REPORT     ***I
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19 December 2016
PE 583.961v02-00 A8-0387/2016

on the proposal for a regulation of the European Parliament and of the Council laying down common rules on securitisation and creating a European framework for simple, transparent and standardised securitisation and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012

(COM(2015)0472 – C8-0288/2015 – 2015/0226(COD))

Committee on Economic and Monetary Affairs

Rapporteur: Paul Tang

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION
 ANNEX: LIST OF ENTITIES OR PERSONSFROM WHOM THE RAPPORTEUR HAS RECEIVED INPUT
 PROCEDURE – COMMITTEE RESPONSIBLE

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the proposal for a regulation of the European Parliament and of the Council laying down common rules on securitisation and creating a European framework for simple, transparent and standardised securitisation and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012

(COM(2015)0472 – C8-0288/2015 – 2015/0226(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2015)0472)),

–  having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8-0288/2015),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 20 January 2016(1),

–  having regard to the opinion of the European Central Bank of 11 March 2016(2)

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0387/2016),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it intends to amend its proposal substantially or replace it with another text;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Amendment    1

AMENDMENTS BY THE EUROPEAN PARLIAMENT(3)*

to the Commission proposal

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REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

laying down common rules on securitisation and creating a European framework for simple, transparent and standardised securitisation and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(4),

Having regard to the opinion of the European Central Bank(5),

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1)  Securitisation involves transactions that enable a lender – typically a credit institution – to refinance a set of loans or exposures such as loans for immovable property, auto leases, consumer loans or credit cards, by transforming them into tradable securities. The lender pools and repackages a portfolio of its loans, and organises them into different risk categories for different investors, thus giving investors access to investments in loans and other exposures to which they normally would not have direct access. Returns to investors are generated from the cash flows of the underlying loans.

(2)  In the Investment Plan for Europe presented on 26 November 2014, the Commission announced its intention to restart high quality securitisation markets, without repeating the mistakes made before the 2008 financial crisis. The development of a simple, transparent and standardised securitisation market constitutes a building block of the Capital Markets Union (CMU) and contributes to the Commission's priority objective to support job creation and a return to sustainable growth.

(3)  The European Union aims to strengthen the legislative framework implemented after the financial crisis to address the risks inherent in highly complex, opaque and risky securitisation. For that purpose, this Regulation introduces a ban on re-securitisation and enhances the conditions for complying with the risk retention obligations. It is essential to ensure that rules are adopted to better differentiate simple, transparent and standardised products from complex, opaque and risky financial instruments and apply a more risk-sensitive prudential framework.

(4)  Securitisation is an important element of well-functioning financial markets. Soundly structured securitisation is a channel for diversifying funding sources and allocating risk more widely within the Union financial system. It allows for a broader distribution of financial sector risk and can help to free up originator's balance sheets to allow for further lending to the real economy. ▌Securitisation can create a bridge between credit institutions and capital markets with an indirect benefit for businesses and citizens (through, for example, less expensive loans and business financing, credits for immovable property and credit cards). Nevertheless, this Regulation recognises the risks of increased interconnectedness and of excessive leverage that securitisation raises and enhances the micro-prudential supervision by competent authorities of a financial institution's participation in that market, as well as the macro-prudential oversight of that market by the European System Risk Board (ESRB) and the national competent and designated authorities for macro-prudential instruments.

(5)  Establishing a more risk-sensitive prudential framework for simple, transparent and standardised ("STS") securitisations requires that the Union clearly defines what a STS securitisation is, since otherwise the more risk-sensitive regulatory treatment for credit institutions and insurance companies would be available for different types of securitisations in different Member States. This would lead to an un-level playing field and to regulatory arbitrage while on the contrary, it is important to ensure that the Union functions as a single market for STS securitisations and facilitates cross-border transactions.

(6)  It is appropriate to provide, in line with the existing definitions in Union sectoral legislation, definitions of all the key concepts of securitisation. In particular, a clear and encompassing definition of securitisation is needed to capture any transaction or scheme whereby the credit risk associated with an exposure or pool of exposures is tranched. An exposure that creates a direct payment obligation for a transaction or scheme used to finance or operate physical assets should not be considered an exposure to a securitisation, even if the transaction or scheme has payment obligations of different seniority.

(7)  At both the international and European level, much work has already been done to identify STS securitisation and in Commission Delegated Regulations (EU) 2015/61(6) and (EU) 2015/35(7), criteria have already been set out for simple, transparent and standardised securitisation for specific purposes, to which a more risk sensitive prudential treatment is attached.

(8)  Based on the existing criteria, on the BCBS-IOSCO criteria adopted on 23 July 2015 for identifying simple, transparent and comparable securitisations in the framework of capital sufficiency for securitisations, and in particular the EBA Advice on qualifying securitisation published on 7 July 2015, it is essential to establish a general and cross-sectorally applicable definition of STS securitisation.

(9)  Implementation of the "STS criteria throughout the EU should not lead to divergent approaches. Those approaches would create potential barriers for cross-border investors by constraining them to enter into the details of the Member State frameworks and thus undermining investor confidence in the STS criteria. The European Securities and Market Authority (ESMA) should therefore, together with the national authorities competent for securities markets, supervise compliance with the STS criteria and develop guidelines to ensure a common and consistent understanding of the STS requirements throughout the Union, in order to address potential interpretation issues. Such a single source of interpretation aims to support the adoption of the STS criteria by originators, sponsors and investors. The European Banking Authority (EBA) should also play an active role in addressing potential interpretation issues.

(10)  ▌In the light of this objective the three ESAs should, in the framework of the Joint Committee of the European Supervisory Authorities, share information regarding practical issues which may arise with regards to STS securitisations. In doing so, the views of market participants should also be requested and taken into account to the extent possible. The outcome of these discussions should be made public on the websites of ▌ESMA so as to help originators, sponsors, SSPEs and investors assess STS securitisations before issuing or investing in such positions. ▌

(11)  Investments in or exposures to securitisations will not only expose the investor to credit risks of the underlying loans or exposures, but the structuring process of securitisations could also lead to other risks such as agency risks, model risk, legal and operational risk, counterparty risk, servicing risk, liquidity risk, concentration risk and risks of operational nature. Therefore, it is essential that institutional investors, including asset managers, are subject to proportionate due diligence requirements ensuring that they properly assess the risks arising from all types of securitisations, to the benefit of end investors. Due diligence can thus also enhance confidence in the market and between individual originators, sponsors and investors. It is necessary that investors also exercise appropriate due diligence with regard to STS securitisations. They can inform themselves with the information disclosed by the securitising parties, in particular the STS notification and the related information disclosed in this context, which should provide investors with all the relevant information on the way STS criteria are met. Institutional investors should be able to place appropriate reliance on the STS notification and the information disclosed by the originator, sponsor and SSPE on whether a securitisation meets the STS requirements.

(12)  It is essential that the interests of originators, sponsors, ▌ original lenders that are involved in a securitisation and investors are aligned. To achieve this, the originator, sponsor or original lender should retain a significant interest in the underlying exposures of the securitisation, at a level of 5% or 10% depending on the modality of retention. Moreover, the securitised exposures should not deliver a performance that would be significatively different from exposures that have not been securitised. It is therefore important for the originators or the sponsors to retain a material net economic exposure to the underlying risks in question. The European Banking Authority (EBA), following an ESRB report, should review every two years the risk retention rate between 5% and 20% for the securitisation market as a whole or for certain segments of that market by way of draft regulatory technical standards. More generally, securitisation transactions should not be structured in such a way so as to avoid the application of the retention requirement. That requirement should be applicable in all situations where the economic substance of a securitisation is applicable, whatever legal structures or instruments are used. There is no need for multiple applications of the retention requirement. For any given securitisation, it suffices that only the originator, the sponsor or the original lender is subject to the requirement. Similarly, where securitisation transactions contain other securitisations positions as underlying exposures, the retention requirement should be applied only to the securitisation which is subject to the investment. The STS notification indicate to investors that originators are retaining a material net economic exposure to the underlying risks. Certain exceptions should be made for cases when securitised exposures are fully, unconditionally and irrevocably guaranteed by in particular public authorities. In case support from public resources provided in the form of guarantees or by other means, any provisions in this Regulation are without prejudice to State aid rules.

(13)  The ability of investors to exercise due diligence and thus make an informed assessment of the creditworthiness of a given securitisation instrument depends on their access to information on those instruments. Based on the existing acquis, it is important to create a comprehensive system under which investors will have access to all the relevant information over the entire life of the transactions and to reduce originators, sponsors and SSPEs reporting tasks and to facilitate investors' continuous; easy and free access to reliable information on securitisations. The originator, the sponsor and the SSPE should also publish information on the long-term sustainable nature of the securitisation, how these contribute to the achievement of the UN’s climate conference agreement COP 21, and how the environmental, social and governance (ESG) factors as referred to in the UN Principles for Responsible Investment are taken into account. To enhance market transparency, a framework for data repositories to collect relevant reports, primarily on underlying exposures in securitisations, should be established. Such data repositories should be authorised and supervised by ESMA and are to comply with strict requirements. In specifying the details of such report, ESMA should consider that the information required to be reported to such repositories should be based on existing templates for disclosures of such information.

(13a)  The obligations created and reinforced by this Regulation regarding the need for participants in securitisations to release public information should not prevent non-public securitisations, in which the originator, sponsor and SSPE of a securitisation at least makes available all underlying documentation that is essential for the understanding of the transaction and sufficiently informs investors.

(14)  Originators, sponsors and SSPE's should make all materially relevant data on the credit quality and performance of underlying exposures available in the investor report, including data allowing investors to clearly identify delinquency and default of underlying debtors, debt restructuring, debt forgiveness, forbearance, repurchases, payment holidays, losses, charge offs, recoveries and other asset performance remedies in the pool of underlying exposures. Data on the cash flows generated by underlying exposures and by the liabilities of the securitisation issuance, including separate disclosure of the securitisation position’s income and disbursements, that is scheduled principal, scheduled interest, prepaid principal, past due interest and fees and charges and any data relating to the breach of any triggers implying changes in the priority of payments or replacement of any counterparties as well as data on the amount and form of credit enhancement available to each tranche should also be made available in the investor report. Although securitisations that are simple, transparent and standardised have in the past performed well, the satisfaction of any STS requirements does not mean that the securitisation position is free of risks, nor does it indicate anything about the credit quality underlying the securitisation. Instead, it should be understood to indicate that a prudent and diligent investor will be able to analyse the risks involved in the securitisation. There should be two types of STS requirements: one for long-term securitisations and one for short-term securitisations (ABCP), which should be subject to a large extent to similar requirements with specific adjustments to reflect the structural features of these two market segments. The functioning of these markets are different with ABCP programmes relying on a number of ABCP transactions consisting of short term exposures which need to be replaced once matured. In addition, STS criteria need also to reflect the specific role of the sponsor providing liquidity support to the ABCP conduits. Because of the potential concentration of liquidity risk at the level of the sponsor bank, this could increase systemic risk. Therefore this Regulation requires regular stress testing for financial institutions that want to support an ABCP programme.

(15)  This proposal only allows for 'true sale' securitisations to be designated as STS. In a true sale securitisation, the ownership of the underlying exposures is transferred or effectively assigned to an issuer entity which is a securitisation special purpose entity (SSPE). The transfer of the underlying exposures to the SSPE should not be subject to severe clawback provisions in the event of the seller's insolvency. Such severe clawback provisions include but should not be limited to provisions under which the sale of the underlying exposures can be invalidated by the liquidator of the seller solely on the basis that it was concluded within a certain period before the declaration of the seller's insolvency or provisions where the SSPE can prevent such invalidation only if it can prove that it was not aware of the insolvency of the seller at the time of sale.

(16)  In securitisations which are not 'true sale', the underlying exposures are not transferred to such an issuer entity, but rather the credit risk related to the underlying exposures is transferred by means of a derivative contract or guarantees. This introduces an additional counterparty credit risk and potential complexity related in particular to the content of the derivative contract. For those reasons, the STS criteria do not allow synthethic securitisation.

The progress made by the EBA in its report of December 2015, identifying a possible set of STS criteria for synthetic securitisation should be acknowledged. Once the EBA has clearly determined a set of STS criteria specifically applicable to balance sheet synthetic securitisations, and with a view to promoting funding to the real economy and in particular SMEs which benefit the most from such securitisations, the Commission is mandated to draft a report and, where appropriate, a legislative proposal in order to extend the STS framework to such securitisations, whereas no such mandate is given to the Commission in respect of arbitrage synthetic securitisations.

(17)  The underlying exposures transferred from the seller to the SSPE should meet predetermined and clearly defined eligibility criteria which do not allow for active portfolio management of those exposures on a discretionary basis. Substitution of exposures that are in breach of representations and warranties should in principle not be considered active portfolio management.

(18)  To ensure that investors perform robust due diligence and to facilitate the assessment of underlying risks, it is important that securitisation transactions are backed by pools of exposures that are homogenous in asset type ESMA is mandated to develop regulatory technical standards to further clarify the homogeneity criteria under the requirements on simplicity.

(19)  It is essential to prevent the recurrence of purely ‘originate to distribute’ models. In those situations lenders grant credits applying poor and weak underwriting policies as they know in advance that related risks are eventually sold to third parties. Thus, the exposures to be securitised should be originated in the ordinary course of the originator’s or original lender's business pursuant to underwriting standards that should not be less stringent than those the originator or original lender applies to origination of similar exposures which are not securitised. Material changes in underwriting standards should be fully disclosed to potential investors. The originator’s or original lender should have sufficient experience in originating exposures of a similar nature to those which have been securitised. In the case of securitisations where the underlying exposures are residential loans, the pool of loans should not include any loan that was marketed and underwritten on the premise that the loan applicant or, where applicable intermediaries, were made aware that the information provided might not be verified by the lender. The assessment of the borrower's creditworthiness should also meet where applicable, the requirements set out in Directives 2014/17/EU or 2008/48/EC of the European Parliament and of the Council or equivalent requirements in third countries.

