EU-niversal due diligence: the saga continues

14 February 2024

ESMA gave the securitisation industry an early Christmas present on 21 December 2023 by publishing a consultation paper, Consultation on the Securitisation Disclosure Templates, which invites comments by 15 March 2024 on the four following policy options to revise the securitisation disclosure framework:

  1. putting on hold the review of the existing disclosure templates until the next review of the EU securitisation regulation;
  2. introducing a few refinements to the existing disclosure templates;
  3. a targeted review of the existing disclosure templates aimed at streamlining the disclosure templates and developing a simplified disclosure template for private securitisations; and
  4. a complete and substantial review of the existing disclosure templates with a view to fundamentally simplifying the disclosure framework.

ESMA is clearly aware of the plethora of issues that have been raised in respect of the existing reporting regime and it is encouraging that they are discussing these issues with stakeholders and proposing solutions. That said, the policy options they have proposed in the latest consultation paper leave much to be desired. Options 1 and 2, for example, are likely to postpone, rather than accelerate, any meaningful revision of the disclosure templates. 

However, the consultation paper does go into some detail as to the difficulties ESMA is facing. In particular, the paper emphasises the lack of consistent feedback received during the consultation process, which has made it difficult for ESMA to identify a set of workable (and popular) solutions. While revisions to the templates may be afoot, they will almost certainly move at a slow pace, and whether they will result in reduced reporting requirements for private securitisations remains to be seen. 

Meanwhile, legislative action continues apace domestically, with HM Treasury publishing the Securitisation Regulations 2024 (SRs) on 30 January of this year.  Some of the SRs provisions came into force on 30 January 2024 but the vast majority are only set to become effective once the FCA and PRA’s new rules on securitisations come into force and retained EU securitisation law is repealed, which is expected in Q2 following the end of the current consultation.  As the UK government begins to legislate to enact the Edinburgh Reforms, we will be paying close attention to the evolving domestic and European legislative agendas particularly as we begin to get clarity on the future of the UK’s domestic securitisation regulation. 

You can read more about the evolving landscape of Article 5(1)(e) of the EU Securitisation Regulations and due diligence requirements for institutional investments in our previous blogpost, Diverging paths: EU-niversal and UK due diligence requirements for securitisations.