Brussels, 18 November 2015
WK 151/2015 INIT
LIMITE
EF
ECOFIN
SURE
WORKING PAPER
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WORKING DOCUMENT
From:
Presidency
To:
Working Party on Financial Services - Securitisation
N° prev. doc.:
ST 13834/15
N° Cion doc.:
COM(2015) 472 FINAL
Subject:
Presidency non-paper on selected Articles of the STS Securitisation Regulation
WK 151/2015 INIT
LIMITE EN
WORKING DOCUMENT #8
Securitisation
Working Party on Financial Services
FROM: Presidency
Meeting of the Council Working Party on Financial Services (Securitisation)
1/8
20 November 2015 (10:00)
Presidency non-paper on selected Articles of the STS
Regulation
Following discussions at the Working Party of 12 November 2015, and taking into account written
comments received from Member States, the Presidency would like to submit to Member States the
present revised drafting proposals on Articles 5, 8(7), 12(2), 13(1), 14, 14a and 14b of the STS
Regulation.
Please note that the new changes compared to the first Presidency compromise text are in red track
changes. Changes made to the Commission’s initial proposal and introduced by the first Presidency
compromise text are in blue.
Article 5
The Presidency would like to have a debate on Article 5 of the STS Regulation. A number of
suggestions have been made, such as distinguishing between investors and potential investors,
between public securitisations and private securitisations, deletion of Article 8b in the
Regulation on credit rating agencies etc. The Presidency would like to get a better feeling on
the appetite of Member States to explore any of these alternatives.
Article 8(7)
[…]
7.
The underlying exposures, at the time of transfer to the SSPE, shall not include exposures in
default within the meaning of Article 178, paragraph 1 of Regulation (EU) No 575/2013 or
exposures to a credit-impaired debtor or guarantor, who, to the best knowledge of the
originator or original lender:
(a)
has declared insolvency or had a court grant his creditors a right of enforcement or
material damages as a result of a missed payment within three years prior to the date of
origination or has undergone a debt restructuring process within three years prior to the
date of transfer or assignment of the underlying exposures to the SSPE, except if:
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(i)
a restructured underlying exposure has not presented new arrears since the
date of the restructuring which must have taken place at least one year prior to the date
of transfer or assignment of the underlying exposures to the SSPE; and
(ii)
the information provided by the originator, sponsor and SSPE in accordance
with Article 10, paragraph 1 explicitly sets out the proportion of restructured underlying
exposures, the time and details of the restructuring as well as their performance since
the date of the restucturing;
(b)
was, at the time of origination, transfer or assignment of the underlying exposures to
the SSPE and where applicable, on a national public credit registry of persons with
adverse credit history or other credit registry that is publicly available to the originator
or original lender;
(c)
has a credit assessment or a credit score indicating that the risk of contractually agreed
payments not be made is significantly higher than for similar exposures held by the
originator which are not securitised.
[…]
Justification - Article 8(7):
Point (a): In light of concerns expressed by a number of Member States, a provision has been added in
order to ensure full transparency with regard to re-structured loans included in the pool of underlying
assets.
Point (b): Following up on the discussion at the last WP meeting and taking into account the various
situations in Member States, the wording has been more closely aligned to the EBA advice while allowing
accommodating situations where there is no registry or no public registry.
Article 12(2)
[…]
“ 2.
Transactions within an ABCP programme shall be backed by a pool of underlying exposures
that are homogeneous in terms of asset type, such as pools of trade receivables, pools of
commercial corporate loans, leases and credit facilities to undertakings of the same category
to finance capital expenditures or business operations, pools of auto loans and leases to
borrowers or lessees or loans and pools of credit facilities to individuals for personal, family or
household consumption purposes. A pool of underlying exposures shall only comprise one
asset type. The pool and shall have a remaining weighted average life of not more than
onetwo years and none of the underlying exposures shall have a residual maturity of longer
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than twothree years, except for pools of auto loans, auto leases and equipment lease
transactions which shall have a remaining exposure weighted average life of not more than [
fourX ] years and none of the underlying exposures shall have a residual maturity of longer
than [ sevenY ] years. The underlying exposures shall not include loans secured by residential
or commercial mortgages or fully guaranteed residential loans, as referred to in paragraph 1,
point (e) of Article 129 of Regulation (EU) No 575/2013. The underlying exposures shall contain
contractually binding and enforceable obligations with full recourse to debtors with defined
payment streams relating to rental, principal, interest, or related to any other right to receive
income from assets warranting such payments. The underlying exposures shall not include
transferable securities listed on a trading venue, as defined in Directive 2014/65/EU. ”
[…]
Justification - Article 12(2):
In light of Member States’ comments regarding maturity caps within an ABCP programme, the
Presidency considers that the thresholds in the Commission’s proposal might be too low for specific
categories of underlying assets as evidenced by existing ABCP programmes. In order not to negatively
impinge on an existing and well-functioning ABCP market, it is suggested to extend the maturity limits
for these categories of assets. This is counterbalanced by a lowering of maturities on the other asset
categories, bringing the latter closer in line with the EBA advice. It should be noted that in most cases,
taking into account the nature of the underlying transactions of an ABCP programme, the suggested
maturities would not lead to an increase of the weighted average maturity of the programme itself
compared to the Commission’s proposal.
