Summer 2020 should mark a very important milestone for the Securitisation Regulation 2017/2402: it is expected that the remaining Regulatory Technical Standards (RTS) will be published in the Official Journal (OJ) of the European Union (EU). The publication in the Official Journal (OJ) will be followed by a period of 20 (calendar) days for the entry into force. The event will hopefully start a new era for securitisation.

 

What does it mean for the ABS (private and public) as well as ABCP?

The month of June triggers the entry into force of the new European Securities and Markets Authority (ESMA) underlying exposure templates in XML format according to the ISO 20022 standard.

In order to facilitate the reporting in the ESMA compliant format, European DataWarehouse (ED) has been providing a dedicated converter tool for all asset classes as the XML format is quite complex. At the same time testing in a sandbox area is also available to make sure that the documents are correctly named and the loan level data files completed with the support from ED dedicated analysts.

The publication of the RTS in the OJ will provide the opportunity apply to become an authorised securitisation repository with the relevant authorities:

1) ESMA in continental Europe
2) The Financial Conduct Authority in the UK

It is expected that the authorisation process for the securitisation repositories may take up to eight months.

Therefore, the announcements from the relevant authorities are expected to be published on their websites in the first half of 2021.

Transition from the ECB to the ECB+ESMA to the ESMA reporting requirements

Since January 2013 the European Central Bank (ECB) templates and taxonomies have been used as eligibility requirements in the context of asset-backed securities (ABS) for the Eurosystem collateral framework.

The announcement of the designation as securitisation repository marks an important milestone. It is one of the necessary but not sufficient conditions for the transfer (see more details in the ECB press release as of 22nd March 2019) from the reporting obligation of the ECB and ESMA templates (dual regime) to a single reporting regime (ESMA only).

The ESMA reporting requirements will also apply to ABS transactions issued prior to January 2019 three years after the date on which the change in the ECB’s transparency requirements becomes effective (likely H1 2024).

In the UK, the Bank of England also issued a press release (11th October 2019).

To this end, ED has developed a Gap Analysis for each asset class to identify the differences between the ECB templates and the equivalent versions of the ESMA reporting requirements.

A sample of the Gap Analysis is available here. To purchase the complete report with field-by-field analysis, email enquiries@eurodw.eu.

In the meanwhile, ESMA has also being working diligently providing:

1) XML schema and validation rules (latest version December 2019, an updated version is expected shortly);
2) Questions and answers on the interpretation of the reporting requirements (a new version is also expected anytime soon).

What further clarifications are expected?

There are a number of issues the industry is seeking further input on. Specifically:

• Third country equivalence is a very important topic for sponsors, originators and SSPEs on one side and investors on the other side outside the European Union;
• The No Data (ND) (1-4) thresholds across asset classes subject to a recent ESMA consultation are also expected to be published soon;
• An updated list of the National Competent Authorities (NCAs) is also on the waiting list as in certain countries, like in Italy, the NCA/s are to be announced.

Are there any elements of sustainable finance included in the ESMA templates?

Yes, certain elements have been introduced including the Energy Performance Certificate together with the certificate provider for residential mortgages [RREC10 and RREC11], auto loans or leases [AUTL57 and AUTL58] and consumer loans [CMRL68 and CMRL69]. Even if for these two fields there is the possibility to enter ND5, when the information is not available, there is a strong demand from originators, sponsors and SSPEs to report the information, where possible. It is also a transparency requirement for securitisations where the underlying exposures are residential loans or auto loans or leases seeking STS (Art.22 (4)). For this purpose, a specific solution called “Giuditta” has been developed by ED to extract the energy performance certificate (EPC) from third party sources like energy efficiency databases.

Want to know more? Register for one of our upcoming webinars or email enquiries@eurodw.eu for any questions.