The European Supervisory Authorities (ESAs) have published an evaluation report on the EU securitisation regulation, calling for reforms to simplify the framework while safeguarding investor protection and financial stability across the EU.
The joint committee of the ESAs — the independent EU bodies that oversee different sectors of the European financial system — has released an evaluation report on the functioning of the EU Securitisation Regulation (SECR). The report, released by the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority, has recommended enhancing the regulatory and supervisory framework, promoting legal clarity and encouraging the growth of a sound securitisation market in Europe.
The report‘s goal is to simplify current rules without compromising on key safeguards. The proposals aim to “strengthen the overall effectiveness of Europe’s securitisation framework through simplification, while ensuring a high level of protection for investors and safeguarding financial stability.”
One of the recommendations is to clarify the scope of the regulation. The ESAs propose that SECR should apply when at least one party involved in a securitisation—either on the sell-side or buy-side—is established in the EU. This change would help ensure greater legal certainty and consistent supervision across Member States.
ALFI: Luxembourg’s ‘securitisations boost’
The report has also advocated for broadening the definition of public securitisation. Suggestions for this include transactions where securities are issued with an EU-approved prospectus, admitted to trading on EU-regulated markets or multilateral trading facilities, or broadly marketed with pre-defined terms and subject to market testing by EU originators or sponsors.
Another area targeted for reform is due diligence. The ESAs recommend more practical and proportionate requirements, particularly for institutional investors. This includes providing data in formats that support meaningful risk assessments and commitments from sell-side parties to deliver ongoing information throughout the life of a transaction.
Transparency and reporting requirements also come under review. The report calls for simplified reporting templates, improved data standardisation, and flexibility to use aggregated or stratified data for specific asset classes. It also highlights the need for exemptions to ease compliance burdens for small and medium-sized reporting entities.
The simple, transparent and standardised framework could also see adjustments, particularly in the context of on-balance-sheet securitisations introduced via the Capital Markets Recovery Package.
The ESAs also proposed clearer risk retention guidance, especially for collateralised loan obligations. This includes a more precise interpretation of the “predominant source of revenues” and other technical clarifications to reduce uncertainty.
Finally, the report underscored the importance of supervisory convergence across the EU. In the short term, stronger coordination is encouraged via the ESAs’ Joint Committee Securitisation Committee. In the long run, the ESAs suggested considering more consolidated supervisory arrangements, particularly for cross-border deals.