Article 13(1)
Programme level requirements
1.
At all times, at least 98[ Z% ] of the aggregate exposure amount of all exposures underlying the
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transactions within an ABCP programme shall fulfil the requirements of Article 12 of this
Regulation.
[…]
Justification - Article 13(1):
Taking into account the recalibration of Article 12(2) and the fact that flexibility granted in this
paragraph would solely aim at preventing the disqualification of the whole programme in case an issue
arises with regard to an underlying transaction, the Presidency suggests fixing Z at 98%.
Article 14
STS notification requirements and ESMA website
1.
The originator, sponsor and SSPE shall jointly notify ESMA by means of the template referred
to in paragraph 5 of this Article that the securitisation meets the requirements of Articles 7 to
10 or Articles 11 to 13 of this Regulation ('STS notification'). The STS notification shall include
an explanation concise justification by the originator, sponsor and SSPE of howregarding the
compliance with each of the STS criteria set out in Articles 8 to 10 or Articles 12 and 13 has
been complied with. ESMA shall publish the STS notification on its official website pursuant to
paragraph 4. The originator, sponsor and SSPE shall also inform their competent authoritiesy.
The originator, sponsor and SSPE of a securitisation and shall designate amongst themselves
one entity to be the first contact point for investors and competent authorities.
1a.
Where the originator, sponsor and SSPE use the services ofrely on a third party authorised
pursuant to Article 14a to assess whethercheck that a securitisation complies with Articles 7 to
10 or Articles 11 to 13 of this Regulation, the STS notification shall include a statement that the
compliance with the STS criteria was confirmedchecked by that third party. The notification shall
include the name of the third party, its place of establishment [OPTION 2B: and the name of the
competent authority that authorised it].
2.
Where the originator or original lender is not a credit institution or investment firm as defined
in Article 4, paragraph 1, points (1) and (2) of Regulation No 575/2013 established in the Union
the notification pursuant to paragraph 1 shall be accompanied by the following:
(a)
confirmation by the originator or original lender that its credit-granting is done on the
basis of sound and well-defined criteria and clearly established processes for approving,
amending, renewing and financing credits and that the originator or original lender has
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effective systems in place to apply such processes in accordance with Article 5a.
(b)
confirmation by the originator or original lender as toa declaration on whether the
elements mentioned in point (a) are subject to supervision.
3.
The originator, sponsor and SSPE shall immediately notify ESMA and their competent authority
when a securitisation no longer meets the requirements of either Articles 7 to 10 or Articles 11
to 13 of this Regulation.
4.
ESMA shall maintain a list of all securitisations for which the originators, sponsors and SSPEs
have notified that they meet the requirements of Articles 7 to 10 or Articles 11 to 13 of this
Regulation on its official website. ESMA shall update the list where the securitisations are no
longer considered to be STS following a decision of competent authorities or a notification by
the originator, sponsor or SSPE. Where the competent authority has imposed administrative
sanctions or remedial measures in accordance with Article 17, it shall immediately notify ESMA
thereof. ESMA shall immediately indicate on the list that a competent authority has imposed
administrative sanctions or remedial measures in relation to the securitisation concerned.
5.
ESMA, in close cooperation with EBA and EIOPA, shall develop draft implementing technical
standards that specifying the format in which the information referred to inthat the originator,
sponsor and SSPE provide to comply with their obligations under paragraph 1 and shall provide
the format by means of standardised templates.
ESMA shall submit those draft implementing technical standards to the Commission by [
six
three months after entry into force of this Regulation].
Power is delegated to the Commission to adopt the implementing technical standards referred
to in this paragraph in accordance with the procedure laid down in Article 15 of Regulation
(EU) No 1095/2010.”
Article 14a
Third party verifying STS compliance
1.
