On 10 October, the European Commission submitted its’s report on the Functioning of Securitisation Regulation to the European Parliament and Council. Overall, the Commission takes the position that the Securitisation Regulation does not need major legislative changes aside from recommending a simplification of due diligence data requirements as well as inviting ESMA to consider a dedicated template for private securitisation transactions.

Key takeaways from the report include:

• Risk retention: The Commission sees no evidence that any risk retention rules are inadequate and has no intention to revise the current requirements. 
• Due diligence provisions: The Commission expressed a desire to simplify data disclosure requirements under Article 7 of the Securitisation Regulation which currently requires originators, sponsors and SSPEs to provide all relevant data and documentation describing the features of the securitisation.
• Private securitisations: Due to the bespoke nature of private securitisations, the Commission invites ESMA to draw up a dedicated template for private securitisation transactions. Additionally, the Commission supports the current definition of private securitisations in the Securitisation Regulation. The Commission intends to revisit private securitisations once sufficient data on their uptake is available.
• STS Equivalence: The Commission considers it premature to introduce an STS equivalence regime at the moment as no third-party country aside from the UK has an STS regime equivalent to the EU’s framework.
• Sustainable securitisation: The Commission in agreement with an EBA report is against the short to medium term introduction of creating a dedicated sustainability label for securitisations.
• Third-party verification of STS criteria: The Commission sees no need to amend the third part verification regime.
• Securitisation special purpose entities (SSPEs): The Commission has no plans to alter the current framework of SSPEs.
• Sell-side obligations: The Commission offers several suggestions to the application of the Securitisation including rejecting a narrow interpretation of Article 6 from the Joint Committee, clarifying the application of article 7, and stating that the Article 9 obligation should be supervised and enforced by an EU entity.
• Buy-side obligations: The Commission is considering amending the phrasing of Article 2(12)(d) to remove any legal uncertainty in the regulation.
• Supervision of securitisation: The Commission notes that EU authorities may need additional time to gain sufficient experience in securitisation supervision.

For further information please contact Sam Koslover ([email protected])