ESMA consults on simplified disclosure template for private securitisations

The European Securities and Markets Authority (ESMA) issued a Consultation Paper on 13 February 2025 presenting a proposal for a simplified disclosure template for private securitisations. ESMA’s stated aim is to reduce unnecessary complexities and compliance costs while ensuring that supervisory authorities have access to the data needed for effective oversight under the EU Securitisation Regulation (SECR)¹.

Although ESMA’s proposal for a simplified template for private securitisations is a long-anticipated and welcome development, the details of the proposal fall short of market expectations and contain a number of problematic features, which are discussed below.

Background

Under the current EU securitisation transparency regime, there is no dedicated template for private securitisations (securitisations where no prospectus has to be drawn up in compliance with the EU Prospectus Regulation²). Originators, sponsors or SSPEs of private securitisations have to fill in the extensive templates that are also used for public securitisations, but are exempted from reporting to a securitisation repository.

In October 2022, in its report on the functioning of the SECR, the European Commission invited ESMA to draw up a dedicated template for private securitisations, in order to simplify the applicable transparency requirements. This reflected the fact that institutional investors in private securitisations can access detailed transaction level data through bilateral arrangements and therefore have less need for disclosure on prescribed templates than investors in public securitisations.

In its December 2023 Consultation Paper on the disclosure templates under Article 7 of the SECR, ESMA sought stakeholder views on possible options, including postponing the review of the templates until the next review of the Level 1 text, introducing a simplified template for private securitisation and undertaking a complete and thorough review of the reporting framework.

In parallel, the European Commission launched a wide-ranging consultation in October 2024, covering all aspects of the EU securitisation framework, including questions on the transparency requirements and whether a simplified template for private securitisations should be introduced.

In December 2024, ESMA published a Feedback Statement summarising the responses received to its Consultation Paper. In light of the European Commission’s ongoing review of the SECR, ESMA concluded that the timing was not optimal to redefine the disclosure framework and that any immediate amendments should remain limited and targeted. ESMA stated that it would coordinate closely with the European Commission to assess whether targeted adjustments to the technical standards – particularly regarding the information to be provided for private securitisations – could be introduced pending the ongoing review of the SECR.

The proposed new template

ESMA is proposing to amend the disclosure regulatory standards³ to add a new single template (Annex XVI) for European private securitisations, including both ABCP and non-ABCP transactions and regardless of the underlying asset class. This would replace the templates in the annexes to the disclosure regulatory standards⁴, currently reported under Article 7(1)(a) of the SECR.

The proposed new template is based on the SSM template which significant institutions acting as securitisation originators or sponsors are required to provide to the European Central Bank, but is “enriched” with information from other reporting templates.

The draft template has four main sections: (i) key transaction information of the securitisation; (ii) exposure and risk retention; (iii) information on securitisation positions; and (iv) synthetic securitisation information.

Importantly, the template proposes aggregate-level reporting on the underlying assets (rather than loan-level reporting) and reduced requirements for transaction-specific data. The template also includes a number of metrics relating to asset performance, such as the current principal balance, defaulted exposures, arrears, and restructured exposures. ‘No data’ options can be used where information cannot be made available or is not applicable due to the characteristics of a specific type of securitisation.

ESMA does not propose to make any changes to the format or specifications of investor reports required under Article 7(1)(e) of SECR. These would still have to be made available to competent authorities, investors and, upon request, to potential investors in the format outlined in Annex 12 (for non-ABCP) and Annex 13 (for ABCP) of the disclosure technical standards.

Method and frequency of reporting

The SECR does not specify any method for reporting private transactions. In the absence of specific instructions from competent authorities, reporting entities are permitted to use any arrangements to meet the transparency requirements in Article 7 of the SECR.

ESMA proposes that the entity designated to fulfil the disclosure requirements in accordance with Article 7(2) of the SECR will be responsible for making the private securitisation template available to investors, its competent authority and, if applicable, the competent authorities of other relevant sell-side parties and, upon request, to potential investors. Reporting entities will be required to transmit this notification directly to the relevant competent authorities using a submission channel specified by the respective competent authorities.

The proposed new template must be made available on a quarterly basis or, in the case of ABCP, on a monthly basis, in accordance with Article 7(1)(a) of the SECR. In addition, the originator, sponsor or securitisation special purpose entity (SSPE) will be required to notify the relevant competent authority, without undue delay, of any significant event identified under Article 7(1)(g) of the SECR.

The proposed provisions will allow the private template to be made available in at least CSV format (rather than using XML schemas), unless transaction parties wish to continue using other formats.

Problems with the proposed new template

The proposals in ESMA’s consultation are problematic in a number of respects, including the following:

1. It applies only to deals with EU originators: The proposed template will only apply to private securitisations where all sell-side parties (originator, sponsor, original lender, and SSPE) are established in the EU (a “European private securitisation”). If these entities are established outside the EU, reporting will have to be on the existing templates and will have to include loan-level information. This is a surprising restriction, given that one of the main reasons for the European Commission’s invitation to ESMA to draw up a simplified template for private securitisations was to reduce the competitive barriers for EU institutional investors to invest in US and other third country securitisations by making it easier for sell-side parties to provide the required information. ESMA has invited market participants to comment on this geographical limitation
2. Full loan-level templates must be provided on request: The consultation paper states 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 provision (although not contained in the draft amendments to the technical standards) appears to defeat the purpose of the simplified template. If the full public templates have to be produced on request, then sell-side parties will still face the compliance costs of producing the public templates, and in a shorter timeframe.
3. The interrelation with the European Commission consultation is unclear: It is not clear how the ESMA consultation ties in with the European Commission’s ongoing review of all aspects of the SECR, which includes a review of the disclosure templates and of the definition of private securitisations. While the ESMA consultation is intended as a short-term solution to challenges facing the securitisation industry, it remains to be seen whether ESMA’s proposals will align with the outcome of the European Commission’s review or be superseded by it.
4. Simplified, but still onerous: Although the proposed new template is expressed to be ‘simplified’, it is primarily designed to meet supervisory requirements under Article 7 of the SECR rather than investor requirements. It still contains a large number of items to be reported, including some items that duplicate items that already have to be reported in the Annex XII investor report (for instance, details of risk retention; portfolio and arrears data).

Timing and next steps

ESMA will consider comments received by 31 March 2025. Based on this feedback, ESMA plans to publish a final report and submit the draft technical standards to the European Commission for endorsement by Q2 2025. ESMA intends to coordinate closely with the European Commission to ensure alignment with potential Level 1 changes to the SECR.