• The European Securities and Markets Authority (ESMA) has published a consultation paper on reforming securitisation reporting templates.

• The comment period ends on 15 March 2024, which makes it unlikely that there will be any major changes to the template regime in the early part of this year.

• The consultation is being undertaken in response to a report by the European Commission which recommended simplification of the reporting regime particularly with regard to private securitisations.

• ESMA however presents four options ranging from doing nothing to increasing the reporting burden to undertaking a significant redesign of the templates.

• Whatever changes are adopted, they will impact EU investors as well as the originators and sponsors of securitisations sold to those investors.

Introduction

On 21 December 2023 the European Securities and Markets Authority (“ESMA”) published a consultation paper on the reform of the templates used for securitisation reporting¹. The paper will be of interest to EU investors and sponsors, originators and arrangers of securitisations sold to EU investors. ESMA has invited comments on the proposals in the paper by 15 March 2024.

Background

In October 2022, the European Commission (“EC”) published a report (the “EC Report”) on the functioning of the Securitisation Regulation² (the “SECR”). The EC Report made it clear that in the EC’s view, in-scope EU investors must obtain reporting compliant with EU technical standards even when they invest in securitisations originated outside of the EU.

The views expressed in the report sparked an upsurge in the number of securitisations with non-EU sponsors and originators that provide EU template reporting. It also resulted in some sponsors and originators deciding to withdraw from the European market, as the templates are difficult to complete for certain types of non-EU securitisations.

The EC Report also identified areas for improvement in the technical standards for reporting. The EC has now determined that enhancements could be made to the existing disclosure framework without altering the SECR and has asked ESMA to undertake a review of the disclosure templates, concentrating on the following aspects:

• Drawing up a simplified and dedicated template for private securitisations (which under the current definition would include all securitisations without a prospectus³) that is tailored particularly to supervisory needs, including non-EU securitisations.

• Assessing the usefulness of loan-level disclosure for highly granular pools of underlying exposures.

• Addressing possible technical and practical difficulties in completing the information required by streamlining or removing unnecessary fields and potentially aligning them more closely with supervisor/investors’ needs.

• Considering the feasibility and usefulness of introducing dedicated templates for new asset classes not covered in the current disclosure framework (e.g., trade receivables).

ESMA’s preliminary views

After publication of the EC Report, ESMA initiated informal discussions with securitisation stakeholders. Upon evaluating the feedback received, ESMA felt that feedback received from stakeholders was varied and at times mutually exclusive. Consequently, ESMA is suggesting different implementation strategies to cater to the diverse needs of the stakeholders involved:

• Option A proposes making no changes to the reporting regime until the SECR is amended.

• Option B suggests maintaining the current framework with the introduction of a few amendments to increase the level of reporting.

• Option C focuses on a targeted review aimed at streamlining the disclosure templates and developing a dedicated template for private securitisations.

• Option D proposes a thorough review of the disclosure templates, aiming at a fundamental simplification of the framework.

Option A

ESMA notes that the reporting regime has not been in place for long and as a result there may not be the necessary level of knowledge to undertake a meaningful review. It also observes that while there is no concrete timeline, at some point there will be a review of the SECR. It is wary of beginning a review of the templates which may overlap with or be closely followed by a change to the SECR.

ESMA also considers that introducing a private template could result in diverse approaches for disclosure of such transactions across the EU. ESMA’s informal discussions revealed both investors and supervisory authorities require the same level of information for both private and public transactions. Introducing a specific template for private securitisations may not adequately facilitate due diligence analysis and could lead to additional reporting needs to bridge the information gap between the two types of securitisations. ESMA has received feedback from unnamed supervisory authorities suggesting that this could be solved by requiring both public and private securitisations to deliver reporting to Securitisation Repositories (“SRs”).

Option B

Under Option B, ESMA says there will be an increased compliance burden with potentially higher operating costs, as the fundamental elements of the current disclosure framework will be maintained with amendments to enhance the information available to data users. This option was introduced as some stakeholders requested for more information during the consultation process.

Specifically, the completeness and consistency thresholds will be adjusted to limit the use of No-Data Options⁴ while the following fields will be added in the following templates to facilitate risk-assessment analysis:

• Annex 4 (Corporates): Probability of Default (PD) and Loss Given Default (LGD).

• Annex 10 (NPE): more information regarding collateral and the collection process.

• Annexes 11 (ABCP) and 12 and 13 (ABCP and Non-ABCP Investor Reports): information about risk retention, re-securitisation, and the STS status of the transactions.

