Securitisation Regulation technical standards published in the OJ and due to come into force on 23 September 2020

The following regulatory technical standards (RTS) and implementing technical standards (ITS) developed by the European Securities and Markets Authority (ESMA) pursuant to Regulation (EU) 2017/2402 (the Securitisation Regulation) were published in the Official Journal of the European Union¹ on 3 September 2020. This means they will come into force on 23 September 2020 (the twentieth day following their publication).

• Disclosure and transparency requirements: final RTS² (Commission Delegated Regulation (EU) 2020/1224) and final ITS³ (Commission Implementing Regulation (EU) 2020/1225)
• STS Notifications: final RTS⁴ (Commission Delegated Regulation (EU) 2020/1226) and final ITS⁵ (Commission Implementing Regulation (EU) 2020/1227)
• Securitisation Repositories: final RTS⁶ (Commission Delegated Regulation (EU) 2020/1230) and ITS⁷ (Commission Implementing Regulation (EU) 2020/1228) (application for registration) and final RTS⁸ (Commission Delegated Regulation (EU) 2020/1229) (operational standards).

Key points in relation to each of these technical standards are included below.

Disclosure requirements RTS and ITS

The technical standards in respect of the transparency obligations described in Article 7 of the Securitisation Regulation set out (in the case of the RTS) the detailed content of the information to be made available by originators, sponsors and securitisation special purpose entities (SSPEs) and (in the case of the ITS) the format and standardised templates to be followed when making such information available.

The technical standards do not include any transitional relief. As such, once they come into force, the transitional provision allowing for the use of the “CRA 3” reporting templates will cease to apply⁹.

Key Points:

• The technical standards do not include a specific template for non-ABCP transactions backed by trade finance assets. Reporting entities in such transactions are expected to make use of the reporting template for esoteric assets (Annex 9)
• In terms of substance of the reporting requirements, little has changed from the draft RTS published by ESMA on 31 January 2019. However, on 19 August, ESMA published updated reporting instructions and XML schema (version 1.2.0)¹⁰. The updates address technical issues identified by stakeholders since December 2019. Reporting entities may choose to use either version 1.1.0 or version 1.2.0 of the XML schema and validation rules until 1 February 2021. As of that date, only version 1.2.0 will be admissible.
• As no transitional period applies, reporting entities will have been and should continue to make arrangements (if necessary) for the development or acquisition of reporting systems necessary to permit deal reporting in the form of the new templates. This is equally the case for private transactions. For STS transactions, data required to be made available to investors pre-pricing of a transaction¹¹ will need to be made available in the form of the new templates which should be borne in mind for any deals approaching launch.
• In the context of EU investors investing in non-EU transactions, the RTS do not provide any further guidance. It therefore remains for investors to take a view as to the level of diligence necessary for such transactions in order to comply with Article 5(1)(e) of the Securitisation Regulation – whether this be that no EU style disclosure is required at all or that, whilst formal compliance is not necessary, some form of substantive compliance with EU transparency obligations is necessary. The approach is currently mixed, varying amongst investor types and asset-classes. It remains the hope that further guidance from regulators will be provided on jurisdictional scope next year 
• Further guidance has also not been provided in respect of co-funding structures, where funding is provided by ABCP and non-ABCP funders. In such cases, transaction parties are again having to take a view as to what amounts to sensible compliance, taking into account the need to not excessively burden reporting entities.
• There remains limited guidance on the appropriateness of using the “ND5” or “not applicable” categorisations for data fields that permit this selection, though general advice remains that when completing the reports, participants should use appropriate record keeping to document where and why ND1-ND5 options have been used.

STS Notification RTS and ITS

The final technical standards developed pursuant to Article 27 of the Securitisation Regulation set out the information to be included in, and the format of, the notification to ESMA of STS eligibility. 

