The European Commission has launched a targeted 8-week consultation on the functioning of the EU Securitisation Regulation.
Notably, the Regulation's jurisdictional scope is a key theme of the consultation. This echoes the focus of the Joint Opinion published earlier this year by the European Supervisory Authorities (ESAs). In that opinion, the ESAs recommended that the Regulation be refined to address uncertainty as to how it applies where one of the sell-side or buy-side parties is located in a third country.
As part of the consultation, the Commission is also seeking industry views on a variety of other matters, including:
- how private securitisations operate, including whether the definition of "private securitisation" needs amendment (this was a key focus of the Joint Report on the Implementation and Functioning of the Securitisation Regulation, published by the ESAs on 17 May 2021);
- whether the due diligence framework is proportionate, and whether loan-by-loan disclosure is helpful (the Joint Report also focused on both of these points);
- whether there should be an equivalence regime for STS securitisations;
- whether ESG disclosure should be broadened beyond securitisations where the underlying exposures are to residential mortgages or auto loans;
- whether developing a system of limited licensed banks to perform the functions of securitisation special purpose entities would add value to the securitisation framework; and
- whether there are any issues with supervisory practices, and whether ESA guidance to competent authorities on how to supervise key areas would be helpful.
In their Joint Report, the ESAs had also emphasised the uncertainties caused by the delayed adoption of the technical standards on retention. Progress was subsequently made on this issue with the launch by the EBA, earlier this month, of a consultation on draft regulatory technical standards (RTS) on retention, which carry over a large amount of provisions from the EBA's July 2018 draft RTS. The updated draft RTS also include a number of new provisions, such as specifying modalities of risk retention in traditional securitisations of non-performing exposures (NPEs) and specifying requirements for the expertise of servicers acting as retainers in NPE securitisations. The EBA consultation closes on 30 September 2021, and the Commission's consultation closes on 17 September 2021.
The Commission had undertaken to review the Regulation as part of the September 2020 revised Capital Markets Union Action Plan (read our briefing on that plan here). The feedback to this consultation (taken together with the ESAs Joint Opinion and Joint Report) will also inform the content of the report that the Commission must submit to the EU Council and European Parliament by 1 January 2022 on the functioning of the Regulation. It is not yet clear whether the Commission will submit a legislative proposal with that report, or whether it will instead publish interpretative guidance on key issues.
We will issue further updates as developments occur.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.