She said: "The long-awaited final technical standards on risk retention represent one of the final pieces of the securitisation regulatory 'jigsaw', and their endorsement by the Commission will add welcome clarity to these important rules”.
The Commission recommends some fine-tuning of some of the requirements of the regime. Accepting that the securitisation industry does not regard the transparency requirements as proportionate, the report tasks ESMA with reviewing the existing disclosure templates and recommending improvements, in a move that will likely be welcomed by the securitisation industry. It also proposes creation of a dedicated template for "private" securitisations which, said McCaw, may bring welcome flexibility.
However, the distinction between public and private securitisations remains a key concern, McCaw said. “The Commission's report rejects calls for a change to the definition of private securitisation, apparently convinced that avoidance of the transparency requirements is behind the industry's push for a clearer delineation,” she said.
On the new regime for ‘simple, transparent and standardised’ (STS) securitisation created by the Securitisation Regulation, the Commission considers the possible establishment of an equivalence regime for non-EU STS securitisations but finds that it is premature to do so. The UK, which has included legislation to establish an equivalence regime for non-UK STS securitisation in its Financial Services and Markets Bill, is further ahead in this work, Katie McCaw said.
“However, the success of any STS equivalence regime depends on reciprocation and the Commission's report makes it clear that this will not be forthcoming in the near future,” she said.
With sustainability a hot topic across many types of finance, the report agrees with the European Banking Authority's earlier assessment of the possible adjustments that could be made to the EU Green Bond Standard to incorporate securitisation by recommending that no separate sustainability label for securitisation is needed at this stage. More required disclosures around sustainability within securitisation transactions are also expected as regulators work on the preparation of technical standards that would accommodate investors' demand for better information about ESG-linked products.