A third party referred to in Article 14, paragraph 1a shall be authorised by [OPTION 2A:
ESMA][OPTION 2B: the competent authority] of the Member State where it is established to
assess the compliance of securitisations with the STS criteria laid down in Articles 7 to 10 or
Articles 11 to 13 of this Regulation. [OPTION 2A: ESMA][OPTION 2B: Tthe competent authority]
shall grant the authorisation if the following conditions are met:
(a)
the third party operates on a not-for-profit basis. It may only charges non-discriminatory
and cost-based fees to the originators, sponsors or SSPEs involved in the securitisations
which the third party assessesexamines, sufficient to cover the expenditure relating to
the assessment of the compliance with STS criteriawithout differentiating fees
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depending on, or correlated to, the result of its assessment;
(b)
The third party is not an originator, sponsor or original lenderthe third party is
established for the sole purpose of assessing the compliance with STS criteria and the
performance of other activities shall not compromise the independence or integrity of
its assessment;
(c)
the members of the management body of the third party have professional
qualifications, knowledge and experience that are adequate for the task of the third
party and they are of good repute and integrity;
(d)
the management body of the third party includes a majority of independent directors,
whose compensation shall not depend on the business performance of the third party
representing experts and investors in the STS securitisation market;
(e)
the third party takes all necessary steps to ensure that the verification of STS compliance
is not affected by any existing or potential conflicts of interest or business relationship
involving the third party, its shareholders or members, managers, employees or any
other natural person whose services are placed at the disposal or under the control of
the third party. To that end, the third party shall establish, maintain, enforce and
document an effective internal control system governing the implementation of policies
and procedures to identify and prevent potential conflicts of interest. Potential or
existing conflicts of interest which have been identified shall be eliminated orand
mitigated and disclosed without delay.possible conflicts of interest and The third party
shall establish, maintain, enforce and document adequate procedures and processes to
ensure the independence of the verificationassessment of STS compliance. The third
party shall periodically monitor and review those policies and procedures in order to
evaluate their effectiveness and assess whether they should be updated.;
(f)
the third party can demonstrate that it has proper operational safeguards and internal
processes that enable it to assess STS compliance.
[OPTION 2A: ESMA][OPTION 2B: The competent authority] may shall withdraw the
authorisation when an third party no longer complies with the above conditions set out in the
first subparagraph.
2.
[OPTION 2A: ESMA][OPTION 2B: -Tthe competent authority] may charge cost-based fees to
the third party referred to in paragraph 1, in order to cover necessary expenditures relating to
the assessment of applications for authorisation and to the subsequent monitoring of the
compliance with the conditions set out in paragraph 1. ] “
3.
ESMA shall develop draft regulatory technical standards specifying the information to be
provided to the competent authorities in the application for the authorisation of a third party
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in accordance with paragraph 1.
ESMA shall submit those draft regulatory technical standards to the Commission by [six
months after entry into force of this Regulation].
Power is delegated to the Commission to adopt the regulatory technical standards referred to
in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 14b
Liability in connection with STS notification
The originator, and sponsor [and SSPE] shall be jointly liable for any losses or damages resulting
from an incorrect or misleading STS notification pursuant to Article 14, paragraph 1.notification
based on an incorrect assessment of the STS criteria. [OPTION 2: Where the originator, sponsor
and SSPE rely on a third party in accordance with Article 14, paragraph 1a to assess the STS
criteria, the third party shall be jointly liable with the originator, sponsor and SSPE for an
incorrect assessment of the STS criteria, except where the third party can prove that its
assessment of the STS criteria was based on fraudulent or incorrect materials submitted to its
examination.]
Justification – Certification process:
Based on the written comments received from Member States and following the discussion of the
Working party of 12 November 2015, the Presidency would like to submit for discussion the above
package for STS certification based on Option 2 of the first Presidency compromise text. The following
features have been added or changed:
In light of split views of Member States on who shall be in charge of authorisation of third parties
(ESMA or national competent authorities) the Presidency proposes a middle ground solution
where national competent authorities are in charge of authorisation, but a coherent European
approach is guaranteed through an ESMA empowerment to issue regulatory technical standards.
The criteria to be authorised as a third party have been modified so as to open up this possibility
to a broad range of entities. The not-for-profit criterion is removed and replaced with rules
regarding the fees to be charged which are inspired by the regulation on credit rating agencies.
Criterion (b) is replaced by a criterion allowing third parties to perform other activities while
providing for adequate independence and integrity of the STS assessment using wording from
the CRA regulation.
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Robust provisions on the prevention, identification, elimination and management of conflicts of
interest are introduced in line with similar provisions in the CRA regulation.
A new criterion provides for proper operational safeguards and internal processes.
The wording of Articles 14 and 14a has been clarified and its consistency has been improved.
In light of the views expressed by a majority of Member States, the joint liability of the third
party has been removed from the text.
The suggestion aims at ensuring a sufficient but light touch supervisory involvement with respect to the
authorisation of third parties verifying STS compliance. The involvement of third party remains optional
according to Article 14.
Open issue:
The Presidency would like to further check with Member States whether they would be supportive of
the idea of a number of Member States to introduce a clear hierarchy in terms of responsibilities and
liability. It has been suggested that the sponsor should by default be the key player when it comes to
compliance with the STS criteria and the notification under Article 14. If there is no sponsor this role
would be attributed to the originator. The same would apply in terms of liability. Such a restructuring of
provisions would in turn also impact the supervisory architecture in e.g. Article 21, the competent
authority of the sponsor becoming the key competent authority or a
de facto “lead supervisor”.
This way to proceed would have the advantage to enhance the clarity of the text and could also facilitate
a solution on Article 21. However it might be questionable whether for instance the SSPE holding all the
underlying assets should be left completely out when it comes to compliance and liability. Moreover the
supervisory architecture where one competent authority has the lead over the others could be seen as
problematic, notably in cross-border situations.