(20)  Where originators, sponsors and SSPE's would like their securitisations to use the STS designation, they should notify investors, competent authorities and ESMA that the securitisation meets the STS requirements. ESMA should then publish it on a list of transactions made available on its website for information purposes. The inclusion of a securitisation issuance in ESMA’s list of notified STS securitisations does not imply that ESMA or other competent authorities have certified that the securitisation meets the STS requirements. The compliance with the STS requirements remains solely the responsibility of the originators, sponsors and SSPEs. This will ensure that originators, sponsors and SSPE's take responsibility for their claim that the securitisation is STS and that there is transparency on the market.

(21)  Where a securitisation no longer meets the STS requirements, the originator, sponsor and SSPE should immediately notify ESMA. Moreover, where a competent authority has imposed administrative sanctions or remedial measures with regard to a securitisation notified as being STS, that competent authority should immediately notify ESMA for its indication on the STS notifications list allowing investors to be informed about such sanctions and about the reliability of STS notifications. It is therefore in the interest of originators, sponsors and SSPE's to make well-considered notifications due to reputational consequences.

(22)  Investors should perform their own due diligence on investments commensurate with the risks involved but they should be able to rely on the STS notifications and on the information provided by the originator, sponsor and SSPE on STS compliance.

(23)  The involvement of third parties in helping to check compliance of a securitisation with the STS requirements may be useful for investors, originators, sponsors and SSPE's and could contribute to increase confidence in the market for STS securitisations. However, it is essential that investors make their own assessment, take responsibility for their investment decisions and do not mechanistically rely on such third parties.

(24)  Member States should designate competent authorities and provide them with the necessary supervisory, investigative and sanctioning powers. Administrative sanctions and remedial measures should, in principle, be published. Since investors, originators, sponsors, original lenders and SSPEs can be established in different Member States and supervised by different sectoral competent authorities close cooperation between relevant competent authorities, including the European Central Bank (ECB) in accordance with Council Regulation (EU) No 1024/2013(8), and with the ESAs should be ensured by the mutual exchange of information and assistance in supervisory activities.

(25)  Competent authorities should closely coordinate their supervision and ensure consistent decisions, especially in case of infringements of this Regulation. Where such an infringement concerns an incorrect or misleading notification, the competent authority finding that infringement should also inform the ESAs and the relevant competent authorities of the Member States concerned ESMA, and, where appropriate, the Joint-Committee of the European Supervisory Authorities, should be able to exercise their binding mediation powers.

(25a)  In order to exercise the ability to impose fines or periodic penalty payments, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of supplementing/amending this Regulation by setting out rules of procedure for imposing fines or periodic penalty payments, as well as the types of fees, the matters for which fees are due and the amount of such fees.

In order to meet the obligation for the originator, sponsor and original lender of a STS securitisation to be established in the Union and in the light of the potential development in third countries of frameworks founded on the BCBS-IOSCO criteria for identifying simple, transparent and comparable securitisations, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of supplementing this Regulation by determining the equivalence of the legal, supervisory and enforcement arrangements of third countries to the STS framework of the Union.

It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(26)  This Regulation promotes the harmonisation of a number of key elements in the securitisation market without prejudice to further complementary market-led harmonisation of processes and practices in securitisation markets. For that reason, it is essential that market participants and their professional associations continue working on further standardising market practices, and in particular the standardisation of documentation of securitisations. The Commission will carefully monitor and report on the standardisation efforts made by market participants.

(27)  The UCITS Directive, the Solvency II Directive, the CRA Regulation, the AIFM Directive and EMIR are amended accordingly to ensure consistency of the EU legal framework with this Regulation on provisions related to securitisation the main object of which is the establishment and functioning of the internal market, in particular by ensuring a level playing field in the internal market for all institutional investors.

(28)  As regards the amendments to Regulation (EU) No 648/2012, over-the-counter ("OTC") derivative contracts entered into by securitisation special purpose entities should not be subject to the clearing obligation provided that certain conditions are met. This is because counterparties to OTC derivative contracts entered into with securitisation special purpose vehicles are secured creditors under the securitisation arrangements and adequate protection against counterparty credit risk is usually provided for. With respect to non-centrally cleared derivatives, the levels of collateral required should also take into account the specific structure of securitisation arrangements and the protections already provided for therein.

(29)  There is a degree of substitutability between covered bonds and securitisations. Therefore, in order to prevent the possibility of distortion or arbitrage between the use of securitisations and covered bonds because of the different treatment of OTC derivative contracts entered into by covered bond entities or by SSPEs, Regulation (EU) No 648/2012 should also be amended to exempt covered bond entities from the clearing obligation and to ensure that covered bond entities are subject to the same bilateral margins.

(30)  In order to specify the risk-retention requirement, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of the adoption of regulatory technical standards laying down the modalities of retaining risk, the measurement of the level of retention, certain prohibitions concerning the retained risk, the retention on a consolidated basis and the exemption for certain transactions. In view of the expertise of EBA, in defining the delegated acts, the Commission should make use of that expertise on the preparation of the delegated acts. EBA should consult closely with the other two European Supervisory Authorities.

(31)  In order to facilitate investors continuous, easy and free access to reliable information on securitisations, the same power to adopt acts should be delegated to the Commission in respect of the adoption of regulatory technical standards for comparable information on underlying exposures and regular investor reports and for the requirements to be met by the website on which the information is made available to holders of securitisation positions. In view of the expertise of ESMA, in defining the delegated acts, the Commission should make use of that expertise on the preparation of the delegated acts. ESMA should consult closely with the other two European Supervisory Authorities.

(32)  In order to facilitate the process to investors, originators, sponsors and SSPE's, the same power to adopt acts should be delegated to the Commission in respect of the adoption of regulatory technical standards regarding the template for STS notifications that will provide investors and competent authorities with sufficient information for their assessment of compliance with the STS requirements. In view of the expertise of ESMA, in defining the delegated acts, the Commission should make use of that expertise on the preparation of the delegated acts. ESMA should consult closely with the other two European Supervisory Authorities.

(33)  In order to specify the terms of the cooperation and exchange of information obligation of competent authorities, the same power to adopt acts should be delegated to the Commission in respect of the adoption of regulatory technical standards laying down the information to be exchanged and the content and scope of the notification obligations. In view of the expertise of ESMA, in defining the delegated acts, the Commission should make use of that expertise on the preparation of the delegated acts. ESMA should consult closely with the other two European Supervisory Authorities.

(34)  The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(35)  Since the objectives of this Regulation cannot be sufficiently achieved by the Member States given that securitisation markets operate globally and that a level playing field in the internal market for all institutional investors and entities involved in securitisation should be ensured but, by reason of their scale and effects, can be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(36)  This Regulation should apply to securitisations the securities of which are issued on or after the entry into force of this Regulation.

(37)  For securitisation positions outstanding as of the date of entry into force of this Regulation, originators, sponsors and SSPEs may use the designation 'STS' provided that the securitisation complies with the STS requirements, for certain requirements at the time of notification and for other requirements at the time of origination. Therefore, originators, sponsors and SSPEs should be able to submit an STS notification pursuant to Article 14 (1) of this Regulation to ESMA. Any subsequent modification to the securitisation should be accepted provided that the securitisation continues meeting all of the applicable STS requirements.

(38)  The due diligence requirements that are applied in accordance with existing Union law before this Regulation enters into force should continue to apply to securitisations issued on or after 1 January 2011 and to securitisations issued before that date, including where new underlying exposures have been added or substituted after 31 December 2014. The relevant articles of Commission Delegated Regulation (EU) No 625/2014 that specify the risk retention requirements for credit institutions and investments firms as defined in Article 4(1) (1) and (2) of Regulation (EU) No 2013/575 should remain applicable until the moment that the regulatory technical standards on risk retention pursuant to this Regulation become of application. For reasons of legal certainty, credit institutions or investment firms, insurance undertakings, reinsurance undertakings and alternative investment fund managers should, for securitisation positions outstanding as of the entry into force of this Regulation; continue to be subject to Article 405 of Regulation (EU) No 575/2013 and to Chapter 1, 2 and 3 and Article 22 of Commission Delegated Regulation (EU) No 625/2014, Articles 254 and 255 of Commission Delegated Regulation (EU) 2015/35 and Article 51 of Commission Delegated Regulation (EU) No 231/2013 respectively. In order to ensure that originators, sponsors and SSPE's comply with their transparency obligations, until the moment that the regulatory technical standards to be adopted by the Commission pursuant to this Regulation apply, make the information mentioned by Annexes I to VIII of Delegated Regulation 2015/3/EU available to the website referred to in Article 5 (4) of this Regulation.

HAVE ADOPTED THIS REGULATION:

Chapter 1

General provisions

Article 1

Subject-matter and scope

1.  This Regulation lays down a general framework for securitisation. It defines securitisation and establishes due diligence, risk retention and transparency requirements for parties involved in securitisations▌. It also provides a framework for Simple, Transparent and Standardised or '"STS' securitisation.

2.  This Regulation applies to institutional investors ▌and to originators, original lenders, sponsors and securitisation special purpose entities.

Article 2

Definitions

For the purposes of this Regulation, the following definitions shall apply:

(1)  'securitisation' means a transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched, having both of the following characteristics:

(a)  payments in the transaction or scheme are dependent upon the performance of the exposures or pool of exposures;

(b)  the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme.

(2)  'Securitisation Special Purpose Entity' or 'SSPE' means a corporation, trust or other legal entity, other than an originator or sponsor, established for the purpose of carrying out one or more securitisations, the activities of which are limited to those appropriate to accomplishing that objective, the structure of which is intended to isolate the obligations of the SSPE from those of the originator, and in which the holders of the beneficial interests have the right to pledge or exchange those interests without restriction;

(3)  'originator' means an entity which:

(a)  itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposures being securitised; or

(b)  purchases a third party's exposures for its own account and then securitises them;

(4)  're-securitisation' means securitisation where at least one of the underlying exposures is a securitisation position;

(5)  'sponsor' means a credit institution or investment firm as defined in Article 4(1) points (1) and (2) of Regulation (EU) No 2013/575 other than an originator that establishes and manages an asset-backed commercial paper programme or other securitisation transaction or scheme that purchases exposures from third-party entities;

(6)  'tranche' means a contractually established segment of the credit risk associated with an exposure or a pool of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in another segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments;

(7)  'asset-backed commercial paper (ABCP) programme' or ‘ABCP programme’ means a programme of securitisations the securities issued by which predominantly take the form of asset-backed commercial paper with an original maturity of one year or less;

(8)  'asset-backed commercial paper (ABCP) transaction' or 'ABCP transaction’ means a securitisation within an ABCP programme;

(9)  'traditional securitisation' means a securitisation involving the economic transfer of the exposures being securitised. This shall be accomplished by the transfer of ownership of the securitised exposures from the originator institution to an SSPE or through sub-participation by an SSPE. The securities issued do not represent payment obligations of the originator institution;

(10)  'synthetic securitisation' means a securitisation where the transfer of risk is achieved by the use of credit derivatives or guarantees, and the exposures being securitised remain exposures of the originator;

(11)  'investor' means a person holding a securitisation position ;

(12)  'institutional investor' means any of the following:

(i)  an insurance undertaking, as defined in Article 13(1) of Directive 2009/138/EC of the European Parliament and of the Council (Solvency II);

(ii)  a reinsurance undertaking, as defined in Article 13(4) of Directive 2009/138/EC;

(iii)  an institution for occupational retirement provision (IORP) falling within the scope of Article 2 of Directive 2003/41/EC of the European Parliament and of the Council , unless a Member States has chosen not to apply that Directive in whole or in parts to that institution in accordance with Article 5 of that Directive;

(iv)  an alternative investment fund manager (AIFM), as defined in Article 4(1)(b) of Directive 2011/61/EU of the European Parliament and of the Council;

(v)  an undertaking for the collective investment in transferable securities (UCITS) management company, as defined in Article 2(1)(b) of Directive 2009/65/EC of the European Parliament and of the Council(9);

(vi)  an internally managed UCITS, which is an investment company authorised in accordance with Directive 2009/65/EC and which has not designated a management company authorised under that Directive for its management;

(vii)  a Money Market Fund (MMF) as identified in Regulation .../... .of the European Parliament and of the Council on Money Market Funds (MMF);

(viii)  a credit institution or an investment firm as defined in points 1 and 2 of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council;

(ix)  a multilateral development bank within the meaning of Article 117(2) of Regulation (EU) No 575/2013, an international organisation or a promotional entity.

(13)  'servicer' means an entity as defined in Article 142(1) point (8) of Regulation No 2013/575/EU;

(14)  'liquidity facility' means the securitisation position arising from a contractual agreement to provide funding to ensure timeliness of cash flows to investors;

(15)  'revolving exposure' means an exposure whereby customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to an agreed limit;

(16)  'revolving securitisation' means a securitisation where the securitisation structure itself revolves by exposures being added to or removed from the pool of exposures irrespective of whether the exposures revolve or not;

(17)  'early amortisation provision' means a contractual clause in a securitisation of revolving exposures or a revolving securitisation which requires, on the occurrence of defined events, investors' positions to be redeemed before the originally stated maturity of the securities issued;

(18)  'first loss tranche' means the most subordinated tranche in a securitisation that is the first tranche to bear losses incurred on the securitised exposures and thereby provides protection to the second loss and, where relevant, higher ranking tranches.

