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
Previous ArticleIASB Could Extend Effective Date for IFRS 17 and IFRS 9 for Insurers
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.