ESMA Defines Standards for Implementation of Securitization Regulation
ESMA issued the first set of technical standards under the Securitization Regulation, which contain both draft regulatory and implementing standards (RTS/ITS). The standards include draft regulatory technical standards specifying the information that the originator, sponsor, and Securitization Special Purpose Entity (SSPE) are required to provide to comply with the STS notification obligations (Article 27(6) of the Securitization Regulation). They also include draft implementing technical standards to establish the templates to be used for the provision of the STS notification (Article 27(7) of the Securitization Regulation) and the draft regulatory technical standards specifying the information to be provided to the competent authorities in the application for the authorization of a third party to assess the compliance of securitizations with the STS criteria (Article 28(4) of Securitization Regulation).
With respect to the notification templates for STS securitizations, the draft technical standards specify the information and format that the originators and sponsors of securitization products are required to notify to ESMA if a securitization transaction meets the STS requirements. The STS notification is a necessary step to apply for STS preferential capital treatment. The STS notification standardized templates distinguish between non-Asset Backed Commercial Paper (ABCP) securitization, ABCP transaction, and ABCP program. The STS notification needs to include a confirmation, concise explanation, or detailed explanation about why the securitization transaction satisfies each of the STS criteria. This obligation is proportionate, as some criteria require greater explanation than others. The notification process also includes a cross-referencing system to investment prospectuses, if any, to avoid duplication of disclosure requirements.
The technical standards contain detailed arrangements to implement the new European regulatory framework for securitizations, which is intended to promote simple, transparent, and standardized (STS) securitizations. ESMA has submitted for endorsement its final draft regulatory and implementing standards to EC. These standards will contribute to delivering a regulatory rulebook for European securitization markets. Regarding the joint ESA technical standards on the clearing obligation under the amendments to EMIR introduced by the Securitization Regulation, ESAs inform that they will require additional time beyond the July 18, 2018 deadline for finalization of the draft technical standards.These standards shall enter into force on the twentieth day following that of their publication in the Official Journal of the European Union. The regulatory technical standards on information to be provided in the application for the authorization of a third party verifying STS compliance shall apply from January 01, 2019.
Related Links
- Press Release
- ESMA Submission Letter to EC (PDF)
- Standards on STS Notification (PDF)
- Standards on Authorization of STS Verification Providers (PDF)
Keywords: Europe, EU, Banking, Securities, STS Securitization, STS Verification, Technical Standards, Securitization Regulation, ABCP Securitization, Notification Templates, ESMA
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