(18a)  'securitisation position' means an exposure to a securitisation;

(18b)  'original lender' means an entity which, either itself or through related entities, concluded the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposure being securitised;

(18c)  ´balance sheet synthetic securitisation´ means a securitisation as defined in Article 242(11) of Regulation 575/2013 where the originator institution is a credit institution or an affiliate of a credit institution, the securitised exposures are part of the banking book of the originator institution or one of its affiliates, and the underlying exposures do not include any transferable securities, as defined in Directive 2004/39/EC (MiFID).

(18d)  'fully-supported ABCP programme' means an ABCP programme that its sponsor directly and fully supports by providing to the SSPE a liquidity facility that covers all of the following:

(a)  all liquidity and credit risks of the programme;

(b)  any material dilution risks of the exposures being securitised;

(c)  any other material ABCP transaction- and ABCP programme-level costs.

(18e)  ´non-financial corporation´ means a non-financial counterparty as defined in in Article 2(9) of Regulation 648/2012;

(18f)  ´beneficial owner´ means any natural person who ultimately owns or controls an entity as defined in Article 3 (6) of Directive (EU) 2015/849.

Article 2a

Parties to the securitisation market

1.  Investors in securitisation shall be institutional investors, other than the originator, sponsor or original lender of a securitisation, or institutions of third countries and territories, whose supervisory and regulatory requirements are considered equivalent to the requirements of the Union under the acts referred to in the Article 2(12)(i) to 2(12)(ix), as applicable.

2.  In a securitisation, at least one of the originator, sponsor or original lender shall be:

(a) a regulated entity as defined in point 4 of Article 2 of Directive 2002/87/EC(10), ;

(b) a creditor as defined in point 2 of Article 4 of Directive 2014/17/EU;

(c) a financial institution whose main corporate objective is to provide financial accommodations, such as loans, leases, hire-purchase arrangements or similar accommodations falling within the scope of point 26 of Article 4(1) of Regulation (EU) No 575/2013 that conducts the lending business or financial leasing pursuant to points 2 and 3 of Annex I to Directive 2013/36/EU; or

(d) a multilateral development bank within the meaning of Article 117(2) of Regulation (EU) No 575/2013.

Article 2b

Requirements for SSPEs

Under this Regulation, SSPEs shall not be established in a third country to which any of the following applies:

(a)  the third country promotes itself as an off-shore financial centre or one in which there are no or nominal taxes;

(b)  there is a lack of effective exchange of information with foreign tax authorities:

(c)  there is a lack of transparency with regard to legislative, judicial or administrative provisions;

(d)  there is no requirement for a substantive local presence;

(e)  the third country is listed as a Non-Cooperative Country and Territory by the Financial Action Task Force on Anti-Money Laundering and Terrorist Financing or is part of the Union list of uncooperative tax jurisdiction;

(f)  the third country has not signed an agreement with the home Member State of the issuer, originator or original lender to ensure that the third country fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters, including any multilateral tax agreements.

Chapter 2

Provisions applicable to all securitisation

Article 3

Due diligence requirements for institutional investors

1.  An institutional investor, other than the originator, sponsor or original lender of a securitisation, shall verify prior to being exposed to a securitisation position that:

(a)  where the originator or original lender is not a credit institution or investment firm as defined in points 1 and 2 of Article 4(1) of Regulation (EU) No 575/2013, the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply these criteria and processes;

  Pursuant to Article 5 of this Regulation, the originator, sponsor or original lender shall disclose to the institutional investor that they retain at all times a material net economic interest in accordance with Article 4 of this Regulation;

(b)  the originator, sponsor and SSPE, where applicable, have made the information required by Article 5 of this Regulation available in accordance with the frequency and modalities provided for in that Article;

2.  Prior to being exposed to a securitisation position, institutional investors, other than the originator, sponsor or original lender of a securitisation, shall also carry out a due diligence assessment commensurate with the risks involved. That assessment shall consider at least the following:

(a)  the risk characteristics of the individual securitisation position and of the exposures underlying it;

(b)  all the structural features of the securitisation that can materially impact the performance of the securitisation position, including the contractual priorities of payment and priority of payment-related triggers, credit enhancements, liquidity enhancements, market value triggers, and transaction-specific definitions of default;

(c)  with regard to a securitisation notified as STS, in accordance with Article 14, the compliance by that securitisation with the requirements laid down in Articles 7 to 10, if that securitisation is not an ABCP securitisation, or in Articles 11 to 14, if that securitisation is an ABCP securitisation. Institutional investors may place appropriate reliance on the STS notification pursuant to Article 14 (1) and on the information disclosed by the originator, sponsor and SSPE on the compliance with the STS requirements.

By derogation from points (a) and (b), in the event of a fully-supported ABCP programme, institutional investors in the relevant commercial papers shall consider the features of the ABCP programme and the liquidity support by the sponsor.

3.  Institutional investors, other than the originator, sponsor or original lender of a securitisation, that are exposed to a securitisation position shall at least:

(a)  establish written procedures commensurate with the risk profile of the securitisation position, and appropriate to their trading and non-trading book where relevant, to monitor compliance with paragraphs 1 and 2 and the performance of the securitisation position and the underlying exposures on an ongoing basis.. Where appropriate, those written procedures shall include monitoring of the exposure type, the percentage of loans more than 30, 60 and 90 days past due, default rates, prepayment rates, loans in foreclosure, recovery rates, repurchases, loan modifications, payment holidays, collateral type and occupancy, and frequency distribution of credit scores or other measures of credit worthiness across underlying exposures, industry and geographical diversification, frequency distribution of loan to value ratios with band widths that facilitate adequate sensitivity analysis. ▌

(b)  regularly perform stress tests on the cash flows and collateral values supporting the underlying exposures that are commensurate with the nature, scale and complexity of the risk of the securitisation position; by derogation, in the case of fully-supported ABCP transactions, regularly perform stress tests on the creditworthiness of the liquidity facility provider also for securitsations that are designated STS;

(c)  ensure that there is an adequate level of internal reporting to their management body so that they are aware of the material risk arising from the securitisation positions and that the risks from those investments are adequately managed;

(d)  be able to demonstrate, upon request, to their competent authorities that for each of their securitisation positions they have a comprehensive and thorough understanding of the position and its underlying exposures and that they have implemented written policies and procedures for their risk management and recording of the relevant information.

(da)  notify ESMA of their investment in accordance with Article 5.

3a.  Without prejudice to paragraphs (1) to (3) of this Article, where an institutional investor has given investment firms or regulated asset managers the power to make investment management decisions that might expose it to a securitisation, the institutional investor may instruct those investment firms or regulated asset managers to fulfil its obligations under this Article in respect of any exposure to a securitisation arising from such decisions. Member States shall ensure that where an institutional investor is instructed pursuant to this paragraph to fulfil the obligations of another institutional investor and fails to do so, any sanction that may be imposed for the purposes of Article 17 and 18, shall be imposed on the managing institutional investor and not the institutional investor who is exposed to the securitisation.

3b.  ESMA may, in accordance with Article 16 of Regulation (EU) No 1095/2010, adopt guidelines in order to further specify the conditions in which the securitised exposures do not represent material risk exposures in accordance with paragraph 2 and in which the compliance with the requirements in points (a) to (c) of that paragraph are to be deemed sufficient.

Article 4

Risk retention

1.  The originator, sponsor or the original lender of a securitisation shall retain on an ongoing basis a material net economic interest in the securitisation of not less than 5 % or 10 % depending on the retention modality chosen in accordance with paragraph 2. As part of the mandate given pursuant to Article 16a of this Regulation, The European Banking Authority (EBA) in close cooperation with the ESRB shall take a reasoned decision on required retention rates of up to 20 % in light of market circumstances. The material net economic interest shall be measured at the time of origination and shall be determined by the notional value for off-balance sheet items. Where the originator, sponsor or the original lender have not agreed between them who will retain the material net economic interest, the originator shall retain the material net economic interest. There shall be no multiple applications of the retention requirements for any given securitisation. The material net economic interest shall be measured at the origination and shall be determined by the notional value for off-balance sheet items. The material net economic interest shall not be split amongst different types of retainers and not be subject to any credit risk mitigation or hedging.

1a.  Losses on the securitised assets, measured over one year, shall not be significantly higher than losses over the same period on homogenous assets, pursuant to Article 8(4), which are randomly selected from the balance sheet of the originator or the original lender of a securitisation. Where this condition is not met, the competent authority shall investigate potential improper selection of assets by the originator, sponsor or the original lender of a securitisation, at risk of a fine in accordance with Article 17.

2.  Only the following shall qualify as a retention of a material net economic interest of not less than that referred to in paragraph 1:

(a)  the retention of no less than 10% of the nominal value of each of the tranches sold or transferred to investors; alternatively, the retention of at least 10% of the nominal value of each of the securitised exposures, provided that the credit risk of such exposures ranks pari passu with or is subordinated to the credit risk securitised for the same exposures;

(b)  in the case of revolving securitisations or securitisations of revolving exposures, the retention of the originator's interest of at least 10% of the nominal value of each of the securitised exposures;

(c)  the retention of randomly selected exposures, equivalent to at least 10% of the nominal value of the securitised exposures, where such non-securitised exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is no less than 100 at origination;

(d)  the retention of the first loss tranche and, where such retention does not amount to 5% of the nominal value of the securitised exposures, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total no less than 5% of the nominal value of the securitised exposures;

(e)  the retention of a first loss exposure of at least 7,5% of every securitised exposure in the securitisation3.  Where a mixed financial holding company established in the Union within the meaning of Directive No 2002/87/EC, a parent credit institution or a financial holding company established in the Union, or one of its subsidiaries within the meaning of Regulation (EU) No 575/2013, as an originator or a sponsor, securitises exposures from one or more credit institutions, investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirements referred to in paragraph 1 may be satisfied on the basis of the consolidated situation of the related parent credit institution, financial holding company, or mixed financial holding company established in the Union.

The first subparagraph shall apply only where credit institutions, investment firms or financial institutions which created the securitised exposures adhere to the requirements set out in Article 79 of Directive 36/2013/EU and deliver the information needed to satisfy the requirements laid down in Article 5 of this Regulation, in a timely manner, to the originator or sponsor and to the EU parent credit institution, financial holding company or mixed financial holding company established in the Union.

4.  Paragraph 1 shall not apply where the securitised exposures are exposures on or exposures fully, unconditionally and irrevocably guaranteed by:

(a)  central governments or central banks;

(b)  regional governments, local authorities and public sector entities within the meaning of Article 4 (1) point (8) of Regulation (EU) No 575/2013 of Member States;

(c)  national promotional banks or institutions within the meaning of Article 2(3) of Regulation (EU) 2015/1017;

(d)  the multilateral development banks listed in Article 117 of Regulation (EU) No 575/2013.

6.  EBA, in close cooperation with the European Securities and Market Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) shall develop draft regulatory technical standards to amend the level of risk retention according to Article 16a and to specify in greater detail the risk retention requirement, in particular with regards to:

(a)  the modalities of retaining risk pursuant to paragraph 2, and the minimum retention rate of a first loss exposure pursuant to point (e) of paragraph 2;

(b)  the measurement of the level of retention referred to in paragraph 1;

(c)  the prohibition of hedging or selling the retained interest;

(d)  the conditions for retention on a consolidated basis in accordance with paragraph 3;

(e)  the conditions for exempting transactions based on a clear, transparent and accessible index referred to in paragraph 5;

(ea)  the annual reporting duties of the originator, sponsor or the original lender of a securitisation to supervisors on the losses suffered on securitised assets in comparison to the retained assets, needed to assess the obligation set out in paragraph 1a;

(eb)  the procedure to randomly select homogenous assets from the balance sheet of the originator or original lender, the measurement used to determine whether a difference in losses is significant and how to calculate the benefit derived from infringing the requirement laid down in paragraph 1a.;

(ec)  the appropriate minimum retention of a first loss exposure of every securitised asset as a value between 5% and 10%

EBA shall submit those draft regulatory technical standards to the Commission by [six months from the date of entry into force of this Regulation]. ▌The Commission is empowered to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

The competent authorities shall apply those regulatory technical standards .

On the basis of those regulatory technical standards, the competent authorities, shall maintain a table of the risk retention rate for different types of securitisation. EBA shall ensure consistency in the implementation by the competent authorities of those regulatory technical standards.

Article 5

Transparency requirements for originators, sponsors and SSPE's and investors

1.  The originator, sponsor and SSPE of a securitisation shall, in accordance with paragraph 2, make at least the following information available to holders of a securitisation position, investors prior to them being exposed to a securitisation position and to the competent authorities referred to in Article 15 of this Regulation.

