Private securitisation disclosure – one step forward, two steps back?

On 13 February 2025, the European Securities and Markets Authority (ESMA) published a consultation paper on the revision of the disclosure framework for private securitisation under Article 7 of the EU Securitisation Regulation (the ESMA Private Templates Consultation). This proposes a move away from asset-class specific underlying exposure reporting for private securitisations. Instead, a simplified reporting template requiring aggregate data on the asset portfolio, primarily designed to meet supervisory requirements, is proposed for private securitisations. Unfortunately, the proposal fails to address certain other key issues for the market. 

Background

Under the EU Securitisation Regulation, “private” securitisations correspond to those securitisations which do not trigger a requirement to produce a prospectus under the EU Prospectus Regulation. This includes bilateral transactions, such as private warehouse financings, where the lenders are very much involved with structuring the transaction and therefore have the ability to request all of the information they require for their own needs. 

Since the current disclosure framework became applicable, market participants have been asking the supervisory authorities to consider a more proportionate approach to disclosure, particularly for private securitisations, given the high costs of compliance and the barriers to entry this has created. 

In 2022, ESMA was asked by the European Commission to review the securitisation reporting templates and, in particular, to simplify the reporting template for private securitisations. In 2023, ESMA published an initial consultation paper on the disclosure requirements generally, in which a full range of options was presented. Respondents to that consultation were largely in favour of a targeted review to streamline the templates and the development of a dedicated template for private securitisations, at least until amendments could be made to the main text of the EU Securitisation Regulation to simplify and streamline the disclosure and transparency regime as a whole.

The ESMA Private Templates Consultation proposals

The ESMA Private Templates Consultation proposes a reporting template for private securitisations (the proposed template) which has been based on the notification template applicable to institutions within the Single Supervisory Mechanism and has been put together for the purpose of meeting the needs of supervisory authorities. In line with previous requests from the industry, the proposed template does not require granular loan level data reporting but instead requires provision of aggregate data. Data to be reported on the portfolio includes (amongst other things) total nominal amounts, jurisdictional distributions, key exposure classifications, information on defaulted exposures and information on arrears. Reports would not be required to be uploaded to a securitisation repository. The proposed template would be required to be submitted at least in CSV format (but not necessarily in XML format). The reporting would need to be made available quarterly for non-ABCP securitisations or monthly for ABCP securitisations and, in the case of significant event reporting, on an event-driven basis. Investor reporting would continue as under the current regime. 

Unfortunately, the proposals set out in the ESMA Private Templates Consultation have failed to address some key issues that stakeholders (in the EU and in third countries) have been highlighting.

Issues for non-EU sell-side parties and EU institutional investors

The most evident problem is that the proposed template would only apply to private securitisations where all sell-side parties – the originator, sponsor, original lender, and Securitisation Special Purpose Vehicle (SSPE) – are established in the EU. 

Market participants had been hopeful that, in addition to reducing the burden of disclosure for EU sell-side entities, the ESMA Private Templates Consultation would address difficulties for EU institutional investors complying with their due diligence requirements with respect to non-EU securitisations. The current rules require EU institutional investors to obtain information on non-EU securitisations in ESMA template report format but it can be difficult for EU institutional investors in obtain disclosure in this format. 

Non-EU securitisations are generally “private” securitisations for the purposes of the EU Securitisation Regulation (where they are not offered to the public in the EU or admitted to trading on a regulated market in the EU, the prospectus requirement is not triggered, even if they are public in nature in their own jurisdiction). Therefore, simplifying the disclosure requirements for all private securitisations, including non-EU securitisations, would make it easier for non-EU sell side parties to provide disclosure sufficient for EU institutional investors to comply with their due diligence requirements. This would help to level the playing field for EU institutional investors as an interim solution until the main text of the EU Securitisation Regulation can be changed. The scoping out of this potential benefit by ESMA is particularly disappointing given the clear steer from the European Commission in its 2022 report on the functioning of the Securitisation Regulation to amend the technical standards to “make it easier also for sell-side parties from third-countries to provide the required information”. 

It is also unclear whether transactions with multiple originators, some inside and some outside of the EU, would be able to use the proposed template or not. 

ESMA has specifically asked for feedback on this jurisdictional scope, so we hope there will be movement here. 

Issues for EU sell-side parties

The potential advantages for EU sell-side parties are hugely constrained by a note from ESMA stating that “originators, sponsors and SSPEs of private transactions must still provide the full set of ‘public’ disclosure information outlined in Article 7(1)(a) of the SECR to investors, potential investors and competent authorities upon request.” This would leave the sell-side parties unsure whether or not they need to be collecting the data required for the public templates as well as the data for the proposed template. This would have the effect of increasing the regulatory burden, rather than reducing it.

Another consideration, as moving to the proposed template would most likely require changes to reporting systems, is whether the benefits outweigh the costs. There is no suggestion in the ESMA Private Templates Consultation that reporting entities for private securitisations could elect on a voluntary basis to complete public reporting templates instead of the proposed template for private securitisations, which might be preferable in some cases, such as if a public securitisation of the assets is envisaged in the near future. This flexibility could be a helpful addition.

Next steps

Market participants have until 31 March 2025 to contribute to the ESMA consultation and provide their feedback on the key issues arising from the ESMA Private Templates Consultation. The consultation paper includes specific questions for stakeholders regarding the proposed approach, scope of application, disclosure frequency, structure of the simplified template and cost-benefit analysis. 

ESMA will consider the feedback received during the consultation period and intends to publish a final report along with draft technical standards to be submitted to the European Commission for endorsement by Q2 2025. ESMA notes that it will coordinate closely with the European Commission to ensure alignment with potential Level 1 changes, in the context of the European Commission’s ongoing review of the regulation of securitisation as a whole.