EBA欧洲银行-JC-2015-022-Final-JC-Report-on-securitisation_104页_1mb

Summary of the Joint Committee Report on Securitisation (12 May 2015)

I. Core Content

The Joint Committee (JC) report on securitisation was prepared in response to the European Commission’s consultation document published on 18 February 2014. It focuses on the standardisation, transparency, and information disclosure of Structured Finance Instruments (SFIs) within the European Union (EU). The report aims to evaluate the current regulatory and legislative framework, identify inconsistencies, and propose recommendations for improvement.

The EU has developed a comprehensive regulatory framework over the years to enhance transparency and investor protection in the securitisation market, including key legislation such as the Prospectus Directive, CRR/CRD IV, AIFMD, CRA Regulation, Solvency II, and central bank collateral frameworks. The report examines the due diligence and disclosure requirements for SFIs and their applicability to different market participants.

II. Main Views and Key Information

1. Nature and Scope of Due Diligence Requirements

• Due diligence is a dynamic process that starts when the investment decision is made and continues until the SFI matures or is divested.
• The CRR (Capital Requirements Regulation), Solvency II, and AIFMD (Alternative Investment Fund Managers Directive) impose different due diligence requirements on investors, including banks, insurers, and AIFMs.
• CRR Article 406(2) requires investors to assess the credit quality and performance of underlying exposures, but the current framework lacks consistency in the level of detail and granularity of the required information.
• Investors must have access to material data on the underlying exposures, including loan-level data, performance metrics, and credit enhancement structures to conduct effective due diligence.

2. Disclosure Requirements

• The CRA 3 RTS (Regulation (EU) No 231/2013) sets broad disclosure requirements for SFIs issued on or after 1 January 2017 or outstanding on that date.
• Disclosure must be transparent and accessible, and all information must be available on the SFI website, which is to be set up by ESMA (European Securities and Markets Authority).
• The CRA 3 RTS includes standardised templates for disclosure, but they are not fully aligned with the due diligence needs of investors. For example, prepayment and credit scoring data are optional in some cases.
• The report recommends mandatory inclusion of specific data fields, such as prepayment amounts, prepayment dates, and borrower creditworthiness (e.g., PD, LGD, credit scores), to support stress testing and risk assessment.

3. Stress Testing and Investor Protection

• Investors should be empowered to conduct stress tests on SFIs, which requires access to reliable cash flow models and assumptions such as constant default rates, prepayment rates, and recovery times.
• The report suggests that third-party validation of cash flow models should be mandatory to avoid conflicts of interest and ensure model accuracy.
• A technical standard should require the availability of liability cash flow models before any SFI is marketed, enabling investors to assess WAL (Weighted-Average Life), Discount Margin, principal losses, and loss on the collateral pool.

4. Harmonisation of Definitions and Regulatory Frameworks

• The report highlights differences in definitions of securitisation and related terms across EU legislation, which can lead to inconsistencies.
• It recommends the development of a comprehensive glossary to clarify key terms and ensure a harmonised approach across all EU laws.
• The report also calls for a common framework for private and bilateral SFIs, which are not typically admitted to trading and thus fall outside the scope of some regulatory requirements.

5. Transparency Across Investment Channels

• The report acknowledges that EU investors may access SFIs through different channels, including:
  • EU regulated markets (Channel A)
  • Non-EU regulated markets (Channel B)
  • OTC (Over-the-Counter) markets (Channel C)
• It recommends that disclosure requirements be extended to all SFIs, regardless of the investment channel, to ensure uniform transparency for all investors.
• For SFIs traded outside the EU, the supervisory framework may need to be adapted to ensure that EU investors are still protected.

6. Supervision and Enforcement

• A comprehensive supervision and enforcement framework is needed to ensure compliance with due diligence and disclosure requirements.
• The report suggests that capital requirements, liquidity ratios, and central bank collateral frameworks should be linked to compliance with disclosure rules to improve supervisory effectiveness.
• Private and bilateral SFIs, which are not admitted to trading, may require a different supervisory approach due to their unique nature.

III. Key Recommendations

Recommendation	Summary
1. Harmonise Due Diligence Requirements	Due diligence should be standardised across investor types to ensure consistency and effectiveness.
2. Align Disclosure with Due Diligence Needs	Disclosure requirements must be adjusted to meet the specific needs of investors, including loan-level data.
3. Standardise Investor Reports and Store in Central Hub	Investor reports should be dynamic and aligned with loan-level data, stored in a central public space like the SFI website.
4. Allow Data Providers to Fulfil Disclosure Obligations	Flexibility should be allowed for data providers to submit necessary information, as long as the data owner retains responsibility.
5. Provide Loan-Level Data to Investors	Loan-level data should be made available to all EU investors, with necessary assumptions included for stress testing.
6. Empower Investors to Conduct Stress Tests	Investors should have access to tools and data to perform comprehensive stress tests on all SFIs.
7. Review Definitions and Key Terms in EU Legislation	A harmonised approach to definitions is needed to reduce discrepancies and enhance clarity.
8. Enhance Investor Protection Across All Channels	Disclosure requirements should apply to all SFIs, regardless of the market or channel, to ensure consistent protection for EU investors.
9. Develop a Comprehensive Supervision Framework	A unified supervision and enforcement framework should be developed to support the implementation of the regulatory requirements.

IV. Conclusion

The report underscores the importance of harmonising due diligence and disclosure requirements across EU legislation to improve transparency, investor protection, and market stability. It calls for standardisation, consistency, and enhanced supervision to ensure that the securitisation market in the EU operates in a safe and transparent manner, aligned with the goals of the European Commission’s consultation on securitisation.