(a)  information on the exposures underlying the securitisation on a quarterly basis, or, in the case of ABCP, information on the underlying receivables or credit claims on a monthly basis;

(b)  all underlying documentation that is essential for an understanding of the transaction, including, to the extent that they are available, at least▌:

(i)  the final offering document or the prospectus together with the closing transaction documents, excluding legal opinions;

(ii)  for traditional securitisation the asset sale agreement, assignment, novation or transfer agreement and any relevant declaration of trust;

(iii)  the derivatives and guarantees agreements and any relevant documents on collateralisation arrangements where the exposures being securitised remain exposures of the originator;

(iiia)   a detailed description of the priority of payments;

(iv)  the servicing, back-up servicing, administration and cash management agreements;

(v)  the trust deed, security deed, agency agreement, account bank agreement, guaranteed investment contract, incorporated terms or master trust framework or master definitions agreement or such legal documentation with equivalent legal value;

(vi)  any relevant inter-creditor agreements, derivatives documentation, subordinated loan agreements, start-up loan agreements and liquidity facility agreements;

(vii)  any other underlying documentation that is essential for the understanding of the transaction;

(viia)  information about the credit granting and credit scoring process followed for the underlying assets in the securitisation and the historical evolution of non-performing loans underwritten by the originator;

(c)  where a prospectus has not been drawn up in compliance with Directive 2003/71/EC of the European Parliament and of the Council(11), a transaction summary or overview of the main features of the securitisation, including, where applicable:

(i)  details regarding the structure of the deal;

(ii)  details regarding the exposure characteristics, cash flows, loss waterfall, credit enhancement and liquidity support features;

(iii)  details regarding the voting rights of the holders of a securitisation position and their relationship with other secured creditors;

(iv)  a list of all triggers and events referred to in the documents provided to in accordance with point (b) that could have a material impact on the performance of the securitisation position;

(v)  the structure diagrams containing an overview of the transaction, the cash flows and the ownership structure;

(d)  in the case of STS securitisations, the STS notification referred to in Article 14;

(e)  quarterly investor reports, or, in the case of ABCP, monthly investor reports, containing the following:

(i)  all materially relevant data on the credit quality and performance of underlying exposures;

(ii)  data on the cash flows generated by the underlying exposures and by the liabilities of the securitisation and information on the breach of any triggers implying changes in the priority of payments or replacement of any counterparties;

(iii)  information about the risk retained, including who retains it and how it is retained, in accordance with Article 4 and the information required pursuant to paragraph 3.

(f)  where applicable, information pursuant to Article 17 of Regulation (EU) No 596/2014 of the European Parliament and of the Council(12) on insider dealing and market manipulation;

(g)  where point (f) does not apply, any significant event such as:

(i)  a material breach of the obligations laid down in the documents provided in accordance with subparagraph (b), including any remedy, waiver or consent subsequently provided in relation to such a breach;

(ii)  a change in the structural features that can materially impact the performance of the securitisation;

(iii)  a significant change in the risk characteristics of the securitisation or of the underlying exposures;

(iv)  in the case of STS securitisations, where the securitisation ceases to meet the STS requirements or where competent authorities have taken remedial or administrative actions;

(v)  any material amendment to transaction documents.

The information described in points (a), (b), (c) and (d) shall be made available without delay after the closing of the transaction at the latest.

The information described in points (a) and (e) shall be made available at the same moment each quarter at the latest one month after the due date for the payment of interest. With regard to ABCP securitisations the information described in point (a) and (e) shall be made available at the same moment each month, at the latest one month after the due date for the payment of interest.

The information described in points (f) and (g) shall be made available without delay.

In the case of ABCP, the information described in points (a), (c)(ii) and (e)(i) shall be made available in aggregate form to holders of securitisation position.

1a.  The investor in a securitisation position on the secondary market shall, in accordance with paragraph 2 of this Article , make at least the following information available to the competent authorities referred to in Article 15 of this Regulation:

(a)  its beneficial owner, including the country of establishment and business sector; and

(b)  the size of their investment and to which tranche of the securitisation it relates

ESMA shall develop draft regulatory technical standards specifying the details on the way investors have to report to their competent authorities.

ESMA shall submit those draft regulatory technical standards to the Commission by [XXX] from the date of entry into force of this Regulation].

The Commission is empowered to adopt the regulatory technical standards referred to in this paragraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

2.  The originator, sponsor and SSPE of a securitisation shall designate amongst themselves one entity to fulfil the information requirements pursuant to paragraph 1. The originator, sponsor and SSPE shall ensure that the information is available free of charge to the holder of a securitisation position and competent authorities, in a timely and clear manner. The entity designated to fulfil the requirements set out in paragraph 1 and 1a shall make the information for a securitisation transaction available by means of a supervised securitisation repository which shall meet the requirements set out in Articles 22a to 22d of this Regulation.

The entity responsible for reporting the information pursuant to this Article, and the supervised securitisation repository where the information is made available shall be indicated in the documentation regarding the securitisation.

3.  ESMA must safeguard the transparency of the securitisation market to the benefit of market participants and supervisors, by creating at least an overview of the market containing at least the securitised assets, issuers and investment positions, using the information from issuers, investors and repositories pursuant to paragraphs 1, 1a and 2 of this Article and Article 22d(3) of this Regulation.

Chapter 2a

Conditions and procedures for registration of a securitisation repository

Article 5a

Registration of a securitisation repository

1.  For the purposes of Article 5(2), a securitisation repository shall register with ESMA.

2.  To be eligible to be registered under this Article, a securitisation repository shall be a legal person established in the Union and shall meet the requirements laid down in Article 22a to Article 22d.

3.  The registration of a securitisation repository shall be effective for the entire territory of the Union.

4.  A registered securitisation repository shall comply at all times with the conditions for registration. A securitisation repository shall, without undue delay, notify ESMA of any material changes to the conditions for registration.

ESMA shall have the right to oppose a material change to the conditions of registration which is notified by the securitisation repository.

Article 5b

Application for registration

1.  A securitisation repository shall submit an application for registration to ESMA.

2.  ESMA shall assess whether the application is complete within 20 working days of receipt of the application.

Where the application is not complete, ESMA shall set a deadline by which the securitisation repository is to provide additional information.

After assessing an application as complete, ESMA shall notify the securitisation repository accordingly.

3.  ESMA shall develop draft regulatory technical standards specifying the details and the format of the application for registration referred to in paragraph 1.

ESMA shall submit those draft regulatory technical standards to the Commission by ... [one year from the date of entry into force of this Regulation].

The Commission is empowered 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 5c

Examination of the application

1.  ESMA shall, within 40 working days of the notification referred to in the third subparagraph of Article 5b(2), examine the application for registration based on the compliance of the securitisation repository with Article 22a to 22d and shall adopt a fully reasoned registration decision or decision refusing or withdrawing registration.

2.  A decision issued by ESMA pursuant to paragraph 1 shall take effect on the fifth working day following its adoption or at a later date if deemed necessary by ESMA, including where the decision takes effect only if specific conditions set by ESMA in its decision are met.

Article 5d

Notification of ESMA decisions relating to registration

1.  Where ESMA adopts a registration decision or a decision refusing or withdrawing registration, it shall notify the securitisation repository within five working days of the date of that decision. That notification shall be accompanied by a fully reasoned explanation of its decision.

2.  ESMA shall publish on its website a list of securitisation repositories registered in accordance with this Regulation. That list shall be updated within five working days of the date of the adoption of a decision pursuant to paragraph 1.

Article 5e

Exercise of the powers referred to in Articles 5f to 5h

The powers conferred on ESMA or any official of or other person authorised by ESMA pursuant to Articles 5f to 5h shall not be used to require the disclosure of information or documents which are subject to legal privilege.

Article 5f

Request for information

1.  ESMA may, by simple request or by decision, require securitisation repositories and related third parties to whom the securitisation repositories have outsourced operational functions or activities to provide all information that is necessary in order to carry out its duties under this Regulation.

2.  When sending a simple request for information under paragraph 1, ESMA shall:

(a)  refer to this Article as the legal basis of the request;

(b)  state the purpose of the request;

(c)  specify what information is required;

(d)  set a time limit within which the information is to be provided;

(e)  inform the person from whom the information is requested that there is no obligation to provide the information but that in case of a voluntary reply to the request the information provided must not be incorrect and misleading; and

(f)  indicate the fine provided for in Article 5j in conjunction with point (a) of Section IV of Annex I to be applied where the answers to questions asked are incorrect or misleading.

3.  When requiring by decision the provision of information pursuant to paragraph 1, ESMA shall:

(a)  refer to this Article as the legal basis of the request;

(b)  state the purpose of the request;

(c)  specify what information is required;

(d)  set a time limit within which the information is to be provided;

(e)  indicate the periodic penalty payments provided for in Article 5k to be applied where the production of the required information is incomplete;

(f)  indicate the fine provided for in Article 5j in conjunction with point (a) of Section IV of Annex I to be applied, where the answers to questions asked are incorrect or misleading; and

(g)  indicate the right to appeal the decision before ESMAs Board of Appeal and to have the decision reviewed by the Court of Justice of the European Union (Court of Justice) in accordance with Articles 60 and 61 of Regulation (EU) No 1095/2010.

4.  The persons referred to in paragraph 1 or their representatives and, in the case of legal persons or associations having no legal personality, the persons authorised to represent them by law or by their constituting act shall supply the information requested. Lawyers duly authorised to act may supply the information on behalf of their clients. The latter shall remain fully responsible if the information supplied is incomplete, incorrect or misleading.

5.  ESMA shall, without delay, send a copy of its decision to the competent authority of the Member State where the persons referred to in paragraph 1 concerned by the request for information are domiciled or established.

Article 5g

General investigations

1.  In order to carry out its duties under this Regulation, ESMA may conduct necessary investigations of the persons referred to in Article 5f(1). To that end, the officials and other persons authorised by ESMA shall be empowered to:

(a)  examine any records, data, procedures and any other material relevant to the execution of its tasks irrespective of the medium on which they are stored;

(b)  take or obtain certified copies of or extracts from such records, data, procedures and other material;

(c)  summon and ask any person referred to in Article 5f (1) or their representatives or staff for oral or written explanations on facts or documents relating to the subject matter and purpose of the inspection and to record the answers;

(d)  interview any other natural or legal person who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation;

(e)  request records of telephone and data traffic.

2.  The officials and other persons authorised by ESMA for the purposes of the investigations referred to in paragraph 1 shall exercise their powers upon production of a written authorisation specifying the subject matter and purpose of the investigation. That authorisation shall also indicate the fines provided for in Article 5j in conjunction with point (b) of Section IV of Annex I to be applied, where the answers to questions asked to persons referred to in Article 5f (1) are incorrect or misleading.

3.  The persons referred to in Article 5f(1) shall cooperate in regard to the investigations launched on the basis of a decision of ESMA. The decision shall specify the subject matter and purpose of the investigation, the periodic penalty payments provided for in Article 5k, the legal remedies available under Regulation (EU) No 1095/2010 and the right to have the decision reviewed by the Court of Justice.

4.  If a request for records of telephone or data traffic referred to in point (e) of paragraph 1 requires authorisation from a judicial authority according to national rules, such authorisation shall be applied for. Such authorisation may also be applied for as a precautionary measure.

5.  Where authorisation as referred to in paragraph 4 is applied for, the national judicial authority shall check that the decision of ESMA is authentic and that the coercive measures envisaged are neither arbitrary nor excessive having regard to the subject matter of the investigations. In its check of proportionality of the coercive measures, the national judicial authority may ask ESMA for detailed explanations, in particular relating to the grounds ESMA has for suspecting that an infringement of this Regulation has taken place and the seriousness of the suspected infringement and the nature of the involvement of the person subject to the coercive measures. However, the national judicial authority shall not review the necessity for the investigation or demand that it be provided with the information contained in ESMA’s file. The lawfulness of ESMA’s decision shall be subject to review only by the Court of Justice following the procedure set out in Regulation (EU) No 1095/2010.

Article 5h

On-site inspections

1.  In order to carry out its duties under this Regulation, ESMA may conduct all necessary on-site inspections at any business premises or land of those legal persons referred to in Article 5f(1). Where the proper conduct and efficiency of the inspection so require, ESMA may carry out the on-site inspection without prior notice.

2.  Officials and other persons authorised by ESMA to conduct an on-site inspection may enter any business premises or land of those legal persons subject to an investigation decision adopted by ESMA and shall have all the powers set out in Article 5g(1). They shall also have the power to seal any business premises and books or records for the period of, and to the extent necessary for, the inspection.

3.  Officials and other persons authorised by ESMA to conduct an on-site inspection shall exercise their powers upon production of a written authorisation specifying the subject matter and purpose of the inspection.

4.  The persons referred to in Article 5f (1) shall cooperate in regard to the on-site inspections ordered by decision of ESMA. The decision shall specify the subject matter and purpose of the inspection, appoint the date on which it is to begin and indicate the periodic penalty payments provided for in Article 5k, the legal remedies available under Regulation (EU) No 1095/2010 as well as the right to have the decision reviewed by the Court of Justice. ESMA shall take such decisions after consulting the competent authority of the Member State where the inspection is to be conducted.

5.  Officials of, as well as those authorised or appointed by, the competent authority of the Member State where the inspection is to be conducted shall, at the request of ESMA, actively assist the officials and other persons authorised by ESMA. To that end, they shall exercise the powers set out in paragraph 2. Officials of the competent authority of the Member State concerned may also attend the on-site inspections on request.

6.  ESMA may also require competent authorities to carry out specific investigatory tasks and on-site inspections as provided for in this Article and in Article 5g (1) on its behalf. To that end, competent authorities shall have the same powers as ESMA as set out in this Article and in Article 5g (1).

7.  Where the officials and other accompanying persons authorised by ESMA find that a person opposes an inspection ordered pursuant to this Article, the competent authority of the Member State concerned shall offer them the necessary assistance, requesting, where appropriate, the assistance of the police or of an equivalent enforcement authority, so as to enable them to conduct their on-site inspection.

8.  If the on-site inspection provided for in paragraph 1 or the assistance provided for in paragraph 7 requires authorisation by a judicial authority according to national law, such authorisation shall be applied for. Such authorisation may also be applied for as a precautionary measure.

