On May 2nd the European Supervisory Authorities (EBA, EIOPA and ESMA) published their Consultation paper on draft Regulatory Technical Standards (RTS) for Simple, Transparent and Standardised (STS) securitisations.

The draft RTS intends to:

• Facilitate optional disclosure of adverse impacts to ESG factors;
• Supplement the securitisation regulation under the Capital Markets Recovery Package (CMRP);
• Draw upon ESAs’ work in respect to sustainability disclosures under the Sustainable Finance Disclosure Regulation (SFDR).
• Other areas of the draft relate to indicators, sustainability disclosure and Principal Adverse Impact (PAI) disclosure.

The disclosure is to be completed through a Principal Adverse Impact (PAI) statement, which can be found in the Annex of the draft RTS. Requirements for the PAI statement include an explanation of how sustainability factors are considered in the evaluation of the originator’s credit criteria and an explanation of sustainability factors for the management of underlying exposures.

The draft currently requires the use of at least one social or governance indicator and one environmental indicator in addition to the mandatory indicators. However, there was no added social or governance indicator requirement for residential real estate.

Additionally, there were no further PAI indicators on sustainability for consumer loans securitisation and credit card debt securitisation. PAI statements also require originators to disclose the share of non-green assets ratio.

The consultation period closes 2 July.

For further information please contact Nicholas Smith ([email protected])