On May 12, 2015, the European Supervisory Authorities published a report setting out the outcome of their review of EU legislative disclosure and due diligence requirements for securitizations and making recommendations for removing inconsistencies across the EU framework. The recommendations constitute the ESA’s response to the European Commission’s consultation on securitization published in February 2015 as part of the Capital Markets Union initiative. The EU framework for structured finance instruments, covering investor due diligence, originator, issuer and sponsor retention and disclosure requirements, is established under a number of EU legislative measures including the Prospectus Directive, the Capital Requirements legislation, the Alternative Investment Fund Managers Directive, the Credit Rating Agency Regulation and Solvency II. The ESAs are recommending: (i) harmonization of due diligence requirements across investor types; (ii) that investor due diligence needs and requirements are met by the disclosure requirements; (iii) a standardized investor report which is available in a centralized public space; (iv) that loan by loan data should be provided to investors; (v) that data providers should be able to fulfill disclosure requirements provided the data owner retains responsibility for the quality of the information; (vi) that all investors should be able to conduct stress tests on all types of structured finance instruments; (vii) a review of the definitions and key terms in the legislation with a comprehensive glossary to support the framework; and (viii) mandatory disclosure requirements for all structured finance instruments admitted to trading on an EU regulated market or offered to the public.
The ESA’s report is available at: http://www.eba.europa.eu/documents/10180/950548/JC+2015+022+- +Final+JC+Report+on+securitisation.pdf.