9.  Where the authorisation referred to in paragraph 8 is applied for, the national judicial authority shall check that ESMA’s decision is authentic and that the coercive measures envisaged are neither arbitrary nor excessive having regard to the subject matter of the inspection. In its check of proportionality of the coercive measures, the national judicial authority may ask ESMA for detailed explanations. However, the national judicial authority shall not review the necessity for the inspection or demand to be provided with the information contained in ESMA’s file. The lawfulness of ESMA’s decision shall be subject to review only by the Court of Justice following the procedure set out in Regulation (EU) No 1095/2010.

Article 5i

Procedural rules for taking supervisory measures and imposing fines

1.  Where, in carrying out its duties under this Regulation, ESMA finds that there are serious indications of possible existence of facts liable to constitute one or more of the infringements listed in Annex I, ESMA shall appoint an independent investigation officer within ESMA to investigate the matter. The appointed officer shall not be involved or have been directly or indirectly involved in the supervision or the registration process of the securitisation repository concerned and shall perform his functions independently from ESMA.

2.  The investigation officer shall investigate the alleged infringements, taking into account any comments submitted by the persons who are subject to the investigations, and shall submit a complete report with his or her findings to ESMA.

In order to carry out his tasks, the investigation officer may exercise the power to request information in accordance with Article 5f and to conduct investigations and on-site inspections in accordance with Articles 5g and 5h. When using those powers, the investigation officer shall comply with Article 5e.

While carrying out his tasks, the investigation officer shall have access to all documents and information gathered by ESMA in its supervisory activities.

3.  Upon completion of his investigation and before submitting the file with his findings to ESMA, the investigation officer shall give the persons subject to the investigations the opportunity to be heard on the matters being investigated. The investigation officer shall base his findings only on facts on which the persons concerned have had the opportunity to comment.

The rights of defence of the persons concerned shall be fully respected during investigations under this Article.

4.  When submitting the report with his findings to ESMA, the investigation officer shall notify that fact to the persons who are subject to the investigations. The persons subject to the investigations shall be entitled to have access to the report, without prejudice to the legitimate interest of other persons to have their business secrets protected. The right of access to the report shall not extend to confidential information or ESMA’s internal preparatory documents.

5.  On the basis of the report containing the investigation officer’s findings and, when requested by the persons concerned, after having heard the persons subject to the investigations in accordance with Article 5l, ESMA shall decide if one or more of the infringements listed in Annex I has been committed by the persons who have been subject to the investigations and, in such a case, shall take a supervisory measure in accordance with Article 5p and impose a fine in accordance with Article 5j.

6.  The investigation officer shall not participate in ESMA’s deliberations or in any other way intervene in ESMA’s decision- making process.

7.  The Commission shall adopt further rules of procedure for the exercise of the power to impose fines or periodic penalty payments, including provisions on the rights of defence, interim provisions, and the collection of fines or periodic penalty payments, and shall adopt detailed rules on the limitation periods for the imposition and enforcement of penalties.

The Commission shall adopt delegated acts in accordance with Article 22e to supplement/amend this Regulation by specifying the rules of procedure referred to in the first subparagraph .

8.  ESMA shall refer matters for criminal prosecution to the relevant national authorities where, in carrying out its duties under this Regulation, it finds that there are serious indications of possible existence of facts liable to constitute criminal offences. In addition, ESMA shall refrain from imposing fines or periodic penalty payments where a prior acquittal or conviction arising from identical fact or facts which are substantially the same has already acquired the force of res judicata as the result of criminal proceedings under national law.

Article 5j

Fines

1.  Where, in accordance with Article 5i (5), ESMA finds that a securitisation repository has, intentionally or negligently, committed one of the infringements listed in Annex I, it shall adopt a decision imposing a fine in accordance with paragraph 2 of this Article.

An infringement by a securitisation repository shall be considered to have been committed intentionally if ESMA finds objective factors which demonstrate that the securitisation repository or its senior management acted deliberately to commit the infringement.

2.  The basic amounts of the fines referred to in paragraph 1 shall be within the following limits:

(a)  for the infringements set out in point (c) of Section I of Annex I and in points (c) to (g) of Section II of Annex I, and in points (c) and (f) of Section III of Annex I the amounts of the fines shall be at least [EUR 100 000] and shall not exceed [EUR 200 000];

(b)  for the infringements set out in points (a), (b) and d) to (h) of Section I of Annex I, and in points (a, (b) and (g) of Section II of Annex I, the amounts of the fines shall be at least [EUR 50 000] and shall not exceed EUR [EUR 100 000].

(c)  for the infringements set out in section IV of Annex I, the amounts of fines shall be at least 5 000 EUR and shall not exceed 10 000 EUR.

In order to decide whether the basic amount of the fines should be at the lower, the middle or the higher end of the limits set out in the first subparagraph, ESMA shall have regard to the annual turnover of the preceding business year of the securitisation repository concerned. The basic amount shall be at the lower end of the limit for securitisation repositories whose annual turnover is below [EUR 1 million], the middle of the limit for the securitisation repository whose turnover is between [EUR 1 and 5 million] and the higher end of the limit for the securitisation repository whose annual turnover is higher than [EUR 5 million].

3.  The basic amounts set out in paragraph 2 shall be adjusted, if need be, by taking into account aggravating or mitigating factors in accordance with the relevant coefficients set out in Annex II.

The relevant aggravating coefficients shall be applied one by one to the basic amount. If more than one aggravating coefficient is applicable, the difference between the basic amount and the amount resulting from the application of each individual aggravating coefficient shall be added to the basic amount.

The relevant mitigating coefficients shall be applied one by one to the basic amount. If more than one mitigating coefficient is applicable, the difference between the basic amount and the amount resulting from the application of each individual mitigating coefficient shall be subtracted from the basic amount.

4.  Notwithstanding paragraphs 2 and 3, the amount of the fine shall not be less than 2% and shall not exceed 20 % of the annual turnover of the securitisation repository concerned in the preceding business year but, where the securitisation repository has directly or indirectly benefited financially from the infringement, the amount of the fine shall be at least equal to that benefit.

Where an act or omission of a securitisation repository constitutes more than one infringement listed in Annex I, only the higher fine calculated in accordance with paragraphs 2 and 3 and relating to one of those infringements shall apply.

Article 5k

Periodic penalty payments

1.  ESMA shall, by decision, impose periodic penalty payments in order to compel:

(a)  a securitisation repository to put an end to an infringement in accordance with a decision taken pursuant to Article 5p (1)(a); or

(b)  a person referred to in Article 5f (1):

(i)  to supply complete information which has been requested by a decision pursuant to Article 5f;

(ii)  to cooperate in regard to an investigation and in particular to produce complete records, data, procedures or any other material required and to complete and correct other information provided in an investigation launched by a decision pursuant to Article 5g; or

(iii)  to cooperate in regard to an on-site inspection ordered by a decision taken pursuant to Article 5h.

2.  A periodic penalty payment shall be effective and proportionate. The periodic penalty payment shall be imposed for each day of delay.

3.  Notwithstanding paragraph 2, the amount of the periodic penalty payments shall be 3 % of the average daily turnover in the preceding business year, or, in the case of natural persons, 2 % of the average daily income in the preceding calendar year. It shall be calculated from the date stipulated in the decision imposing the periodic penalty payment.

4.  A periodic penalty payment shall be imposed for a maximum period of six months following the notification of ESMA’s decision. At the end of that period, ESMA shall review the measure.

Article 5l

Hearing of the persons concerned

1.  Before taking any decision on a fine or on a periodic penalty payment under Articles 5j and 5k, ESMA shall give the persons subject to the proceedings the opportunity to be heard on its findings. ESMA shall base its decisions only on findings on which the persons subject to the proceedings have had an opportunity to comment.

2.  The right of defence of the persons subject to the proceedings shall be fully respected in the proceedings. They shall be entitled to have access to ESMA’s file, subject to the legitimate interest of other persons to have their business secrets protected. The right of access to the file shall not extend to confidential information or ESMA’s internal preparatory documents.

The first subparagraph shall not apply if urgent action is needed in order to prevent significant and imminent damage to the financial system or significant and imminent damage to the integrity, transparency, efficiency and orderly functioning of financial markets, including the stability or the accuracy of data reported to trade repository. In such a case, ESMA may adopt an interim decision and shall give the persons concerned the opportunity to be heard as soon as possible after taking its decision.

Article 5m

Disclosure, nature, enforcement and allocation of fines and periodic penalty payments

1.  ESMA shall disclose to the public every fine and periodic penalty payment that has been imposed pursuant to Articles 5j and 5k, unless such disclosure would seriously jeopardise the financial markets or cause disproportionate damage to the parties involved. Such disclosure shall not contain personal data within the meaning of Regulation (EC) No 45/2001.

2.  Fines and periodic penalty payments imposed pursuant to Articles 5j and 5k shall be of an administrative nature.

3.  Where ESMA decides not to impose fines or penalty payments, it shall inform the European Parliament, the Council, the Commission, and the competent authorities of the Member State concerned accordingly and shall set out the reasons for its decision.

4.  Fines and periodic penalty payments imposed pursuant to Articles 5j and 5k shall be enforceable in accordance with the rules of civil procedure in force in the Member State in the territory of which fine or period penalty payment has been imposed..

The order for its enforcement shall be appended to the decision without any formality other than the check of the authenticity of such a decision by the authority designated by the government of each Member State for that purpose. and shall be made known to ESMA and to the Court of Justice.

When those formalities have been completed on application by the party concerned, the latter may proceed to enforcement in accordance with the national law, by bringing the matter directly before the competent body.

Enforcement may be suspended only by a decision of the Court of Justice. However, the courts of the Member State concerned shall have jurisdiction over complaints the enforcement of which is being carried out in an irregular manner.

5.  The amounts of the fines and periodic penalty payments shall be allocated to the general budget of the European Union.

Article 5n

Review by the Court of Justice

The Court of Justice shall have unlimited jurisdiction to review decisions whereby ESMA has imposed a fine or a periodic penalty payment. It may annul, reduce or increase the fine or periodic penalty payment imposed.

Article 5o

Withdrawal of registration

1.  Without prejudice to Article 5q, ESMA shall withdraw the registration of a securitisation repository where the securitisation repository:

(a)  expressly renounces the registration or has provided no services within the six months preceding the date of the withdrawal decision;

(b)  obtained the registration by making false statements or by any other irregular means;

(c)  no longer meets the conditions under which it was registered.

2.  ESMA shall, without undue delay, notify the relevant competent authority referred to in Article 15 of a decision to withdraw the registration of a securitisation repository.

3.  The competent authority of a Member State in which the securitisation repository performs its services and activities and which considers that one of the conditions referred to in paragraph 1 has been met, may request ESMA to examine whether the conditions for the withdrawal of registration of the securitisation repository concerned are met. Where ESMA decides not to withdraw the registration of the securitisation repository concerned, it shall provide full reasons.

4.  The competent authority referred to in paragraph 3 shall be the authority designated under Article 15.

Article 5p

Supervisory fees

1.  ESMA shall charge fees to the securitisation repository in accordance with this Regulation and in accordance with the delegated acts adopted pursuant to paragraph 3 of this Article. Those fees shall fully cover ESMA’s necessary expenditure relating to the registration and supervision of securitisation repository.

2.  The amount of a fee charged to a securitisation repository shall cover all administrative costs incurred by ESMA for its registration and supervision activities and be proportionate to the turnover of the securitisation repository concerned.

3.  The Commission shall adopt delegated acts in accordance with Article 22e to supplement/amend this Regulation by specifying further the type of fees, the matters for which fees are due, the amount of the fees and the manner in which they are to be paid.

Article 5q

Supervisory measures by ESMA

1.  Where, in accordance with Article 5i(5), ESMA finds that a securitisation repository has committed one of the infringements listed in Annex I, it shall take one or more of the following decisions:

(a)  requiring the securitisation repository to bring the infringement to an end;

(b)  imposing fines under Article 5j;

(c)  issuing public notices;

.

(e)  requiring the temporary cessation of any practice that is contrary to this Regulation;

(f)  adopting any measures to ensure that a securitisation repository continues to comply with legal requirements under this Regulation;

(g)  imposing a temporary prohibition on the acceptance of new originators, sponsors or SSPE or the extension of the services that the securitisation repository offers, when these would compromise the stability or the accuracy of data;

(h)  requiring the removal of a natural person from the governing bodies of a trade repository;

(d)  as a last resort, withdrawing the registration of the securitisation repository

2.  When taking the decisions referred to in paragraph 1, ESMA shall take into account the nature and seriousness of the infringement, to be assessed based on the following criteria:

(a)  the duration and frequency of the infringement;

(b)  whether the infringement has revealed serious or systemic weaknesses in the undertakings procedures or in its management systems or internal controls;

(c)  whether financial crime has been occasioned, facilitated or otherwise attributable to the infringement;

(d)   whether the infringement has been committed intentionally or negligently.

3.  Without undue delay, ESMA shall notify any decision adopted pursuant to paragraph 1 to the securitisation repository concerned, and shall communicate it to the competent authorities as designated pursuant to Article 15 and to the Commission. It shall publicly disclose any such decision on its website within 10 working days from the date of its adoption.

When making public its decision as referred to in the first subparagraph, ESMA shall also make public the right of the securitisation repository concerned to appeal the decision, the fact, where relevant, that such an appeal has been lodged, specifying that such an appeal does not have suspensive effect, and the fact that it is possible for ESMA’s Board of Appeal to suspend the application of the contested decision in accordance with Article 60(3) of Regulation (EU) No 1095/2010.

Article 5r

Ban on re-securitisation

The underlying exposures used in a securitisation shall not include securitisations.

