ESMA Publishes Consultation Paper on a Simplified Reporting Template for Private Securitisations

The European Securities and Markets Authority (ESMA) has published a consultation paper in relation to a simplified reporting template for private securitisations. This follows its previous consultation paper in relation to the securitisation disclosure templates under Article 7 of the EU Securitisation Regulation in December 2023, which itself followed a report by the European Commission in October 2022 in relation to the EU Securitisation Regulation, including suggested revisions to the disclosure framework.

BACKGROUND

Many market participants have expressed the view that the investor due diligence and disclosure requirements in the EU Securitisation Regulation and the associated technical standards are burdensome and disproportionate. The European Commission (the Commission) published a report on the functioning of the EU Securitisation Regulation (Regulation (EU) 2017/2402, as amended) in October 2022 (the Commission Report). The Commission Report acknowledged the above concerns and asked ESMA to review the reporting templates and to draw up a dedicated reporting template for "private" transactions (being transactions where a prospectus is not required to be drawn up in compliance with the EU Prospectus Regulation). The reporting template for private transactions would be in a simplified form and would be particularly tailored to the need of supervisors to gain an overview of the market and of the main features of the private transactions.

In addition, the Commission considered how the investor due diligence requirements should be interpreted, given that obtaining the reporting templates has been challenging for EU investors in third-country deals. Even though the Commission acknowledged that the requirement to obtain the full EU reporting templates "de facto excludes EU institutional investors from investing in certain third-country securitisations", it expressed the view that "differentiating the scope of information to be provided, depending on whether the securitisation is issued by EU entities or by entities based in third-countries, is not in line with the legislative intent, since it does not matter for the proper performance of the EU based institutional investors’ due diligence whether a securitisation originated inside or outside the EU."

However, the Commission anticipated that the proposed measures to amend the transparency technical standards would help reduce the competitive disadvantage for EU institutional investors.

ESMA published a consultation paper in relation to the securitisation disclosure templates under Article 7 of the EU Securitisation Regulation in December 2023. Broadly, this set out four possible options for consideration, as follows:

• Option A: The review of the templates would be put on hold until further changes to the EU Securitisation Regulation.
• Option B: To maintain the current framework with a few amendments.
• Option C: A targeted review to streamline the templates and the development of a dedicated template for private securitisations.
• Option D: A thorough review of the templates with a fundamental simplification of the reporting framework.

In December 2024, ESMA published a feedback statement summarising the responses. In summary, most respondents appeared to favour a review in line with Option C, although there were concerns about the timeline for implementation given the wider review of the EU Securitisation Regulation.

In parallel, a review of the EU Securitisation Regulation and related regulations has been underway. In October 2024, the Commission launched its "Targeted consultation on the functioning of the EU securitisation framework," with responses due by early December 2024. This was a wide-ranging consultation which included questions on investor due diligence, disclosure, and the distinction between "public" and "private" securitisation.

The feedback statement published by the Commission on 17 February 2025 indicates that most respondents believe that the due diligence requirements should be more principles-based, proportionate, and less burdensome. In addition, most respondents were in favour of streamlining the current disclosure templates for public securitisations and introducing a simplified template for private securitisations.

In the United Kingdom, a new securitisation framework came into force on 1 November 2024, and while this is largely based on the previous regime, and very similar in many respects to the EU securitisation regime, it is worth noting that the investor due diligence requirements have moved to a more principles-based approach, with an investor being required to obtain sufficient information to enable it to assess the risks of holding the securitisation position.

THE ESMA CONSULTATION PAPER

On 13 February 2025, ESMA published its Consultation Paper on the revision of the disclosure framework for private securitisation under Article 7 of the Securitisation Regulation (the ESMA Consultation).

The ESMA Consultation proposes a simplified template for private securitisations and includes draft amendments to the regulatory technical standards that set out the information to be made available and the implementing technical standards that contain the templates. Some key points from the ESMA Consultation are as follows:

• The proposed template would be intended for securitisations where all the originators, sponsors, original lenders and securitisation special purpose entities (SSPEs) are in the European Union, with a new definition of "European private securitisations."
• The information in the proposed template is primarily designed to meet supervisory requirements.
• The template would apply to non-ABCP and ABCP securitisations (provided that they are European private securitisations).
• The template would replace only the templates required under Article 7(1)(a) of the EU Securitisation Regulation (information on underlying exposures) for European private securitisations, and not Article 7(1)(e) (investor reports).
• The template would apply to all types of underlying assets.
• Aggregate data would be required in relation to the underlying assets, in contrast to the more granular approach in the existing templates.
• The template is proposed to be in CSV format (the existing templates use XML schema).
• Originators, sponsors and SSPEs would still need to provide the full set of "public" disclosure information to investors, potential investors and competent authorities upon request.
• In preparing the template, ESMA considered the current ECB notification template with respect to Articles 6-8 of the EU Securitisation Regulation, together with additional information from various other sources, and developed a new template.
• The draft template contains four main sections dealing with the following:
  • Key transaction information of the securitisation
  • Information on the underlying exposures and risk retention
  • Information on securitisation positions
  • Synthetic securitisation information
• Significant event information will also be required to be included (currently "significant events" are required to be notified without delay, but the templates relating to "significant events" are not required to be used for private securitisations).
• "No Data" options will be available.

While the development of a simplified reporting template, with a reduced number of data fields and aggregate level reporting, is certainly to be welcomed in principle, the current proposals appear to raise some concerns.

The ESMA Consultation asks whether the proposal to limit the template to "European private securitisations" is appropriate and whether it should be limited to transactions where the originator and sponsor are in the European Union.

Given that the Commission Report did not consider it appropriate to differentiate between the information to be provided in an EU securitisation and a third-country securitisation, and it was hoped that the simplified reporting template for private securitisations would alleviate the issue of obtaining full reporting for EU investors in third-country deals, the proposed limitation of this template to EU deals only is surprising and will not be helpful for such investors. EU investors in third-country deals are likely to be disappointed by this.

The proposed jurisdictional scope would also create some strange results—for example, in a multi-jurisdictional transaction which has EU originators and which then adds a non-EU originator, presumably the type of reporting would have to change from the simplified template to whatever the relevant template would be for that transaction, which would mean a different set of information would need to be provided. A similar situation could presumably occur in an EU transaction where a ABCP conduit with a non-EU sponsor bank later accedes as a funder, resulting in complexity and a lack of consistency.

It is proposed that the new template will replace Annex XI, the underlying exposures template for ABCP transactions, assuming they are European private securitisations. This would mean adjusting from the current template, and market participants will need to consider whether this would work for them or whether they would prefer to continue to use Annex XI.

The requirement to provide the full set of "public" disclosure information to investors, potential investors and competent authorities upon request would be difficult or impossible to meet if the only information that has been obtained is that which is required for the simplified reporting template. If this requirement means that the relevant parties need to ensure that the full reporting can be provided at any time, this could defeat the object of having a simplified reporting template and could in fact lead to an increased reporting burden.

While ESMA intends to coordinate closely with the Commission to ensure alignment with any Level 1 changes, it is not clear how the current proposals will fit together with the wider review of the investor due diligence requirements, the disclosure requirements and consideration of the distinction between public and private securitisations, which could all have implications for the use of the proposed simplified template.

NEXT STEPS

ESMA intends to publish a final report and submit draft technical standards to the Commission for endorsement by Q2 2025.

The deadline for responses is 31 March 2025.

Market participants will want to consider the ESMA Consultation carefully, as well as monitoring other developments in relation to the EU Securitisation Regulation regime.