ESAs Propose ESG Disclosure on STS Securitization, Issue Other Updates
The Joint Committee of the three European Supervisory Authorities (ESAs) proposed to amend the Implementing Regulation 2016/1799 on the mapping of External Credit Assessment Institutions' (ECAIs) credit assessments. This proposal is in context of the Article 136(1) and (3) of the Capital Requirements Regulation, with the feedback period ending on June 26, 2023. In another development, ESAs jointly submitted, to the European Commission or EC, the draft regulatory technical standards on the ESG impact disclosure for Simple, Transparent, and Standardized (STS) securitizations under the Securitization Regulation. Finally, ESAs also published a discussion paper, which follows the EC request for technical advice on the criteria for critical information and communications technology (ICT) third-party providers and the oversight fees to be levied on these providers under the Digital Operational Resilience Act (DORA). The feedback period for the discussion paper ends on June 23, 2023.
ESAs on mapping of ECAIs’ credit assessments. The Joint Committee of the ESAs is required to monitor the existing mappings of ECAIS' credit assessments and has, therefore, analyzed whether the mapping of existing ECAIs remains appropriate. Overall, changes include removal of the mapping table of the CRA that has lost ECAI status following its deregistration as a CRA under the CRA Regulation and reflection of name changes of two registered entities, amendments due to the re-allocation of Credit Quality Steps (CQS), and amendments due to new or amended credit rating scales. As a result of this assessment, the existing mapping tables are to be amended for 10 ECAIs, either as a result of changes in the allocation of CQS due to an updated assessment of risk in line with the EBA methodology, based on additional information collected since the last amendment was produced, or due to the assignment of mappings for newly introduced or replaced credit rating scales by existing ECAIs, or as a result of changes in the name of the Credit Rating Agencies (CRA) or the rating scale/ rating category symbols.
ESAs on ESG disclosures for STS securitizations. The key proposals included in the technical standards submitted to EC specify ESG disclosures that would apply to STS securitizations where the underlying exposures are residential loans, auto loans, and leases. The regulatory technical standards on the ESG impact disclosure for STS securitizations aim to ensure consistency with those developed under the Sustainable Finance Disclosure Regulation (SFDR): these distinguish between the publication of available information on mandatory indicators (for example, energy efficiency) and on additional indicators (for example, emissions). Thus, an adapted version of the template set out in Annex I of the SFDR regulatory technical standards was used as the basis for this draft set of regulatory technical standards. However, in some key respects, these draft standards diverge from the SFDR regulatory technical standards while considering the specific characteristics of securitization products and the relevant legal framework. Following the submission of these regulatory technical standards, EC is expected to endorse these standards within three months of their publication.
ESAs on critical third-party providers. EC has requested the technical advice from ESAs to further specify the criteria for critical ICT third-party service providers (CTPPs) and determine the fees levied on such providers. ESAs shall deliver their technical advice by September 30, 2023. The purpose of this discussion paper is to consult market participants, on the ESAs’ proposals toward the specific issues listed in the EC Call for Advice. The responses received to this consultation will be considered in the ESAs’ advice. The proposals in the discussion paper cover the criteria to be considered by ESAs when assessing the critical nature of ICT third-party service providers—particularly, a number of relevant quantitative and qualitative indicators for each of the criticality criteria, along with the necessary information to construct such indicators. The paper also contains proposals in relation to the amount of the fees levied on critical third-party providers and the way in which the fees are to be paid. ESAs are seeking input on the fee calculation method and other practical issues regarding the payment of fees.
Related Links
- Consultation on Mapping of ECAI Credit Assessments
- Draft Standards on ESG Disclosures
- Discussion paper on Critical Third-Party Providers
Keywords: Europe, EU, Banking, ECAI, Credit Assessments, STS Securitization, ESG, Disclosures, SFDR, DORA, ICT Third Party Providers, ESAs
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