Chapter 3

Simple, transparent and standard securitisation

Article 6

Use of the designation 'simple, transparent and standardised securitisation'

Originators, sponsors and SSPE's may only use the designation "STS" or "simple, transparent and standardised" or a designation that refers directly or indirectly to these terms for their securitisation only where the securitisation meets all the requirements of Section 1 or Section 2 of this Regulation, ▌where they have notified ESMA pursuant to Article 14 (1) and where the relevant securitisation is included in the list referred to in Article 14(4).

The originator, sponsor and SSPE involved in a securitisation considered STS shall be established in the Union, unless they are established in a third country for which the Commission has adopted a delegated act in accordance with Article 22f.

Section 1

General requirements for STS securitisation

Article 7

Simple, transparent and standardised securitisation

1.  Securitisations, excluding ABCP programmes and transactions, that meet the requirements in Articles 8, 9 and 10 of this Regulation shall be considered 'STS'.

1a.  Securitisations, excluding ABCP programs and transactions, sold to investors after 1 January 2011 and before the date of entry into force of this Regulation will, from the time they are the subject of a notification pursuant to Article 14(1), be considered "STS" provided that:

(a)  they met at the time of issuance, the requirements set out in Article 8(1) to (5) and (7) to (9) and Article 9(1) and (3);

(b)  they meet, from the time of the notifications set out in Article 14(1), the requirements provided for in Article 8(2) and (6), Article 9(2), (4) to (8) and Article 10(1) to (4).

1b.  ESMA shall adopt, in accordance with Article 16 of Regulation 1095/2010 guidelines and recommendations on the harmonised interpretation and application of the requirements laid down in Articles 8, 9and 10.

Article 8

Requirement relating to simplicity

1.  The underlying exposures shall be acquired by a SSPE by means of a sale or assignment in a manner that is enforceable against the seller or any other third party including in the event of the seller's insolvency. The transfer of the underlying exposures to the SSPE shall not be subject to any severe clawback provisions in the event of the seller's insolvency. Where the transfer of the underlying exposures is performed by means of an assignment and perfected at a later stage than at the closing of the transaction, the triggers to effect such perfection should, at a minimum, incorporate the following events:

(a)  severe deterioration in the seller credit quality standing;

(b)  seller default or insolvency; and

(c)  unremedied breaches of contractual obligations by the seller.

2.  The seller shall provide representations and warranties that, to the best of its knowledge, the underlying exposures included in the securitisation are not encumbered or otherwise in a condition that can be foreseen to adversely affect enforceability of the sale or assignment.

3.  The underlying exposures transferred from the seller to the SSPE shall meet predetermined and clearly defined eligibility criteria which do not allow for active portfolio management of those exposures on a discretionary basis.

4.  The securitisation shall be backed by a pool of underlying exposures that are homogeneous. The underlying exposures in a pool shall be deemed to be homogeneous where they belong to the same asset type and where their contractual, credit risk, prepayment and other characteristics that determine the cash flows on those assets are sufficiently similar. Pools of residential loans, pools of corporate loans, business property loans, leases and credit facilities of the same category, pools of auto loans and auto leases, and pools of credit facilities to individuals for personal, family or household consumption purposes shall be deemed as single asset types. The underlying exposures shall be contractually binding and enforceable obligations with full recourse to debtors, with defined periodic payment streams, the instalments of which may differ in their amounts, relating to rental, principal, interest payments, or related to any other right to receive income from assets warranting such payments. The underlying exposures shall not include transferable securities, as defined in Directive 2014/65/EU.

5.  The underlying exposures shall not include securitisations.

6.  The underlying exposures shall be originated in the ordinary course of the originator’s or the original lender's business pursuant to underwriting standards that are no less stringent than those that the originator or the original lender applies to origination of similar exposures that are not securitised and shall be comparable in terms of economic substance and creditor classes to exposures originated in the ordinary course of the originator's or the original lender's business that are not securitised. Material changes in underwriting standards shall be fully disclosed to potential investors. In the case of securitisations where the underlying exposures are residential loans, the pool of loans shall not include any loan that was marketed and underwritten on the premise that the loan applicant or, where applicable intermediaries, were made aware that the information provided might not be verified by the lender. The assessment of the borrower's creditworthiness shall meet the requirements set out in paragraphs 1 to 4, 5(a), and 6 of Article 18 of Directive 2014/17/EU of the European Parliament and of the Council or of Article 8 of Directive 2008/48/EC of the European Parliament and of the Council or equivalent requirements in third countries. The originator or original lender shall have expertise in originating exposures of a similar nature to those securitised.

7.  The underlying exposures, at the time of selection, that are transferred to the SSPE without undue delay, shall not include exposures in default within the meaning of Article 178(1) of Regulation (EU) No 575/2013 or exposures to a credit-impaired debtor or guarantor, who, at the time of signing the credit agreement, to the best knowledge of the originator or original lender:

(a)  has declared insolvency, agreed with his creditors to a debt dismissal or reschedule 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;

(b)  is on an official registry of persons with adverse credit history;

(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 the average debtor for this type of loans in the relevant jurisdiction.

8.  The debtors or the guarantors shall at the time of transfer of the exposures, have made at least one payment, except in the case of revolving securitisations backed by ▌ exposures payable in a single instalment or having a maturity of less than one year, including without limitation monthly payments on revolving credits.

9.  The repayment of the holders of the securitisation positions shall not have been structured to depend predominantly, on the sale of assets securing the underlying exposures. Underlying exposures that are secured by assets the value of which is guaranteed or fully mitigated by a repurchase obligation by the seller of the assets securing the underlying exposures or by another third party do not depend on the sale of assets securing the underlying exposures. This shall not prevent such assets from being subsequently rolled-over or refinanced.

9 a.  Arbitrage synthetic securitisations shall not be part of an STS securitisation and shall not be considered to be STS where the assets are not transferred to a SSPE through a true sales securitisation or retained on the balance sheet of the originator as is the case in a balance sheet synthetic securitisation.

9 b.  ESMA, in close cooperation with EBA and EIOPA, shall develop draft regulatory standards further specifying:

(a)  the characteristics of the underlying exposures referred to in paragraph 4 of this Article and what are the criteria for determining that those characteristics are sufficiently similar; and

(b)  the other asset types regarded as single asset types for the purpose of paragraph 4 of this Article and Article 12(2).

ESMA shall submit those draft regulatory standards to the Commission by ... [six months from the date of entry into force of this Regulation].

The Commission is empowered to adopt the regulatory technical standards referred to in this paragraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 9

Requirements relating to standardisation

1.  The originator, sponsor or the original lender shall satisfy the risk retention requirement in accordance with Article 4 of this Regulation.

2.  Interest rate and currency risks arising from the securitisation shall be mitigated and the measures taken to that effect shall be disclosed. The underlying exposures shall not include derivatives, unless for the purpose of hedging currency risk and interest rate risk. Those derivatives shall be underwritten and documented according to common standards in international finance.

3.  Any referenced interest payments under the securitisation assets and liabilities shall be based on generally used market interest rates and shall not reference ▌ formulae or derivatives.

4.  Where the securitisation has been set up without a revolving period or the revolving period has terminated and where an enforcement or an acceleration notice has been delivered, no substantial amount of cash shall be trapped in the SSPE and principal receipts from the underlying exposures shall be passed to investors via sequential amortisation of the securitisation positions, as determined by the seniority of the securitisation position. Repayment of the securitisation positions shall not be reversed with regard to their seniority and performance-related triggers shall be included in transactions which feature non-sequential priority of payments, including at least the deterioration in the credit quality of the underlying exposures below a pre-determined threshold. There shall be no provisions requiring automatic liquidation of the underlying exposures at market value.

5.  The transaction documentation shall include appropriate early amortisation events or triggers for termination of the revolving period where the securitisation has been set up with a revolving period, including at least the following:

(a)  a deterioration in the credit quality of the underlying exposures to or below a pre-determined threshold;

(b)  the occurrence of an insolvency-related event with regard to the originator or the servicer;

(c)  the value of the underlying exposures held by the SSPE falls below a pre-determined threshold (early amortisation event);

(d)  a failure to generate sufficient new underlying exposures that meet the pre-determined credit quality (trigger for termination of the revolving period).

6.  The transaction documentation shall clearly specify:

(a)  the contractual obligations, duties and responsibilities of the servicer and its management team, who shall have expertise in servicing the underlying exposures, and, where applicable, of the trustee and other ancillary service providers;

(b)  the processes and responsibilities necessary to ensure that a default or insolvency of the servicer does not result in a termination of servicing, such as a contractual replacement provision which enables the replacement of the servicer in case of default or insolvency;

(c)  provisions that ensure the replacement of derivative counterparties, liquidity providers and the account bank upon their default, insolvency, and other specified events, where applicable.

Policies, procedures and risk management controls shall be well documented and effective systems shall be in place.

7.  The transaction documentation shall include definitions, remedies and actions relating to delinquency and default of debtors, debt restructuring, debt forgiveness, forbearance, payment holidays, losses, charge offs, recoveries and other asset performance remedies in clear and consistent terms. That documentation shall clearly specify the payment priority, triggers, changes in payment priority following trigger events as well as the obligation to report such events. Changes in such terms and processes can be made provided that those changes will not materially adversely affect the repayment of the securitisation positions. Any change in the payment priority shall be reported at the time of its occurrence.

8.  The transaction documentation shall include clear provisions that facilitate the timely resolution of conflicts between different classes of investors, voting rights shall be clearly defined and allocated to noteholders and the responsibilities of the trustee and other entities with fiduciary duties to investors shall be clearly identified.

Article 10

Requirements relating to transparency

1.  The originator and the sponsor ▌shall provide access to data on static and dynamic historical default and loss performance, such as delinquency and default data, for substantially similar exposures to those being securitised to the investor before investing. Those data shall cover a period no shorter than seven years for non-retail exposures and five years for retail exposures. The basis for claiming similarity shall be disclosed.

2.  A sample of the underlying exposures shall be subject to external verification prior to issuance of the securities resulting from the securitisation by an appropriate and independent party, including verification that the data disclosed in respect of the underlying exposures is accurate, with a confidence level of 95%.

3.  The originator or the sponsor shall make available a clearly documented liability cash flow model to investors, both before the pricing of the securitisation and on an ongoing basis, which precisely represents the contractual relationship between the underlying exposures and the payments flowing between the originator, sponsor, investors, other third parties and the SSPE.

3a.  The originator and the sponsor shall publish information on the long-term, sustainable nature of the securitisation for the investors, using environmental, social and governance criteria to describe how the securitisation contributed to real economy investments and in which way the original lender used the freed-up capital.

4.  The originator and sponsor ▌ shall be jointly responsible for compliance with Article 5 of this Regulation and for ensuring that all information required by Article 5(1) (a) is made available to potential investors before pricing. The originator and sponsor shall also be responsible for ensuring that the information required by Article 5 (1) (b) to (e) is made available before pricing at least in draft or initial form, where permissible under Article 3 of Directive 2003/71/EC. In addition, the originator and the sponsor ▌shall be responsible for ensuring that the final documentation is made available to investors at the latest 15 days after closing of the transaction.

Section 2

Requirements for ABCP Securitisation

Article 11

Simple, transparent and standardised ABCP Securitisations securitisation

An ABCP transaction shall be considered 'STS' where it complies with the transaction level requirements in Article 12. An ABCP programme shall be considered 'STS' where it complies with the requirements in Article 13.

Article 12

Transaction level requirements

1.  A transaction within an ABCP programme shall meet the requirements of this Article to be considered STS. For the purposes of this Section, the terms "originator" and "original lender" under Article 8(7) shall be considered the seller.

1a.  The repayment of the holders of the securitisation positions shall not depend on the sale of assets securing the underlying exposures. That requirement shall not apply to assets the value of which is guaranteed or fully mitigated by an effective commitment by the seller or another third party to repurchase or refinance the asset securing the underlying exposure at a fixed amount nor shall it prevent such assets from being subsequently rolled-over or refinanced.

2.  Transactions within an ABCP programme shall be backed by a pool of underlying exposures that are homogeneous in terms of asset type and shall have a remaining weighted average life of no more than one year and no such transactions shall have a residual maturity of longer than three 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 four and a half year and none of the underlying exposures shall have a residual maturity of longer than six 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(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, as defined in Directive 2014/65/EU.

3.  Any referenced interest payments under the securitisation transaction's assets and liabilities shall be based on generally used market interest rates, but shall not reference complex formulae or derivatives.

4.  Following the seller’s default or an acceleration event, no substantial amount of cash shall be trapped in the SSPE and principal receipts from the underlying exposures shall be passed to investors holding a securitisation position via sequential payment of the securitisation positions, as determined by the seniority of the securitisation position. There shall be no provisions requiring automatic liquidation of the underlying exposures at market value.

5.  The underlying exposures shall be originated in the ordinary course of the seller's business pursuant to underwriting standards that are no less stringent than those that the seller applies to origination of similar exposures that are not securitised. Material changes in underwriting standards shall be fully disclosed to potential investors. In the case of securitisations where the underlying exposures are residential loans, the pool of loans shall not include any loan that was marketed and underwritten on the premise that the loan applicant or, where applicable intermediaries, were made aware that the information provided might not be verified by the lender. The seller shall have expertise in originating exposures of a similar nature to those securitised.

6.  The transaction documentation shall include triggers for termination of the revolving period, including at least the following:

(a)  a deterioration in the credit quality of the underlying exposures to or below a pre-determined threshold;

(b)  the occurrence of an insolvency-related event with regard to the seller or the servicer.