• Across all annexes pertaining to underlying exposures: payment schedules for individual loans.

ESMA acknowledges that asset-backed securities are currently not covered by the Corporate Sustainability and Reporting Directive (CSRD). However, given the ECB’s decision that, from 2026, the Eurosystem will only accept collateral issued by companies whose social and environmental disclosures comply with the CSRD, ESMA is also open to incorporating this type of disclosure into the current process.

Option C

Under Option C, a consolidated template for the reporting of any type of private transaction for supervisory purposes will replace the use of all existing ESMA templates for private securitisations.

ESMA does not include a draft form in the consultation paper but does consider whether it would be appropriate to use the current form of notice used by significant institutions⁵ when notifying the European Central Bank of securitisation transactions where they have acted as originator or Sponsor (the “SSM Notice”).⁶

While the SSM Notice contains fewer required fields than the current ESMA templates, the SSM Guide specifically requires that “the requirements of Articles 6-8 SECR have to be fulfilled on a continuous basis”⁷, written confirmation that the securitisation complies with Article 7 and an indication of where and how the information required by Article 7 is made available. ESMA does not explain how it proposes to modify these requirements so that private securitisations will have a simplified reporting regime rather than a regime that requires full template reporting plus an additional form based on the SSM Notice.

ESMA also notes some concerns about creating a simplified template for private securitisations:

• First, as noted in Option A, some stakeholders want the same level of disclosure for both private and public transactions, including in some cases delivery to SRs.

• Second, introducing a new template might necessitate adjustments to internal systems, incurring costs that may not be adequately offset by practical benefits.

As part of Option C, loan level data would be removed for securitisations involving highly granular portfolios, such as auto loans, credit card loans, and trade receivables with a considerable number of loans, or portfolios featuring short maturities (30/90 days). However, ESMA considers that in the context of RMBS and CMBS, where underlying pools are made up of highly granular assets with longer maturities, maintaining the loan-level information is crucial. ESMA observes that this may require a broader change of approach as loan level data is required for Eurosystem collateral eligibility and there is regulatory guidance suggesting loan level data is necessary for investors to have an accurate understanding of securitisations⁸.

ESMA considers that there is an absence of clear consensus for any other type of streamlining of the existing templates but does mention that it received proposals for simplified reporting on trade receivables (using Annex 11 (ABCP portfolio data) rather than Annex 9 (Esoteric)) and synthetic transactions.

Option D

Under Option D, the templates adopted will be simplified regardless of whether the securitisation is private or public, true-sale or synthetic. During the informal engagement, ESMA received a set of highly simplified, tailored templates used by some market participants which appear to cover various aspects of the transaction, particularly elements related to the deal structure, borrower data, loan information, amortisation profile, and data associated with rating and default information. The market participants submitting the templates explained that they are intended to apply to all types of securitisation transactions. ESMA considers that these templates can only be adopted if they are sufficient to ensure compliance with all requirements for disclosure and due diligence set out in the SECR.

In connection with this proposal, as with Option C, ESMA would consider aggregate loan data for transactions that (a) are revolving in nature, (b) are highly granular or (c) have short-term maturity, including auto loans, credit card loans, and trade receivables.

This proposal would also involve a more radical overhaul of the No Data Option regime, replacing it with the following new disclosure categories:

• Mandatory (M): these fields are strictly required, and validations of both format and content are applied.

• Conditionally mandatory (C): these fields are required if the specific conditions set out in the applicable validation rules are met. If these conditions are not met, the field can be populated on an optional basis unless otherwise specified. Format and content validations are applied.

• Optional (O): these fields should be populated if they are relevant to the given scenario or transaction features. It is important to note that fields specified as optional in the validation rules must always be populated when applicable. Format and content validations are only applied when the field is populated.

¹Consultation on the Securitisation Disclosure Templates

²Regulation EU 2017/2402 (as amended).

³“Prospectus” is defined in the EU Prospectus Regulation (EU 2017/1129) and is a document required if securities are issued to the public or offered on a regulated market.

⁴A reporting entity may report a No-Data Option under the Disclosure RTS corresponding to the reason justifying the unavailability of the information to be made available.

⁵“Significant institutions” means “significant supervised entities” as defined in Article 2(16) of Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation) (ECB/2014/17).

⁶European Central Bank, ‘Guide on the notification of securitisation transactions’ (the “SSM Guide”).

⁷The SSM Guide.

⁸Joint Committee of the European Supervisory Authorities, ‘Joint Committee Report on the Implementation and Functioning of the Securitisation Regulation (Article 44)’ at [26].