Today, the European supervisory authorities EBA, ESMA and EIOPA published the Joint Committee Report on the implementation and functioning of the EU Securitisation Regulation (SECR) under Article 44 SECR.
It includes recommendations on how to address initial inconsistencies and challenges that may affect the overall efficiency of the current securitisation regime. The report is intended to provide guidance to the European Commission in its review of the functioning of the SECR. It also provides initial input into the ongoing discussion on the efficiency of the securitisation framework in light of the role securitisation could play in the recovery from the Covid 19 pandemic.
In particular, the report highlights the following:
- Transparency requirements:
The ESAs assess the strong increase in STS notifications of private securitisations (including ABCP) in 2020 and the slight decrease in public securitisations as indicative of more new issuance in the private segment. However, from the perspective of market participants, the reason for this is likely to be primarily that the majority of existing transactions were only able to implement the STS criteria from 2020 onwards due to the transition period and the necessary adjustments. The report recommends more precise legal definitions for private securitisations, if necessary, the mandatory inclusion of a securitisation repository.
- Due diligence requirements:
It is recommended to specify in regulatory guidelines how proportionality in the area of due diligence could be implemented to facilitate the entry of new investors into the EU securitisation market.
- Criteria for simple, transparent and standardised (STS) securitisations:
Targeted changes to the STS criteria are needed to facilitate the use of the STS label for ABCP programmes. In addition, in the medium term, as more STS issuances take place and the STS market reaches a stable pace, further analysis should be conducted by the European Commission, with the support of the ESAs, to determine how the STS criteria could be simplified without reducing the quality of the standard.
- Supervision of securitisation requirements:
In order to further improve the supervision of securitisation requirements, it is considered necessary to explore how common EU supervisory tools can be developed, examine possible alternatives to the current STS supervisory framework, in particular for those EU countries with few STS securitisation issues, and explore the relevance of a common EU approach to the ongoing supervision of third-party verifiers' eligibility requirements.