(c)  a failure to generate sufficient new underlying exposures that meet the pre-determined credit quality;

7.  The transaction documentation shall clearly specify:

(a)  the contractual obligations, duties and responsibilities of the sponsor, the servicer and its management team who shall have expertise in servicing the underlying exposures, and, where applicable, the trustee and other ancillary service providers;

(b)  the processes and responsibilities necessary to ensure that a default or insolvency of the servicer does not result in a termination of servicing;

(c)  provisions that ensure the replacement of derivative counterparties and the account bank upon their default, insolvency or other specified events, where applicable.

Policies, procedures and risk management controls shall be well documented and effective systems shall be in place.

Article 12 a

Role of the sponsor of an ABCP programme

1.  The sponsor of the ABCP programme shall be a credit institution supervised under Directive 2013/36/EU or a regulated fund or asset manager.

2.  The sponsor of an ABCP programme shall be a liquidity facility provider and shall support all securitisation positions on an ABCP programme level by covering all liquidity and credit risks and any material dilution risks of the securitised exposures as well as any other transaction costs and programme-wide costs with such support. The sponsor shall disclose a description of the support provided at transaction level to the investors including a description of the liquidity facilities provided.

3.  Before being able to sponsor a STS ABCP programme, the credit institution shall demonstrate to its supervisor in a stress test that its role under paragraph 2 does not endanger its financial stability, not even in an extreme stress situation in the market, where short term funding market dries up for all the ABCP programmes for which it has that role. For that purpose, the sponsor shall on a regular basis provide its supervisor with specific information concerning its cumulative liquidity risk obligations and how those obligations can be borne by its liquidity buffers.

4.  The sponsor of the ABCP programme shall verify before becoming exposed to an ABCP transaction that, the seller grants all its credits on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes. The sponsor shall perform its own due diligence pursuant to Article 3 of this Regulation and verify that the seller meets sound underwriting standards, servicing capabilities and collection processes that meet the requirements specified in points (i) to (m) of Article 259(3) of Regulation (EU) No 575/2013 or equivalent requirements in third countries. Policies, procedures and risk management controls shall be well documented and effective systems shall be in place.

5.  The original lender or issuer, at the level of a transaction, or the sponsor, at the level of the ABCP programme, shall satisfy the risk retention requirement in accordance with Article 4.

6.  Article 5 shall apply to ABCP programmes. The sponsor of the ABCP programme shall be responsible for compliance with Article 5 and shall:

(a)  make all aggregated information required by point (a) of Article 5(1), available to investors, such information being updated on a quarterly basis; and

(b)  make the information required by points (b) to (e) of Article 5(1) of this Regulation, available.

7.  In the event that the sponsor does not renew the funding commitment of the liquidity facility before its expiry, the liquidity facility shall be drawn down and the maturing securities shall be repaid.

Article 13

Programme level requirements

1.  All transactions within an ABCP programme shall fulfil the requirements of Article 12 ▌. With the exception of Article 12(2), single transactions amounting to a maximum of 5 % of the aggregate amount of the exposures underlying an ABCP programme, can temporarily be in non-compliance with Article 12 without affecting the STS status of the programme.

2.  The originator, sponsor or the original lender shall satisfy the risk retention requirement in accordance with Article 4▌.

3.  The ▌credit enhancement shall not establish a second layer of tranching at the programme level.

4.  The sponsor of the ABCP programme shall be a credit institution supervised under Directive 2013/36/EU. The sponsor shall be a liquidity facility provider and shall support all securitisation positions at transaction level within the ABCP programme and cover all liquidity and credit risks and any material dilution risks of the securitised exposures as well as any other transaction costs and programme-wide costs.

5.  Securitisations issued by an ABCP programme and that include call options, extension clauses or other clauses at the discretion of the originator, sponsor or SSPE, and that have an effect on their final maturity shall not be regarded as STS.

6.  Interest rate and currency risks arising at ABCP programme level shall be mitigated and the measures taken to that effect shall be disclosed. Derivatives shall only be used at programme level for the purpose of hedging currency risk and interest rate risk. Such derivatives shall be documented according to common standards in international finance.

7.  The documentation relating to the programme shall clearly specify:

(a)  the responsibilities of the trustee and other entities with fiduciary duties, if any, to investors;

▌ (c)  the contractual obligations, duties and responsibilities of the sponsor, and its management team, who shall have expertise in credit underwriting, trustee, if any, and other ancillary service providers;

▌ (e)  the provisions for replacement of derivative counterparties, and the account bank at ABCP programme level upon their default, insolvency and other specified events, where the liquidity facility does not cover such events .

(f)  that upon specified events, default or insolvency of the sponsor remedial steps shall be provided for to achieve, as appropriate, collateralisation of the funding commitment or replacement of the liquidity facility provider. In case the liquidity facility provider does not renew the funding commitment within 30 days of its expiry, the liquidity facility shall be drawn down, the maturing securities shall be repaid and the transactions shall cease to purchase exposures while amortising the existing underlying exposures.

Policies, procedures and risk management controls shall be well documented and effective systems shall be in place.

8.  The originator and sponsor ▌shall be jointly and severally responsible for compliance at ABCP programme level with Article 5 and shall ensure that the following information is made available to potential investors before pricing.

(a)  all aggregated information required by point (a) of Article 5(1);

(b)  the information required by points (b) to (e) of Article 5(1).

8a.  The prospectus or, where a prospectus has not been issued, the documentation relating to the programme, shall state whether and how the STS criteria referred to in Articles 11 to 13 have been met.

Article 14

STS notification and due diligence

1.  Originators and sponsors 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'). Where an ABCP programme has multiple originators, each originator shall notify ESMA only with regard to the requirements provided in Article 12 for its own transaction. ESMA shall publish the STS notification on its official website pursuant to paragraph 4. They shall also inform their competent authority. The originator, sponsor and SSPE of a securitisation shall designate amongst themselves one entity to be the first contact point for investors and competent authorities. Where the originator and sponsor have not agreed between themselves which entity shall accomplish the requirements under this Article, the originator shall comply with those requirements.

1a.  The originator, sponsor or SSPE may use the service of a third party to check whether a securitisation complies with the STS criteria. However, such third party advice shall not affect the liability of the originator, sponsor or SSPE in respect of their legal obligations under this Regulation.

Where the originator, sponsor or SSPE uses the service of a third party to assess whether a securitisation complies with Articles 7 to 10 or Articles 11 to 13, the STS notification shall include a statement that the compliance with the STS criteria was confirmed by that third party. That notification shall also include the name of the third party and its place of establishment.

2.  Where the originator or original lender is not a credit institution or investment firm as defined in Article 4 (1) points (1) and (2) of Regulation No 575/2013 the notification pursuant to paragraph 1 of this Article 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 effective systems in place to apply such processes.

(b)  a declaration on whether the elements mentioned in subparagraph (a) are subject to supervision.

3.  The originator, sponsor or 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 ▌.

4.  ESMA shall immediately publish on an appropriate section of its website 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. 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 regulatory technical standards that specify the information that 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 regulatory technical standards to the Commission by ... [twelve months from the date of entry into force of this Regulation].

▌The Commission is empowered to adopt the regulatory technical standards referred to in this paragraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Chapter 4

Supervision

Article 15

Designation of competent authorities

1.  Compliance with the obligations set out in Article 3 of this Regulation shall be ensured by the following competent authorities in accordance with the powers granted by the relevant legal acts:

(a)  for insurance and reinsurance undertakings, the competent authority designated according to Article 13 (10) of Directive 2009/138/EC;

(b)  for alternative investment fund managers, the competent authority responsible designated according to Article 44 of Directive 2011/61/EU;

(c)  for UCITS and UCITS management companies, the competent authority designated according to Article 97 of Directive 2009/65/EC;

(d)  for institutions for occupational retirement provision, the competent authority designated according to Article 6 (g) of Directive 2003/41/EC;

(e)  for credit institutions or investments firms, the competent authority designated according to Article 4 of Directive 2013/36/EU, including the ECB in accordance with Council Regulation (EU) No 1024/2013.

2.  Competent authorities responsible for the supervision of sponsors in accordance with Article 4 of Directive 2013/36/EU, including the ECB in accordance with Council Regulation (EU) No 1024/2013, shall ensure that sponsors comply with the obligations set out in Articles 4 to 14 of this Regulation.

3.  Where originators, original lenders and SSPEs are supervised entities in accordance with Directive 2013/36/EU, Regulation (EU) No 1024/2013, Directive 2009/138/EC, Directive 2003/41/EC, Directive 2011/61/EU or Directive 2009/65/EC, the relevant competent authorities designated according to those acts, including the ECB in accordance with Council Regulation (EU) No 1024/2013, shall ensure compliance with the obligations set out in Articles 4 to 5 of this Regulation.

4.  For entities not covered by the Union legislative acts referred to in paragraph 3, Member States shall designate one or more competent authority to ensure compliance with Articles 4 to 5 of this Regulation. Member States shall inform the Commission, ESMA, EBA and EIOPA and the competent authorities of other Member States of the designation of competent authorities pursuant to this paragraph. That obligation shall not apply with regard to non-financial corporations selling exposures under an ABCP programme or another securitisation transaction or scheme.

4a.  ESMA, together with the national competent authorities responsible for the supervision of securities markets, shall supervise and enforce compliance with the obligations set out in Articles 6 to 14.

5.  ESMA shall publish and keep up-to-date on its website a list of the competent authorities referred to in this Article.

Article 16

Powers of the competent authorities

1.  Each Member State shall ensure that the competent authority, designated in accordance with Article 15(2) to (4a) has the supervisory, investigatory and sanctioning powers necessary to fulfil its duties under this Regulation.

2.  The competent authority, designated in accordance with Article 15(2) to (4a), shall regularly review the arrangements, process and mechanisms implemented by originators, sponsors, SSPE's and original lenders to comply with this Regulation.

2a.  The competent authority shall monitor, including through regular spot checks, new issuance, in particular of securitisations of which the market has little experience, in order to detect breaches as referred to in Article 17(1) or features for which there is no apparent justification other than to circumvent provisions of this Regulation.

3.  Competent authorities shall require that risks arising from securitisation transactions, including reputational risks, are evaluated and addressed through appropriate policies and procedures of originators, sponsors, SSPE's and original lenders.

3a.  The competent authority shall monitor, as applicable, the specific effects that the participation in the securitisation market has on the stability of the financial institution that operates as original lender, originator, sponsor or investor as part of its prudential supervision in the field of securitisation, taking into account, without prejudice to stricter sectoral regulation:

(a)  the size of capital buffers, in order to dampen the pro-cyclicality of the securitisation market;

(b)  the size of the liquidity buffers to counterbalance a potential concentration of support for ABCP programmes by credit institutions;

(c)  the liquidity risk for investors due to a maturity mismatch between their funding and investments.

In cases where the competent authority identifies a risk to financial stability of a financial institution or the financial system as a whole, irrespective of its obligations under Article 21, it shall take action to mitigate those risks, report its findings to the designated authority competent for macro-prudential instruments under Regulation (EU) No 575/2013 and the European Systemic Risk Board, and notify the Commission and the European Parliament thereof.

3b.  The competent authority, together with ESMA, shall monitor any possible circumvention of the obligations set out in Article 4(1a) of this Regulation whereby securitisations are specifically structured or marketed with a view to falling outside the scope of those obligations. The competent authority shall monitor and report to ESMA, ESMA shall assess the information reported by the competent authority and report to the Commission, Parliament and Council any critical developments in the evolution of market practices in that respect.

Article 16 a

Macro-prudential oversight of the securitisation market

1.  Within the limits of their respective tasks, the European Systemic Risk Board shall be responsible for the macro-prudential oversight of the European Unions securitisation market and EBA shall be responsible for the micro-prudential oversight, while taking into account the specificity of market segments and asset classes.

2.  Following the publication of the biennial report on the securitisation market referred to in Article 29, and in order to reflect changes in market circumstances, to prevent asset bubbles from developing in different market segments or asset classes and to prevent parts of the Unions securitisation market from closing down in times of crisis, EBA, in close cooperation with ESRB, shall develop draft regulatory technical standards within six months of the date of publication of such a report and develop revised regulatory technical standards every two years thereafter, in order to specify:

(a)  the level retention rate referred to in Article 4(1) within a maximum range from 5% to 20%, applicable for modalities of retention listed in Article 4(2), taking into account the specificities of market segments;

(b)   to what extent guarantees are applicable on the securitised assets;

(c)   whether the originator has retained the exposures on its balance sheet for part of their original maturity, when setting the required retention rate;

(d)  whether the required retention rates shall be brought up to the maximum of 20% or motivate why it should be adjusted downward, while taking into account specificities of market segments; and

(e)  if guarantees are applicable on the securitised assets.

Those draft regulatory technical standards shall be developed by ... [two years from the date of entry into force of this Regulation] or, as the case may be, two years from the time the most recent draft regulatory technical standards were developed pursuant to this paragraph. An adjustment of the retention rate included in the draft regulatory technical standards will come into effect for securitisations that have not been notified to the ECB in accordance with Articles 243 and 244 of Regulation (EU) No 575/2013 by the time of the entry into force of those regulatory technical standards.

EBA shall submit those draft regulatory technical standards to the Commission by ... [two years from the date of entry into force of this Regulation].

The Commission is empowered to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

3.  Following the publication of the report referred to in Article 29 of this Regulation, the ESRB shall make recommendations to Member States specifying whether it is necessary to reassess borrower based measures including adjustment of the maximum Loan To Value, Loan To Income or Debt Service To Income for assets to be securitised.

