Investment Operations

Collateral Framework to Include Transparency Requirements of Securitization Regs

EU CCP Stress Test
  • Eligibility requirements for loan-level data reporting in collateral framework to be adjusted to reflect EU Securitization Regulation’s disclosure requirements
  • Eligibility criteria for asset-backed securities to change at a future date, dependent on fulfillment of certain conditions
  • Phasing-in of new loan-level data requirements will be gradual and will facilitate continued eligibility of transactions fulfilling current reporting standards

The European Central Bank (ECB) has decided that the loan-level data reporting requirements of the Eurosystem collateral framework will converge towards the disclosure requirements and registration process for securitization repositories specified in the Securitization Regulation (Regulation (EU) No 2017/2402). The ECB says it has taken this decision with a view to promoting efficiency and standardization in the securitization market.

The Securitization Regulation sets out the rules for all securitization transactions and creates a framework for simple, transparent and standardized securitization. Analysts say it will enhance harmonization and transparency in the securitization market and strengthen the efforts, initiated in 2013 with the establishment of the ECB’s loan-level data initiative, to support a higher degree of transparency in the asset-backed securities (ABS) market.

The disclosure requirements of the Securitization Regulation will be reflected in the eligibility requirements for the acceptance of ABSs as collateral in the Eurosystem’s liquidity-providing operations. In addition, the ECB says it will phase out its designation process for loan-level data repositories and will rely instead on the registration of securitization repositories by the European Securities and Markets Authority (ESMA) under the Securitization Regulation.

The Securitization Regulation became applicable on 1 January 2019. ABSs issued after that date and older ABSs seeking to obtain the simple, transparent and standardized (STS) label, as defined in Chapter 4 of the Regulation, will be subject to its provisions. However, the change in the Eurosystem’s loan-level data reporting requirements to reflect the Securitization Regulation’s disclosure requirements and registration process for securitization repositories is dependent on two conditions being met. First, the underlying exposure templates specified in the implementation technical standards adopted by the European Commission under Article 7(4) of the Securitization Regulation must have entered into force. Second, at least one securitization repository must have been registered by ESMA. The change in the Eurosystem’s transparency requirements will come into effect after a transitional period of three months from the date on which these two conditions are fulfilled.

According to an ECB statement, for ABSs issued prior to 1 January 2019 that are not subject to the Regulation, the Eurosystem’s current loan-level data reporting requirements will be maintained for a grandfathering period of three years after the date on which the change in the ECB’s transparency requirements becomes effective. After that period, they envisage that the disclosure requirements of the Securitization Regulation will apply in full to these ABSs.