMA's combined approach is welcome.
The deadline for the submission of the final draft regulatory technical standards to the European Commission is 18 Januar 2019. The consultation period ends on 19 March 2018.
REPORTING ON UNDERLYING EXPOSURES
Article 7(1)(a) of the Securitisation Regulation requires the originator, sponsor and SSPE of a securitisation (each defined in the draft RTS as a "reporting entity") to make information on the underlying exposures available to the holders of a securitisation position, to the competent authorities and to potential investors. The Securitisation Regulation does neither specify the level of detail nor address the format in which such information is to be submitted. Instead, Article 7(3) mandates ESMA to develop RTS to specify the information which the reporting entity must provide in order to comply with their reporting obli- gations under Article 7(1)(a).
To master this task, ESMA has adopted the template approach that already exists in the securitisation market, in particular the current European Central Bank ("ECB") loan-level data templates and the proposed templates provided by the CRA3 RTS.1 The templates have been updated to incorporate additional features which, in ESMA's view, are required by the Securitisation Regulation, and to reflect the various needs of securitisation market user groups as well as the lessons learned since the implementation of these templates. The set of templates now proposed by ESMA captures new information that is considered relevant and necessary for the due diligence to be conducted by investors and potential investors, as well as for the performance of certain market monitoring and supervisory tasks imposed on public authorities. The updated template design is set out in Annex 2 to the Consultation Paper and will ultimately be annexed to the corresponding ITS.
ESMA summarises the goals to be achieved by using standardised templates as follows:
- Providing greater clarity for investors and potential investors on the performance and likely performance of securitisations;
- Assisting the public bodies listed in the Securitisation Regulation to accomplish their respective tasks and obligations, in particular with regards to market monitoring and financial stability assessments;
- Contributing to restoring confidence in the securitisation market, by explicitly identifying a distinct underlying exposure type and
- Providing certainty to reporting entities on the extent and manner of information to disclose for their respective securitisations.
Different Sets of Templates
ESMA's proposal distinguishes between templates for non- asset-backed commercial paper ("ABCP") securitisations an templates for ABCP securitisations.
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