This means that generally, existing securitisations will continue to be subject to the previous rules, unless new securities are issued or a new securitisation position is created.
The Securitisation Regulation came into effect across European Union member states from 1 January 2019 (the Effective Date) . It applies to new securitisation transactions issued on or after the Effective Date and to any existing securitisation in which a new "securitisation position" is created on or after the Effective Date. This means that generally, existing securitisations will continue to be subject to the previous rules, unless new securities are issued or a new securitisation position is created.
Article 7(1) of the Securitisation Regulation sets out an overview of information on the transaction and underlying exposures that is to be made available to holders of a securitisation position (investors), the competent authorities and, upon request, potential investors on an ongoing basis.
The Securitisation Regulation also states that the "Securitisation Special Purpose Entity" (i.e. the Issuer), the Sponsor and the Originator are jointly responsible for this reporting. However, Article 7(2) of the Regulation allows for those parties to designate one of them as the "Reporting Entity" to fulfil the disclosure requirements.
The Securitisation Regulation mandates the European Securities and Markets Authority (ESMA) to develop draft regulatory technical standards (RTS) to specify information and the details of the securitisation to be made available in accordance with the disclosure requirements (which apply to both private and public deals).
Draft RTS were published by ESMA in August 2018, which were subsequently rejected and revised draft RTS were published earlier this year . These RTS were finally adopted by the European Commission (EC) on 16 October 2019.
The RTS will become effective only after (i) the three-month objection period for the European Parliament has expired, during which the European Parliament or the Council of Ministers may object to the RTS as adopted by the EC; and (ii) 20 calendar days has passed following the date the RTS have been published in the Official Journal of the European Union, following approval by the European Parliament.
Once effective, all securitisations within the scope of the Securitisation Regulation will be required to use the applicable RTS.
ESMA has advised that it will not be necessary to re-report any information previously reported from dates prior to when the RTS are effective.
In the event the UK leaves the European Union (Brexit), corresponding legislation, similar to the Securitisation Regulation, will be created under domestic UK law on the date of Brexit pursuant to the Securitisation (Amendment) (EU Exit) Regulations 2019, which was made a statutory instrument earlier this year. If Brexit were to occur prior to the RTS becoming effective, the FCA and the PRA would need to adopt separate reporting templates for the UK.
In anticipation for the RTS to become effective, market participants are encouraged to review the EC approved RTS and commence any required preparations to ensure that they are able to report on the relevant data once the RTS become effective.
Sign up to our email digest