Featured Product

    ECB Responds to ESA Proposal on ESG Disclosures of STS Securitizations

    The European Central Bank (ECB) recently issued a response to the joint consultation of the European Supervisory Authorities (ESAs) on sustainability-related disclosures for Simple, Transparent, and Standardized (STS) securitizations. In its response, ECB welcomes the initiative and discusses the potential areas of improvements in the associated STS securitization templates.

    ECB welcomed the joint initiative of ESAs, which aims to publish sustainability templates for STS securitizations to foster climate-related reporting for asset-backed securities (ABSs) and enhance transparency of climate-related risks for investors. In its response, ECB states that a comprehensive and more consistent data on the climate-related risks of ABSs and the underlying assets would help to incorporate climate-related considerations into the monetary policy framework of the Eurosystem. ECB notes that climate-related reporting templates should aim for consistent treatment of different financial instruments backed by similar types of collateral. Also, further legislative and/or regulatory action should aim to ensure broader adoption of climate-related disclosure, irrespective of the specific type of financial instrument or label. In particular, the proposed templates could be extended to cover non-STS ABSs, to encourage and enhance transparency regarding financial instruments backed by the same types of asset. Having consistent and harmonized templates for different asset classes would avoid an unwarranted proliferation of inconsistent disclosure standards, foster comparability across asset classes for investors, and facilitate equal treatment of different asset classes by regulatory authorities. 

    ECB also notes that the proposed standards for STS securitizations could explain more clearly how originators should treat missing data. Data availability will constitute a major challenge for originators of ABSs that decide to use the proposed STS sustainability templates. This issue is likely to become less acute as more climate-related information on new loans is collected at the time of origination. To encourage a broad-based improvement in data availability, the draft standards could explain in more detail how originators are expected to deal with missing data for existing loans in securitized portfolios. One option would be for originators to report the percentage of underlying exposures for which no data are available, ideally distinguishing between different reasons for the absence of data, as is currently done with the templates for loan-level data (underlying exposures) that are maintained by the European Securities and Markets Authority (ESMA). Another option would be to allow for estimated data and ask originators to disclose the percentage of underlying exposures for which data underpinning the principal adverse impact (PAI) indicators have been estimated and to disclose details of their estimation methodology. This would mirror the approach pursued by the European Banking Authority (EBA) in its implementing technical standards for Pillar 3 disclosure requirements on environmental, social and governance-related (ESG) risks, but it could result in less accurate information.

     

    Related Link: ECB Response (PDF)

     

    Keywords: Europe, EU, Banking, STS Securitization, Pillar 3, Basel, Climate Change Risk, Disclosures, Securitization Regulation, ESG, Reporting, ESAs, ECB

    Featured Experts
    Related Articles
    News

    EBA Launches Stress Tests for Banks, Issues Other Updates

    The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.

    January 31, 2023 WebPage Regulatory News
    News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8700