EDW Welcomes EU Proposal to Boost the Securitisation Market

European DataWarehouse (EDW) welcomes the European Commission’s recent proposal to enhance the EU securitisation framework. The proposed amendments to Article 5 (due diligence) and Article 7 (transparency and reporting) aim to reduce regulatory complexity and unlock securitisation’s potential as a vital financing tool for supporting investment and growth across Europe.

The proposal introduces a more proportionate, risk-based approach to due diligence under Article 5:

• Investors in EU-originated securitisations would no longer need to verify, prior to investment, the originator’s or sponsor’s compliance with transparency, retention, or STS requirements.
• A lighter due diligence process would apply to low-risk investments such as senior tranches or repeat transactions.
• Due diligence for secondary market trades could be documented up to 15 days post-investment, easing operational pressures.
  

While the streamlined approach is a welcome improvement, securitisations involving non-EU sell-side parties would still be subject to stricter requirements, including full verification of compliance with EU retention and Article 7 reporting standards.

The proposal’s redefinition of “public” and “private” securitisations may extend repository reporting obligations to hundreds of transactions that were previously exempt. Although both public and private deals already provide ESMA templates to investors (upon request), the change could reshape compliance expectations for many issuers.

This new classification offers an opportunity to harmonise transparency standards—but careful calibration will be key to avoid unnecessary burdens.

The Commission also proposes a 35% reduction in reporting fields for public securitisations, aligning with the EU’s broader effort to cut reporting burdens. While issuers may benefit from lower reporting costs, this could limit the granularity of data available to investors and credit rating agencies, potentially affecting deal analysis.

For private securitisations, the Commission suggests introducing a simplified, supervisor-focused template, likely aligned with the SSM notification format. While this may minimise costs, some argue that building on existing, widely used templates like the European Benchmark Exercise might offer a more practical solution.

EDW strongly supports direct market involvement in designing new templates. The success of the original ECB loan-level data templates shows the value of working groups that include issuers, investors, supervisors, and repositories early in the process, rather than relying solely on formal consultations.

Despite the many improvements, further clarity is needed on the treatment of non-EU transactions: Non-EU deals would still need to comply fully with EU-style reporting and EU investors would still be required to verify compliance by non-EU issuers with EU transparency requirements before investing in third country securitisations.

Clarifying these aspects will be crucial to enabling more robust EU investor participation in global securitisation markets.

The European Commission’s proposal is a positive step towards a more efficient and accessible securitisation market. While the reforms to Articles 5 and 7 offer clear progress, further refinements—particularly in relation to non-EU transactions, public/private classifications, and template usability—will be essential to ensure the framework works effectively in practice.

EDW remains committed to supporting the legislative process and collaborating with stakeholders to promote a strong and well-functioning securitisation market in Europe.

To learn more, watch the recording of EDW’s Regulatory Roundtable Webinar from 27 June, where the EDW team and experts from TSI and A&O Shearman discussed the proposed changes—focusing especially on Article 5 (due diligence) and simplified reporting under Article 7.