Securitisation
5th Political Trilogue on 12 April 2017
FROM: Presidency
PRESIDENCY FLASH NOTE
On 12 April 2017, the fifth political trilogue on the Regulation on simple, transparent and
standardised securitisation (STS) and the Regulation amending the Capital Requirements
Regulation (CRR) took place in the European Parliament (EP).
CRR specific issues
Securitisation Mapping - EBA mandate (CRR Article 270e): lines 593 and 598
All the trilogue participants shared the understanding that EBA has delivered these ITS already and
that existing CRR text should therefore not be amended, i.e. "shall" remains.
Mandate to Commission to update the securitisation provisions in the light of international
developments (CRR Article 456 (1) point (k)): line 618 and 619
The EP agreed to the Council text on lines 618 and 619.
Report (Article 519a): lines 625-629
Commission stated it could live with both Council and EP amendments, with the exception of the
two year-deadline, arguing that it would be too short for a meaningful report. The participants
agreed to revert to a three year-deadline, to combining EP and Council amendments in line 625,
and to streamline the EP's wording in lines 627-629.
STS specific issues
Validation of technical work
Technical work on STS was agreed with the exception for a number of lines where either the EP or
the Council wanted to discuss further in the technical group (see Annex).
ESG criteria in STS disclosure requirements (STS Article 10(3a) EP): STS line 443
EP insisted on the principle of including ESG criteria in the STS disclosure requirements but showed
some openness as to the way of doing so. Council and Commission pointed at practical difficulties
and mentioned the ongoing horizontal work of the high-level expert group on sustainable finance.
They argued that any ESG disclosure requirements that would be introduced at this point in time
should be targeted and rely on available data. The Commission was asked to provide a non-paper
on this basis, which should also include a review clause for possibly enhancing ESG disclosure
requirements later taking into account the work of the expert group.
Transitional provisions for legacy transactions (STS Art 28): STS lines 749-751
No political differences were identified and the technical group was mandated to work on this.
Securitisation
5th Political Trilogue on 12 April 2017
FROM: Presidency
Risk retention (STS Article 4) and Macro-prudential oversight of the securitisation market (STS
Article 16a EP and CRR Article 270f EP)
Council and Commission presented their arguments against the EP's proposals for setting the risk
retention rate. Presidency indicated that based on preliminary views, there seems to be support
in the Council for the way forward proposed by the Commission in its non-paper. Presidency
underlined that any additional powers for ESRB and EBA should be within their existing mandates.
While recognising the importance for the EP of introducing fines for adverse selection, it also
insisted that they should be well framed. EP, in response, reinstated the importance of a sound
prudential framework at EU-level, including micro-prudential supervision (EP line 566 and further),
and thought the ESRB and EBA roles were not made clear enough in the Commission non-paper.
EP also mentioned that it did not agree to the introduction of the "intent of wrongdoing" as a
factor in imposing fines for adverse selection. Commission proposed to further consider the
macro- and micro-prudential supervisory dimension, clarifying the different actors' tasks and
responsibilities, and to revise its non-paper accordingly, while maintaining the level of 5% and
excluding the possibility of changing the level via a delegated act. Disagreement, including within
the EP, persists on whether the risk retention method would merit a change in the retention rate.
In this sense, the Presidency re-iterated that Council is quite firm on this point and the evidence
that was provided was deemed to not satisfy any deviation from the present widely accepted risk-
retention framework in line with global standards.
Supervision (STS Articles 15 and 16)
Commission presented its non-paper. Presidency made clear that while the compromise proposed
departs a lot from the general approach, it did see that provisions had been streamlined, and
promised that it would take this back to the Council with a view to settling this issue in the context
of a broader package. It also made suggestion for some clarifications, in particular on the peer
review clause. EP, in turn, underlined the importance of a proactive role for ESMA, which is already
provided for in some other parts of the text. In response to questions, Commission clarified that it
thought neither EP nor Council text in line 557 should be taken over. Furthermore, it will revise its
non-paper based on the comments made.
Sanctions (STS Articles 17)
The participants agreed in principle to each other's text in lines 588-595 and the technical group
was mandated to work on these lines. There was no agreement on lines 606 and 607, where EP
insisted on having fines of three times the amount of the benefit derived and on the introduction
of minimum fines because this would strengthen the STS label. Both Commission and Council
argued against these proposals, for reasons of proportionality and consistency with other
legislative acts. No conclusion was reached.
Transparency requirements (STS Article 5 and related STS Articles 5a to 5q and 22a to 22e EP)
Commission presented its non-paper and highlighted that political guidance was needed on the
question what would happen if no private operator were available. Presidency made clear that it
Securitisation
5th Political Trilogue on 12 April 2017
FROM: Presidency
would not be easy to convince the Council of the introduction of a new transparency regime, but
said that nevertheless the non-paper could serve as a basis for discussion. It also emphasised that
some details needed more reflection and refinement. EP was sceptical on the exclusion of private
transactions and thought these should be better defined to avoid loopholes. Commission
promised to work on the definition and the introduction of safeguards to prevent cases of fraud.
Other issues
Technical work on the issues that have not been listed as political is ongoing; in addition, the
technical group will start working on the follow-up of the political trilogue as per above.
Delegations be kept up-to-date on the outcome of the work.
Further trilogues
The next trilogue has been scheduled for 16 May, with a possible fall-back trilogue meeting on 15
June. The EP showed willingness to agree on the files, before the end of the Maltese Presidency,
while reiterating that the issue of the hierarchy of methods remained a red line for them.
The Presidency will hold a Working Party meeting on 25 April to prepare for the next trilogue.
___________________________
Annex
Date: 27 March 2017 - overview table for 5th trilogue on 12 April 2017
NB: Only STS lines are for validation at this trilogue.
Status
Line numbers in STS tables Line numbers in CRR table
Lines for validation
407-410, 412-413, 424,
432-434, 441-442, 445,
447, 468, 470, 471, 474,
476, 479-480, 481-483,
486-487, 489, 491, 495 to
497, 499, 500, 502-514,
517, 520-524
Lines remaining open due to EP 440, 444
60, 63, 65, 67, 70, 82
comments
Lines remaining open due to MS 112-113
56a, 62-66, 67-69, 70, 77,
comments
85, 86, 110-112, 114, 121,
122, 159, 163, 211
Lines remaining open due to outstanding 65, 73, 80, 83, 123-124, 130 24
technical work or to (connection to) 386, 394, 411, 414, 426, 26
political issues
436, 443-444, 485, 488, 57
498, 519
59 to 61
84
120
171
278-283
304, 305, 306
310, 311
355
365
381
Lines already validated on 7 March 2017 50 to 53
9
55 to 60
10a
62 to 64
21 to 22a
67 to 72
33
75 to 79
36
105 to 109
41 to 46
117 to 119
48 to 56
122
58
125 and 126
76
378 to 385
80
387 to 390
92
395
98
396
103
398-400
108
404
116
138
143 to 146
150
153 to 156
165
169 and 170
196
224
Lines already validated on 28 March
69
2017
82
89-91
125
173-180
197-202, 209
203
204
206
212
265
275, 276
286-288
290-298
314-316
343
366
378