ESMA publishes final report on securitisation data completeness



On July 10th, 2020, the European Securities and Markets Authority (ESMA) published the final report on guidelines on securitisation repository data completeness and consistency thresholds (1).

The guidelines clarify the accepted levels of No-Data (ND) options contained in the securitisation data submitted to securitisation repositories. The guidelines explain how securitisation repositories should verify that the ND options contained in the underlying exposure annexes (Annexes II – XI) of the securitisation disclosures are only used where permitted and do not prevent the data submission from being sufficiently representative of the underlying exposures in the securitisation. The publication of the final report follows a consultation earlier this year which for the most part had received support for the proposed data completeness and consistency thresholds (see our original note below). The main change in the final report compared to the consultation paper relates to corporate exposures (Annex IV in the Securitisation Disclosure Regulation) which is relevant for CLO, SME ABS and a number of NPL ABS transactions. Both corporate ND thresholds for legacy assets (Threshold 1) and legacy IT systems (Threshold 2) where increased from 20 to 35. Table A shows the final thresholds. The definition of the two threshold types are explained in more detail in our previous note below and in the consultation paper.


Table A. (from Annex A, ESMA Final Report Guidelines on securitisation repository data completeness and consistency thresholds, 10 July 2020)


ESMA clarified that it will consider these guidelines for the purpose of its supervision as of 1 January 2021. The guidelines will be verified by securitisation repositories. The first securitisation repositories are now expected to become accredited in early 2021. The disclosure requirements including the data completeness and consistency thresholds will apply to relatively recent securitisations only i.e. any securities issued from 1 January 2019 onwards. The requirements also apply to securitisations issued on or before 31 December 2018 that seek to obtain STS status. Securitisations issued on or before 31 December 2018 that do not seek to obtain STS status are not within the scope of the disclosure requirements and would not be required to undergo such checks. ESMA has not yet defined a threshold path, but considers that the thresholds will be gradually tightened over time as market participants are able to improve their data collection and reporting processes.

In our view, the delays in publishing the ESMA disclosure regulation in the official journal of the European Union and the expected delay in the accreditation of securitisation repositories provide additional time for securitisation data providers to prepare and test their disclosure reports. Data providers for CMBS, CLO and NPL ABS will find the ESMA reporting most challenging as these exposure types rarely produced standardized loan-level data reports before such as those required by the ECB and delivered to the European DataWarehouse. We believe CMBS will find the ND limits challenging whereas the increased thresholds in Annex IV should help CLOs to become compliant.

For NPL ABS, the ND threshold in Annex X (NPL Add-on) is deliberately set high and does not impose an additional constraint. The consultation paper clarified that the thresholds apply cumulatively for the Annex X and hence the ND threshold for, say, the a residential mortgage sub-portfolio of an NPL ABS would be 30+203=233 which should not cause concerns in practice. However, NPL data provider will find the reporting of some of the data fields in annexes II-IX challenging. Many of the fields in Annexes II-IX are not provided to investors as they are deemed less relevant. Examples include the original and current interest rate or maturity date of a terminated and accelerated NPL. Many NPL ABS contain non-performing loans of different exposure types. For instance, an NPL ABS portfolio that contains mainly non-performing consumer loans and a small percentage of residential mortgage NPL must provide the relevant Annexes II, VI and X.

All annexes include data fields that do not allow the use of the no-data option. If data providers cannot deliver any one of those fields, the submission will fail. The preparation of the different annexes in an NPL ABS can take considerable time and effort and we recommend that reporting entities start their data preparation immediately. Data provider not only need to provide the annexes on the underlying exposures (II-X) but also the investor report annexes XI or XII and the significant event reports (annex XIV or XV). The no data option is available for some fields in annexes XI-XV but the ND thresholds apply only to the annexes for the underlying exposures (II-IX).

This article is an update to: The No Data Option in Securitisation Disclosures