Key Points:

• Originators seeking to notify ESMA of STS eligibility should extract the relevant Annex (depending on whether the transaction is ABCP or non-ABCP) from the final form RTS.
• For private transactions, being transactions where no prospectus must be drawn up in accordance with the Prospectus Regulation ((EU) 2017/1129), originators and sponsors are permitted to submit to ESMA two STS templates: a fully completed STS notification and an anonymised STS notification suitable for publication on ESMA website. The non-anonymised STS notification will not be published on ESMA’s website and will be stored by ESMA in a secure register available and accessible to the relevant competent authorities.

Securitisation Repositories - RTS and ITS on application for registration and RTS on operational standards

The final technical standards developed by ESMA pursuant to Article 10 and Article 17 of the Securitisation Regulation set out the details, and format, of the application for registration of a securitisation repository (or extension of registration of a trade repository) and securitisation repository operational standards for data collection, aggregation, comparison, access and verification of completeness and consistency.

Key Points:

• Upon receiving a new application of registration, ESMA will assess whether the information is complete within 20 working days from the receipt of the application. If the application is considered as incomplete, ESMA will send a letter of incompleteness to the applicant, together with a table specifying the missing information to be provided.

• From giving an applicant a notification that the application is complete, ESMA has 40 working days to examine the application’s compliance with the requirements of the Securitisation Regulation - the registration decision must be taken by ESMA within 40 working days from the notification on completeness (and notified to the applicant within 5 working days from the decision).

• Notwithstanding the above, it remains to be seen whether ESMA will aim to grant approvals for potential repositories at the same time to ensure appropriate choice remains available to market participants and such participants are not compelled to move their reporting process to an ESMA approved provider whilst their current provider is going through the application process¹².

• There is no requirement to re-report information previously uploaded to a non-approved securitisation repository.

1. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L:2020:289:TOC
2. Commission Delegated Regulation (EU) 2020/1224 of 16 October 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard to regulatory technical standards specifying the information and the details of a securitisation to be made available by the originator, sponsor and SSPE
3. Commission Implementing Regulation (EU) 2020/1225 of 29 October 2019 laying down implementing technical standards with regard to the format and standardised templates for making available the information and details of a securitisation by the originator, sponsor and SSPE
4. Commission Delegated Regulation (EU) 2020/1226 of 12 November 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council and laying down regulatory technical standards specifying the information to be provided in accordance with the STS notification requirements
5. Commission Implementing Regulation (EU) 2020/1227 of 12 November 2019 laying down implementing technical standards with regard to templates for the provision of information in accordance with the STS notification requirements
6. Commission Delegated Regulation (EU) 2020/1230 of 29 November 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the application for registration of a securitisation repository and the details of the simplified application for an extension of registration of a trade repository
7. Commission Implementing Regulation (EU) 2020/1228 of 29 November 2019 laying down implementing technical standards with regard to the format of applications for registration as a securitisation repository or for extension of a registration of a trade repository pursuant to Regulation (EU) 2017/2402 of the European Parliament and of the Council
8. Commission Delegated Regulation (EU) 2020/1229 of 29 November 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard to regulatory technical standards on securitisation repository operational standards for data collection, aggregation, comparison, access and verification of completeness and consistency
9. Article 43(8) of the Securitisation Regulation
10. https://www.esma.europa.eu/press-news/esma-news/esma-provides-updated-xml-schema-and-reporting-instructions-securitisation-0
11. Article 22 Securitisation Regulation.
12. At present, where no securitisation repository is registered in accordance with Article 10 of the Securitisation Regulation, an originator or sponsor may make the information available by means of any website that fulfils the following criteria:
(a) includes a well-functioning data quality control system;
(b) is subject to appropriate governance standards and to maintenance and operation of an adequate organisational structure that ensures the continuity and orderly functioning of the website;
(c) is subject to appropriate systems, controls and procedures that identify all relevant sources of operational risk;
(d) includes systems that ensure the protection and integrity of the information received and the prompt recording of the information; and
(e) makes it possible to keep record of the information for at least five years after the maturity date of the securitisation.

Authors: Thomas Picton; Martin Kaiser; Jonathan Walsh; Zena Kukreja