Today, the European Securities and Markets Authority (ESMA) confirmed that the long awaited elements of the new disclosure regime under the securitisation regulation (SR) will come into force on 23 September 2020.
This confirmation follows the publication of seven technical standards implementing the SR in the Official Journal of the European Union. We summarize recent regulatory changes that impact the securitisations of non-performing loans (NPL):
- The disclosure templates of the SR will enter into force on September 23 and applications for entities to register as securitisation repositories will open on that date. Securitisation repositories will centrally collect and maintain the records of securitisations and will be registered and supervised by ESMA. Until ESMA has registered at least one repository, information that should be made available by reporting entities to repositories on public securitisations must be made available via a website which meets certain requirements. The disclosure templates must be used to make any new information available about a securitisation in accordance with Article 7 of the SR.
- ESMA published revised XML schemata and technical reporting instructions for the reporting of the different disclosure annexes. The changes made in version 1.2.0 are corrections and clarification of the technical implementation details, but no major change in the overall reporting requirements.
- The European Commission announced a legislative proposal regarding the approach to the NPL securitisations and to permit synthetic balance sheet securitisations to qualify for STS treatment.
- The Basel Committee published a technical amendment on the capital treatment of NPL securitisations. The technical amendment establishes a 100% risk weight for certain senior tranches of NPL securitisations.
In our view, these proposed amendments are positive for the market of NPL securitisation as they address gaps in the existing regulatory framework. We expect the use of NPL securitisation to increase based on higher NPL volumes as a result of the Covid-19 economic downturn. However, we do not expect these changes to have a material impact on deal volumes. The new ESMA disclosure regime is particularly demanding on NPL securitisations and may deter or delay the use of securitisation deals in the near term.
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