On September 3, 2020, two regulations on disclosure requirements under the Securitisation Regulation were published in the Official Journal of the European Union, finally bringing the process of harmonizing the information disclosure on securitisation transactions across the European Union to an end.
These regulations further elaborate on the information to be provided to investors, competent authorities and potential investors in securitisation transactions which fall under the scope of the Securitisation Regulation, providing greater certainty and accuracy to these players.
The Securitisation Regulation applies to all securitisations (as defined therein) completed on or after 1 January 2019 or which create new securitisation positions on or after such date (the "Securitisation Transactions"). According to article 7 of the Securitisation Regulation, originators, sponsors and SSPEs are required to make certain information available to investors, competent authorities and potential investors.
This duty includes the provision of reports on the underlying exposures and investor reports, which shall be provided quarterly in respect of nonABCP securitisations and monthly in respect of ABCP securitisations. Institutional investors subject to the Securitisation Regulation are also required to undertake due diligence on the underlying exposures and verify that originators, sponsors or SSPEs comply with the requirements of article 7.
The heterogeneity of the exposures underlying the different Securitisation Transactions, lead the EU legislator to take concern in increasing efficiency of data collection and assessment by the relevant parties and facilitating seamless aggregation and comparability across Securitisation Transactions.
In this context, ESMA was mandated under article 7 of the Securitisation Regulation to produce draft technical standards and standardised templates to be used for the provision of detailed information on the underlying exposures and investor reports.
The drafting process has included several reviews and has culminated with the adoption by the European Commission, in October 2019, of the Disclosure RTS and the Disclosure ITS prepared by ESMA. The publication of these regulations ended up occurring on September 3, 2020, and their entry into force is scheduled to occur on September 23, 2020.
New disclosure templates
The Disclosure RTS contains in its annexes the set of information to be provided, for Securitisation Transactions, on underlying exposures and investor reports and, for public Securitisation Transactions, on inside information and significant events.
In turn, the Disclosure ITS contains in its annexes the standardised templates for making such information available.
The templates are as follows (links enclosed):
The Disclosure RTS also set out guidance on those cases where certain information can not be made available or is not applicable, allowing the use of specific "No Data" options. The use of these "No Data" options is limited to the situations in which there are justifiable reasons to do so and should not be used to circumvent the reporting requirements set out under the Securitisation Regulation. Securitisation repositories are required to verify the completeness and consistency of the information provided with respect to public securitisations and that the use of the "No Data" options does not prevent the reported information from being sufficiently representative of the underlying exposures, as well as the compliance with certain percentage thresholds.
Securitisation repositories will centrally collect and maintain the records of securitisations and will be registered and supervised by ESMA. Multiple technical standards on securitisation repository registration and supervisory fees were published in the Official Journal of the European Union on 3 September 2020 and will enter into force on 23 September 2020, allowing for the registration of securitisation repositories with ESMA as of such date. Until at least one securitisation repository has been registered with ESMA, information that should be made available by reporting entities in securitisation repositories must instead be made available via a website that meets the requirements set out under article 7(2) of the Securitisation Regulation.
As of September 23, 2020, the templates referred herein shall be used to report the information in respect of the existing Securitisation Transactions and the transitional provisions currently in force namely article 43(8) of the Securitisation Regulation, which allows for the use of the so-called "CRA 3" reporting templates will cease to apply.
The publication of the Disclosure RTS and Disclosure ITS and entry into force of these reporting templates has been long-awaited by the securitisation market stakeholders and will bring a greater level of homogeneity and certainty in the information disclosed to the investors, therefore reducing due diligence costs and increasing comparability across transactions. Nevertheless, the actual relevance and level of difficulty in the filling of these templates will only be duly assessed as the market starts to make wide use of them.
More information on these updates can be found on the following ESMA webpage: https://www.esma.europa.eu/policy-activities/securitisation