ESMA urges market to prepare for SR implementation

The European Securities and Markets Authorities’ (Esma) executive director Verena Ross this week said that implementation of the Securitisation Regulation will be difficult, given uncertainties and the lack of a transition period for the regulation, which came into effect at the start of the year. But she urged all market participants to be prepared.

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Ross also used her keynote address at the Global ABS conference in Barcelona to defend the authority against accusations of being uncommunicative with market stakeholders.

Although the regulation is in effect, the European Commission has not yet adopted ESMA’s regulatory technical standards (RTS). If the Commission adopts them, the European Council and the European Parliament will then be given a non-objection period, creating a further delay. Some market players do not expect the regulation to enter the official journal until late this year.

Ross expressed some dissatisfaction with the timing, pace and ambiguities of the process, so far. Speaking about the lack of clarity as to whether certain disclosure requirements are applicable only to public securitizations, or all of them, she said: “We can all agree that it would have been helpful if the Securitization Regulation would have been a bit clearer in this regard from the outset.” 

Ross said that it has become clear that the templates dealing with underlying exposures and investor reporting must be completed for all securitizations. The 15 templates create a total of 1350 fields of information, she said.

She also defended the authority against the perception that it has not communicated enough with market stakeholders, saying that ESMA has already published Q&As this year, and will continue to do so in the coming weeks.

“I recognise that for you asking… questions, it will sometimes appear that we take a lot of time to answer them. This delay is not a sign of nothing happening behind the scenes, however,” Ross said. She emphasised that ESMA must coordinate with multiple other public bodies, including national competent authorities and market stakeholders, before they can agree on a “common line” and begin answering questions and making clarifications.

She added that since January, ESMA has been busy creating “the necessary technical documents for the templates to actually be incorporated into database systems.

“Normally we would do that after the regulation is finalised but given there’s no phase-in or transitional period foreseen in the SR, which is very unfortunate, it means we tried to front load that technical part of our work and hope to publish in the next few weeks first versions of Excel XML schema validation rules and reporting instructions on our website,” she said.

Ross underlined that ESMA moved straight into the implementation phase from submitting its RTS to the Commission — a phase that would normally wait until after the Commission’s adoption. “ESMA did not pause after the rulemaking phase, but has moved straight into the implementation phase, even before the technical standards have been adopted,” Ross said. 

And though ESMA cannot officially begin reviewing submissions for ‘simple, standardised and transparent’ (STS) securitizations that qualify for more lenient capital treatment, it has created an interim solution for issuers anxious to be approved. “We have already received 16 STS notifications, the majority of which have been for public securitizations and covering residential mortgages and auto leases, whose originators and sponsors are established in the Netherlands, Germany, the UK and France,” Ross said.

ESMA, the European Banking Authority and the European Insurance and Occupational Pensions Authority have created a securitization subcommittee, Ross said, which convened at the end of May and has “has already begun to discuss themes and many other topics requiring further cross-cutting interpretation”.

“ESMA and the rest of the subcommittee are well aware of the need to reduce uncertainty as much as possible for market participants” who are “operating under substantial uncertainty and time pressure”.

“I would like to emphasise that there’s only so much we can do from our side and would very much urge all participants to be ready by the time technical standards like the disclosure requirements become EU law,” Ross added. She acknowledged that preparing for implementation is not just the responsibility of market participants, but on the relevant public authorities.

To that end, Richard Hopkin, managing director and head of fixed income for the Association for Financial Markets in Europe, asked Ross if ESMA would be open to hosting confidential roundtables with market participants, as the EBA has done, to facilitate a dialogue that he said had thus far been “not full”. While Ross said the authority is keen to continue the dialogue, she said that ESMA is now concentrated on providing answers to submitted questions, and that its staff is “not getting much time for workshops”.