ESAs (EBA, EIOPA, and ESMA) published a statement in response to the industry concerns about severe operational challenges in meeting the transitional provisions of the Securitization Regulation disclosure requirements. The statement also addressed concerns about complying with the EU requirements on risk retention, transparency, re-securitization, and criteria for credit-granting obligations on a consolidated basis by EU credit institutions engaged in local securitization activities in third countries.
The Securitization Regulation (EU Regulation 2017/2402) enters into force on January 01, 2019. The regulation contains a set of high-level transparency requirements, which must be met by reporting entities (that is, the entity designated among the securitization originator, sponsor, and Securitization Special Purpose Entity to fulfill these requirements). The details and standardized templates to be used to fulfill these requirements will be further specified in a Commission Delegated Regulation using as a basis a set of draft regulatory and implementing technical standards developed by ESMA (the ESMA disclosure templates). ESMA and EC are considering how to address market concerns raised about some aspects of the ESMA disclosure templates. These templates are, therefore, unlikely to be adopted by January 01, 2019; therefore, the Securitization Regulation transitional provisions will apply. The transitional provisions require that the CRA3 templates (templates under the Credit Rating Agencies Regulation) be used until the ESMA disclosure templates are adopted.
However, the reporting entities may need to make substantial and costly adjustments to their reporting systems to comply with the CRA3 templates on a temporary basis, until the ESMA disclosure templates enter into application. Therefore, ESAs expect competent authorities to generally apply their supervisory powers in their day-to-day supervision and enforcement of applicable legislation in a proportionate and risk-based manner. This approach entails that competent authorities can, when examining reporting entities’ compliance with the disclosure requirements of the Securitization Regulation, take into account the type and extent of information already being disclosed by reporting entities. This approach entails a case-by-case assessment, by the competent authorities, of the degree of compliance with the Securitization Regulation. The ESAs and competent authorities expect that these difficulties will be solved with the subsequent adoption of the ESMA disclosure templates and, thus, the expiry of the transitional arrangements involving the CRA3 templates in the Securitization Regulation.
Moreover, the EU banking entities are facing challenges with regard to complying with specific provisions of the CRR Amending Regulation relating to the scope of the Chapter 2 (due-diligence, risk retention, transparency, resecuritization and criteria for credit-granting) requirements in the Securitization Regulation. ESAs and competent authorities expect that these difficulties will be solved with the adoption of the new Capital Requirements Amending Regulation (CRR 2) under which the scope of Article 14 of the CRR is expected to be reduced and references to Chapter 2 will be replaced with reference to Article 5 (due-diligence requirements) only.
Keywords: Europe, EU, Banking, Securitization Regulation, CRA Regulation, Disclosures, Reporting, Transitional Provisions, CRR 2, ESAs
EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.
FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).
APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.
BCBS and FSB published a report on supervisory issues associated with benchmark transition.
IAIS published a report on supervisory issues associated with benchmark transition from an insurance perspective.
ESMA updated the reporting manual on the European Single Electronic Format (ESEF).
EBA published a statement on resolution planning in light of the COVID-19 pandemic.
BCBS Finalizes Revisions to Credit Valuation Adjustment Risk Framework
ECB published a guideline (2020/97), in the Official Journal of European Union, on the definition of materiality threshold for credit obligations past due for less significant institutions.
FED temporarily revised the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes in response to the COVID-19 pandemic.