Background

In December 2023, EMSA, launched a consultation to gather insights for the cost and benefits of the various approaches to revising the securitisation disclosure framework. In light of this consultation, ESMA published a Feedback Statement highlighting that stakeholders favoured prioritising proportionality and addressing the reporting costs and limitations associated with private securitisations. This came as no surprise as market participants have sought less arduous disclosure requirements for private securitisations. Under the current securitisation regime, both private and public securitisations must report virtually identical information. In effect, originators, sponsors or SSPEs of private securitisations are required to complete extensive templates used for public securitisations. These disclosure requirements make it more difficult to use private securitisation, in particular where: (i) there is a direct relationship between investors and originator, and the parties do not intend to make robust disclosures; (ii) there is particularly sensistive business data to protect; and (iii) the transaction volume is too small to justify the cost of overbearing disclosures. It further places  EU institutional investors who cannot invest globally in transactions that fall short of these requirements at a competitive disadvantage.

On 13 February 2025, ESMA published the consultation paper as the first critical step towards simplifying the disclosure requirements for private securitisations.

Overview of Reforms

ESMA seeks to introduce the following changes:

a) replacing the current public templates with a simplified template which focuses on key transaction details, relevant parties, and underlying exposures. This is a shift away from the previously granular-level disclosure to aggregate-level data disclosure for private securitisations. The template includes dedicated sections on  values of underlying exposures and certain metrics related to performance of the underlying assets;

b) collapsing the existing class-specific templates under Article 7 and replacing them with a simplified template which would apply uniformly to ABCP and non-ABCP securitisations regardless of the underlying asset class, including esoteric asset classes;

c) limiting the simplified disclosure template to private securitisations where all sell-side parties  (the originator, sponsor, original lender, and SSPE) are established in the EU. Non-EU securitisations will continue to follow the same disclosure requirements as public securitisations;

d) mandating originators, sponsors and SSPEs to still provide the full set of public disclosure information to investors, potential investors and competent authorities upon request;

e) mandating originators, sponsors, or SSPE to designate one entity to fulfil the disclosure requirements in accordance with Article 7(2). The designated entity shall be responsible for making the private securitisation template available to investors, its competent authority, and, if applicable, the competent authorities of the relevant sell-side parties;

f) requiring the disclosures to be made available on a quarterly basis or in the case of ABCP, on a monthly basis;

g) mandating originators, sponsors or SSPE to notify the relevant competent authority of any significant event; and

h) including information on risk retention to ensure completeness and reduce the frequent need for supervisory authorities to request additional data through ad hoc templates.

Key Implications for stakeholders 

The consultation paper is a step in the right direction. The central idea being to simplify the disclosure requirements while ensuring that supervisors and investors receive the necessary data. A notable effect of the consultation paper, to the extent that it is enforced, is that originators will no longer be required to provide detailed disclosures for private securitisations. The simplified template will also now apply uniformly to ABCP and non-ABCP; implying that originators can structure both ABCP and non-ABCP in the same transaction while providing identical disclosures.

ESMA limits the scope of the simplified template to deals with EU originators. The rationale being that EU investors can struggle to obtain the reporting templates from issuers outside the EU. This appears to contradict the EU Commission's original position, i.e. that information disclosure should not be differentiated on the basis of the origin of a securitisation (see Page 21, Commission's Assessment 2022). 

From a transaction structuring perspective, applying the template to only EU securitisations would create some challenges, particularly in multi-jurisdictional securitisations. For instance, any addition of non-EU originator in an EU structured securitisation would require the originators to change the reporting. 

The simplified template also seeks to impose additional compliance obligations, including the requirement to report significant events that are essential for supervisory monitoring across transaction types. Issuers are mandated to report events such as a material breach of obligation, change in structural features, change in risk characteristics, and material amendments to transaction documents. It further imposes quarterly and monthly disclosure obligations for ABCP deals, thereby increasing the frequency of disclosures for private securitisations. 

EMSA proposes the inclusion of a provision which requires originators, sponsors and SSPEs of private securitisations to provide full public-style disclosures to investors, supervisory bodies and potential investors, upon request. EMSA suggests that the simplified template is designed to align disclosure requirements with the needs of investors and supervisors. As a result, originators must make public-style disclosures when requested by regulators, investors or potential investors. 

Overall, it appears that EMSA's simplified template may impose additional obligations on originators of private securitisations without fully addressing the existing market concerns.

What are the Next steps?

EMSA will consider the comments received by 31 March 2025. It has indicated that it will work closely with EU Commission to explore whether adjustments to the technical standards, particularly regarding disclosures for private securitisations, can be implemented before review of the regulation itself.