Reform of the EU Securitisation Framework—Part 4: Amendments to the Transparency Regime Under Article 7 of the EU Securitisation Regulation

Background

Under the current Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 (the "EU Securitisation Regulation"), Article 7 establishes transparency requirements for originators, sponsors, and SSPEs. The reporting entity, designated among them in accordance with Article 7(2) thereof, is responsible to provide to investors:

• Information on underlying exposures (quarterly for non-ABCP transactions and monthly for ABCP transactions);
• The underlying documentation;
• A transaction summary (for nonpublic securitisations);
• The notification for "simple, transparent, and standardised" ("STS") securitisations (if any);
• Investor reports (quarterly for non-ABCP transactions and monthly for ABCP transactions); and 
• Significant event reports, when necessary.

Both public and private securitisations are subject to similar disclosure requirements, but currently only public securitisations are required to report via a securitisation repository.

Commission Delegated Regulation (EU) 2020/1224 of 16 October 2019 provides regulatory technical standards setting out, notably, 14 templates on disclosure (one for each type of underlying exposures by asset class); requires loan-level granularity information; and provides for details on the information to be included in 'significant events' reports.

The Commission's report on the functioning of the EU Securitisation Regulation, dated 10 October 2022, highlighted that some respondents find the information provided under Article 7 of the EU Securitisation Regulation to be excessive. They identify problematic fields in the reporting templates which are redundant or unclear. Respondents also questioned the loan-by-loan information for portfolios composed of a large number of exposures, and the ability for the templates to take into account the specificities of a deal—in particular, for private securitisations.

The Proposals: Lowering the Reporting Burden

The Commission proposes that the Joint Committee of the ESAs be charged with promulgating new draft regulatory technical standards with respect to Article 7 of the EU Securitisation Regulation. These standards would include new reporting templates intended to take account of: (i) the needs of investors and supervisors; (ii) the public or private nature of the securitisation; (iii) the type of underlying exposures; and (iv) whether the transaction is short-term or long-term.

It is in our view important to note that the Commission also proposes to distinguish between public and private securitisations, in line with a report from the Joint Committee of the ESAs on the implementation and functioning of the Securitisation Regulation (Article 44), dated 31 March 2025. In the second Commentary of this series, we addressed the Commission's proposal to distinguish public from private securitisations and the implications of introducing such a distinction into the EU Securitisation Regulation. Private securitisations would use a separate specific template, which would be simplified. Such reports would need to be submitted through a securitisation repository, which is currently not mandatory under the EU Securitisation Regulation.

The Commission proposes to relax investors' due diligence obligations with respect to verifying that the reporting entity (which is designated among the originator, sponsor, or SSPE) has made the required information available, by limiting this obligation only to securitisation transactions where the reporting entity is established outside the EU.

Analysis of the Proposed Changes

1. General Principles for Elaboration of the New Reporting Rules. Regarding the new reporting templates, the Commission sets out ambitious goals. One of the objectives is to reduce the number of fields to report by around 35% or more. Reporting for granular and short-term expositions (such as credit card exposures and certain consumer loans) would no longer require loan-level information. This proposal aims at responding to a request expressed during the consultation conducted by the Commission in late 2024.

The Commission expressly requires that, when drafting the new reporting templates, the Joint Committee of the ESAs should consider distinguishing between mandatory and voluntary fields, thereby promoting a more principle-based approach to reporting under the EU Securitisation Regulation.

2. Specific Templates for Private Securitisations. In addition, for private securitisations, the Commission has proposed a dedicated and simplified reporting template, which would be identical for all types of underlying assets. It would also focus on the needs of supervisors, and it is expected to be significantly lighter than the templates for public securitisations.

The European Securities and Markets Authority's ("ESMA") consultation paper on the revision of the disclosure framework for private securitisation under Article 7 of the EU Securitisation Regulation, dated 13 February 2025, already proposed draft regulatory technical and implementing technical standards with a specific reporting template for private securitisations.

It remains to be seen to what extent it will differ from the template proposed in ESMA's consultation paper of February 2025.

The Commission proposes that disclosure for private securitisations also be made via securitisation repositories, which would more or less erase the distinction between private and public securitisations.

3. Lighter Due Diligence on Reporting by Institutional Investors. Non-EU securitisations are not subject to the EU Securitsation Regulation directly. However, Article 5 of the EU Securitisation Regulation requires EU institutional investors in such securitisations to verify that the relevant originator or issuer has provided information compliant with Article 7 of the EU Securitisation Regulation (including reporting templates) before investing. As a result, the current framework places EU institutional investors at a comparative disadvantage to third-country participants with respect to investing in non-EU securitisations.

Further, under the Commission's proposed changes to Article 32 of the EU Securitisation Regulation, an institutional investor who fails to meet the due diligence requirements under Article 5 of EU Securitisation Regulation would be subject to administrative sanctions.

The simplification of reporting templates may facilitate reporting by third-country, sell-side entities (and thereby make compliance for EU institutional investors with due diligence requirements easier). However, EU institutional investors will remain at a competitive disadvantage when third-country reporting entities do not provide the relevant reporting information in the prescribed content and format and/or via a securitisation repository—particularly if this requirement is extended to private securitisations.

The introduction of a third-country equivalence regime for transparency requirements—as recommended by the Joint Committee of the ESAs in its Opinion to the Commission on the jurisdictional scope of application of the Securitisation Regulation, dated 25 March 2021—has not been followed by the Commission.

4. Process and Calendar. The EBA is proposed to lead the ESAs on the elaboration of the new reporting rules, working in close cooperation with ESMA and the European Insurance and Occupational Pensions Authority. The reporting technical standards establishing new templates for both public and private securitisations are expected to be submitted to the Commission six months after the amendments to the EU Securitisation Regulation are finalised and enter into force. The Commission will then adopt the delegated regulation, which would enter into force 12 months thereafter.

The Commission has not proposed any grandfathering clause for existing securitisations. The inclusion of such a clause in the final draft of the regulation amending EU Securitisation Regulation would be welcomed, as it would provide for explicit rules around the application of the new reporting rules to existing securitisation transactions (whether private or public) over time.

A Look Ahead

The Commission's proposed amendments have been submitted to the European Parliament and the Council of the EU for review and approval. Changes to the current draft amendments should be expected as part of the legislative negotiation process, though it is unclear at the present stage how extensive such changes may be. There is no defined timeline for the process, though it is expected to be at least 18-24 months before the proposals would become law. The proposed amendments also give rise to certain practical issues, which might challenge the success of the legislative proposals.

Further, it is unclear whether the United Kingdom will seek to minimise regulatory divergence by adopting similar changes to its "on-shored" version of the EU regime. Market participants are advised to conduct a thorough legal analysis of the evolving regulatory landscape, including the interplay between EU and United Kingdom regimes, to ensure compliance and to capitalise on new investment opportunities that may arise from a harmonised or divergent approach.

Sneak preview: In part five of this series, we will look at the Commission's proposed changes to the due diligence and risk retention regime.