
The Joint Committee (JC) of the European Supervisory Authorities (ESAs) has published its evaluation report on the functioning of the EU Securitisation Regulation (SECR). The report puts forward recommendations to strengthen the overall effectiveness of Europe’s securitisation framework through simplification, while ensuring a high level of protection for investors and safeguarding financial stability.
This report identifies areas where the regulatory and supervisory framework can be enhanced, supporting the growth of robust and sound securitisation markets in Europe.
Key recommendations
Clarifying the scope of the Securitisation Regulation
The ESAs recommend specifying that the application of SECR is triggered where at least one party to the securitisation — whether on the sell-side or buy-side — is established in the European Union. This aims to ensure legal certainty and consistent supervision.
Broadening the definition of public securitisation
The report proposes reviewing the definition of public securitisation to include transactions where securities are:
- Issued with a prospectus approved under the EU Prospectus Regulation; or
- Admitted to trading on EU-regulated markets or multilateral trading facilities (MTFs); or
- Marketed broadly with non-negotiable terms and subject to a market test requiring EU originators or sponsors to demonstrate that transactions are not offered to an undefined public.
Introducing proportionality in due diligence requirements
The report calls for more proportionate and practical due diligence requirements, enabling institutional investors to receive data in formats that support meaningful risk assessment, along with commitments from sell-side parties to provide ongoing information throughout the life of the transaction.
Simplifying transparency and reporting requirements
Recommendations include streamlining reporting templates for public securitisations, improving data standardisation and introducing flexibility to use aggregated or stratified data for certain asset classes. The report also suggests targeted exemptions to reduce compliance burdens for small and medium-sized reporting entities.
Targeted changes to the STS framework
The report proposes focused adjustments to improve the efficiency of the Simple, Transparent, and Standardised (STS) framework, particularly in relation to on-balance-sheet (OBS) securitisations introduced under the Capital Markets Recovery Package (CMRP).
Clarifying risk retention rules
Clearer guidance on risk retention is recommended to reduce interpretation challenges, particularly for Collateralised Loan Obligations (CLOs) and including the term “predominant source of revenues”.
Promoting greater supervisory consistency across Europe
The need for stronger supervisory convergence is highlighted to prevent fragmentation and ensure consistent application across Member States. In the short term, this could be achieved through stronger coordination at the ESAs Joint Committee Securitisation Committee. In the longer term, the ESAs suggest exploring more consolidated European supervisory arrangements, especially for cross-border transactions.
Next steps
These recommendations will feed into the European Commission’s legislative review of the securitisation legislative framework, contributing to the development of well-functioning, resilient and transparent securitisation markets across the European Union.
Source: ESMA
MFA encourages ESMA to adopt a principles-based approach to private securitisation disclosure requirements
Requiring a standardised disclosure template would deter investment and hinder EU economic competitiveness
MFA encouraged the European Securities and Markets Authority (ESMA) to adopt a principles-based approach to disclosure requirements for private securitisations in a letter today. The letter responds to ESMA’s consultation proposing a simplified disclosure template for private securitisations. The European Commission is expected to undertake broader securitisation reforms later this year.
“Prescriptive and duplicative disclosure rules for private securitisations will harm EU economic competitiveness and the development of securitisation markets in Europe,” said Jillien Flores, MFA Chief Advocacy Officer. “A principles-based approach to securitisation disclosures aligns with the Savings and Investments Union and will protect investors, enhance the attractiveness of European securitisations, and attract global capital into EU markets.”
In the letter, MFA supports efforts to enhance EU securitisation markets. However, mandating a prescriptive disclosure template for private transactions between sophisticated institutional investors is duplicative and burdensome. Institutional investors, including alternative investment fund managers (AIFMs), already conduct extensive, tailored due diligence as a standard market practice and under existing regulatory requirements. A principles-based approach that lets investors determine what information they need to fulfill their fiduciary obligations will better serve investors, reduce compliance costs, and encourage greater investment in EU securitisation markets.
MFA also cautions against applying the disclosure template to transactions involving any non-EU parties including sponsors, lenders, or originators based outside the EU. Inappropriately applying the template to non-EU parties will make it harder for global investors to participate in EU securitisation markets. These requirements will deter global capital from flowing into EU markets and undermine the EU’s goal of building a deeper, more integrated Savings and Investments Union.
Read the full letter here.
Source: MFA