4.  Whenever a draft regulatory technical standard is submitted under paragraph 2 of this Article, the Commission shall also consider whether, in accordance with Article 270f of Regulation (EU) No 575/2013, amendments to the risk floor levels for securitisations provided for in Articles 259, 260, 261, 263 and 264 of Regulation (EU) No 575/2013 are required, and adopt delegated acts accordingly, where appropriate.

Article 17

Administrative sanctions and remedial measures

1.  Without prejudice to the right for Member States to provide for and impose criminal sanctions pursuant to Article 19 of this Regulation, Member States shall lay down rules establishing appropriate administrative sanctions and remedial measures applicable to situations where:

(a)  an originator, sponsor or original lender has failed to meet the requirements of Article 4;

(b)  an originator, sponsor and SSPE have failed to meet the requirements of Article 5;

(c)  a securitisation is designated as STS and an originator, sponsor and SSPE of that securitisation have failed to meet the requirements of Articles 7 to 10 or Articles 11 to 13 ▌.

(ca)  an originator or sponsor uses the designation 'STS' for their securitisation, by breaching Article 6 of this Regulation, other than while the securitisation meets all the requirements of either Articles 7 to 10 or Articles 11 to 13 of this Regulation;

(cb)  an originator or sponsor makes a misleading notification pursuant to Article 14(1) of this Regulation.

Member States shall also ensure that administrative sanctions and/or remedial measures are effectively implemented.

2.  Those sanctions and measures shall be effective, proportionate and dissuasive and shall include, at least the following:

(a)  a public statement, which indicates the identity of the natural or legal person and the nature of the infringement in accordance with Article 22;

(b)  an order requiring the natural or legal person to cease the conduct and to desist from a repetition of that conduct;

(c)  a temporary ban against any member of the originator's, sponsor's or SSPE's management body or any other natural person, who is held responsible, to exercise management functions in such undertakings;

(d)  in case of the infringement referred to in the paragraph 1 (c) of this Article a temporary ban for the originator, sponsor and SSPE to notify that a securitisation meets the requirements set out in Articles 7 to 10 or Articles 11 to 13 of this Regulation;

(e)  in the case of a natural person, maximum administrative fines of at least EUR 5 000 000, or in the Member States whose currency is not the euro, the corresponding value in the national currency on ... [the date of entry into force of this Regulation]

(f)  or in the case of a legal person, the maximum administrative fines referred to in point (e) or of up to 10 % of the total annual turnover of the legal person according to the last available accounts approved by the management body; where the legal person is a parent undertaking or a subsidiary of the parent undertaking which has to prepare consolidated financial accounts in accordance with Directive 2013/34/EU, the relevant total annual turnover shall be the total annual turnover or the corresponding type of income in accordance with the relevant accounting legislative acts according to the last available consolidated accounts approved by the management body of the ultimate parent undertaking;

(g)  maximum administrative fines of at least three times the amount of the benefit derived from the infringement where that benefit can be determined, even if that exceeds the maximum amounts in points (e) and (f).

(ga)  minimum administrative fines of at least the amount of the benefit derived from the infringement where that benefit can be determined, even if that exceeds the maximum amounts referred to in points (e) and (f) of this paragraph.

3.  Where the provisions referred to in the first paragraph apply to legal persons, Member States shall also ensure that competent authorities apply the administrative sanctions and remedial measures set out in paragraph 2 to members of the management body, and to other individuals who under national law are responsible for the infringement.

4.  Member States shall ensure that any decision imposing administrative sanctions or remedial measures set out in paragraph 2 is properly reasoned and is subject to the right of appeal before a tribunal.

Article 18

Exercise of the power to impose administrative sanctions and remedial measures

1.  Competent authorities shall exercise the powers to impose administrative sanctions and remedial measures referred to in Article 17 of this Regulation in accordance with their national legal frameworks:

(a)  directly;

(b)  in collaboration with other authorities;

(c)  by application to the competent judicial authorities.

2.  Competent authorities, when determining the type and level of an administrative sanction or remedial measure imposed under Article 17 of this Regulation, shall take into account all relevant circumstances, including, the extent to which the infringement is intentional or results from a factual error and, where appropriate:

(a)  the materiality, gravity and the duration of the infringement;

(b)  the degree of responsibility of the natural or legal person responsible for the infringement and whether advice was gathered from a third party in ensuring that the STS conditions were met;

(c)  the financial strength of the responsible natural or legal person, as indicated in particular by the total turnover of the responsible legal person or the annual income and net assets of the responsible natural person;

(d)  the importance of profits gained or losses avoided by the responsible natural or legal person, insofar as they can be determined;

(e)  the losses for third parties caused by the infringement, insofar as they can be determined;

(f)  he level of cooperation of the responsible natural or legal person with the competent authority, without prejudice to the need to ensure disgorgement of profits gained or losses avoided by that person;

(g)  previous infringements by the responsible natural or legal person.

Article 19

Provision of criminal sanctions

1.  Member States may decide not to lay down rules for administrative sanctions or remedial measures for infringements which are subject to criminal sanctions under their national law.

2.  Where Member States have chosen, in accordance with paragraph 1, to lay down criminal sanctions for the infringement referred to Article 17 (1) of this Regulation, they shall ensure that appropriate measures are in place so that competent authorities have all the necessary powers to liaise with judicial, prosecuting, or criminal justice authorities within their jurisdiction to receive specific information related to criminal investigations or proceedings commenced for the infringements referred to in Article 17 (1), and to provide the same information to other competent authorities and ESMA; EBA and EIOPA to fulfil their obligation to cooperate for the purposes of this Regulation.

Article 20

Notification duties

Member States shall notify the laws, regulations and administrative provisions implementing this Chapter, including any relevant criminal law provisions, to the Commission, ESMA, EBA and EIOPA by [one year from the date of entry into force of this Regulation]. Member States shall notify the Commission, ESMA, EBA and EIOPA without undue delay of any subsequent amendments thereto.

Article 21

Cooperation between competent authorities and the European Supervisory Authorities

1.  The competent authorities referred to in Article 15 of this Regulation and ESMA, EBA and EIOPA shall cooperate closely with each other and exchange information to carry out their duties pursuant to Article 16 to 19, in particular to identify and remedy infringements of this Regulation.

1a.  A specific securitisation committee shall be established within the framework of the joint-committee of the European Supervisory Authorities, within which competent authorities shall closely cooperate, in order to carry out their duties pursuant to Articles 16 to 19 of this Regulation.

2.  Competent authorities may also cooperate with competent authorities of third country authorities with respect to the exercise of their sanctioning powers and to facilitate the recovery of pecuniary sanctions.

3.  Where a competent authority finds that this Regulation has been infringed or has reason to believe so, it shall inform the competent authority of the originator, sponsor, original lender, SSPE or investor of its findings in a sufficient detailed manner. The competent authorities concerned shall closely coordinate their supervision in order to ensure consistent decisions and the competent authority that detected the infringement shall immediately notify ESMA.

4.  Where the infringement referred to in paragraph 3 concerns, in particular, an incorrect or misleading notification pursuant to Article 14 (1) of this Regulation, the competent authority finding that infringement shall also notify without delay ESMA, EBA and EIOPA of its findings.

5.  Upon reception of the information referred to in paragraph 3, the competent authority shall take any necessary action to address the infringement identified and notify the other competent authorities concerned, in particular those of the originator, the sponsor, SSPE and the competent authorities of the holder of a securitisation position, when known. In case of disagreement between the competent authorities, the matter shall be referred to ESMA and the procedure of Article 19 and, where applicable, Article 20 of Regulation (EU) No 1095/2010 shall apply.

6.  ESMA shall, in close cooperation with EBA and EIOPA, develop draft regulatory technical standards to specify the general cooperation obligation and the information to be exchanged under paragraph 1 and the notification obligations pursuant to paragraph (3) and (4).

ESMA shall, in close cooperation with EBA and EIOPA submit those draft regulatory technical standards to the Commission by ... [twelve months from the date of entry into force of this Regulation].

▌The Commission is empowered to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulations (EU) No 1095/2010.

Article 22

Publication of administrative sanctions and remedial measures

1.  Member States shall ensure that competent authorities publish without undue delay on their official websites any decision imposing an administrative sanction or remedial measure for infringement of Articles 4, 5 or 14 (1) of this Regulation after the addressee of the sanction or measure of the sanction or measure has been notified of that decision.

2.  The publication referred to in paragraph 1 shall include information on the type and nature of the infringement and the identity of the persons responsible and the sanctions or measures imposed.

3.  Where the publication of the identity, in case of legal persons, or the identity and the personal data, in the case of natural persons is considered by the competent authority to be disproportionate following a case-by-case assessment, or where the competent authority considers that the publication jeopardises the stability of financial markets or an on-going investigation, Member States shall ensure that competent authorities either:

(a)  defer the publication of the decision imposing the administrative sanction or remedial measure until the moment where the reasons for non-publication cease to exist; or

(b)  publish the decision imposing the administrative sanction or remedial, omitting for a reasonable period of time the identity and personal data of the addressee, if it is envisaged that within that period the reasons for anonymous publication shall cease to exist and provided that such anonymous publication ensures an effective protection of the personal data concerned; or

(c)   not publish at all the decision to impose the administrative sanction or remedial measure in the event that the options set out in points (a) and (b) are considered to be insufficient to ensure:

(i)  that the stability of financial markets would not be put in jeopardy;

(ii)  the proportionality of the publication of such decisions with regard to measures which are deemed to be of a minor nature.

4.  In the case of a decision to publish a sanction or measure on an anonymous basis, the publication of the relevant data may be postponed Where a decision imposing an administrative sanction or remedial measure is subject to an appeal before the relevant judicial authorities, competent authorities shall also immediately add on their official website that information and any subsequent information on the outcome of such appeal. Any judicial decision annulling a decision imposing an administrative sanction or a remedial measure shall also be published.

5.  Competent authorities shall ensure that any publication referred to in paragraphs 1 to 4 shall remain on their official website for at least five years after its publication. Personal data contained in the publication shall only be kept on the official website of the competent authority for the period which is necessary in accordance with the applicable data protection rules.

6.  Competent authorities shall inform ESMA, EBA and EIOPA of all administrative sanctions and remedial measures imposed, including, where appropriate, any appeal in relation thereto and the outcome thereof. Member States shall ensure that competent authorities receive information and the final judgement in relation to any criminal sanction imposed and submit it to ESMA, EBA or EIOPA.

7.  ESMA, EBA and EIOPA shall jointly maintain a central database of administrative sanctions and remedial measures communicated to them. That database shall be only accessible to competent authorities and shall be updated on the basis of the information provided by the competent authorities in accordance with paragraph 6.

Chapter 4a

Requirements for securitisation repositories

Article 22a

General requirements

1.  A securitisation repository shall:

(a)   have robust governance arrangements, including a clear organisational structure with well defined, transparent and consistent lines of responsibility and adequate internal control mechanisms, including sound administrative and accounting procedures, which prevent any disclosure of confidential information;

  (b)  maintain and operate effective written organisational and administrative arrangements to identify and manage any potential conflicts of interest concerning its managers, employees, or any person closely linked to them, whether directly or indirectly;

(c)  establish adequate policies and procedures sufficient to ensure its compliance, including of its managers and employees, with this Regulation in ints entirety; and

(d)  maintain and operate an adequate organisational structure to ensure continuity and orderly functioning of the securitisation repository in the performance of its services and activities. It shall employ appropriate and proportionate systems, resources and procedures.

2.  Where a securitisation repository offers ancillary services such as analysis, market forecasts, estimates of economic trends, pricing and other general data analysis as well as related distribution services, the securitisation repository shall maintain those ancillary services operationally separate from the securitisation repository’s function of centrally collecting and maintaining records of information on securitisation as specified in Article 5 (1) of this Regulation.

3.  The senior management and members of the board of a securitisation repository shall be of sufficiently good repute and experience so as to ensure the sound and prudent management of the securitisation repository.

4.  A securitisation repository shall have objective, non-discriminatory and publicly disclosed requirements for access by originators, sponsors and SSPE subject to the transparency obligation laid down in Article 5(1) of this Regulation. A securitisation repository shall grant service providers non-discriminatory access to information held by the securitisation repository, on condition that the relevant counterparties have provided their consent. Restrictions of access shall only be permitted to the extent that their objective is to control the risk to the information held by a securitisation repository.

5.  A securitisation repository shall publicly disclose the prices and fees associated with services provided under this Regulation. It shall disclose the prices and fees of each service provided separately, including discounts and rebates and the conditions to be fulfilled to benefit from those reductions. It shall allow the originators, sponsors and SSPE to fulfil the information requirements to separately access specific services . The prices and fees charged by a securitisation repository shall be cost-related.

6.  A securitisation repository shall have adequate procedures to ensure the quality of the published information.

7.  In order to ensure consistent application of the transparency requirements and accuracy of the information, ESMA shall develop draft regulatory standards specifying the details of the procedures to be applied by the securitisation repository in order to verify the completeness and correctness of the information submitted by the originators, sponsors and SSPE pursuant to Article 5(2).

ESMA shall submit those draft regulatory technical standards to the Commission by [one year from the date of entry into force of this Regulation].

The Commission is empowered to adopt the regulatory technical standards referred to in this paragraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 22b

Operational reliability

1.  A securitisation repository shall identify sources of operational risk and minimise them through the development of appropriate systems, controls and procedures. Such systems shall be reliable and secure and have adequate capacity to handle the information received.

2.  A securitisation repository shall establish, implement and maintain an adequate business continuity policy and disaster recovery plan aiming at ensuring the maintenance of its functions, the timely recovery of operations and the fulfilment of the securitisation repository’s obligations. Such a plan shall at least provide for the establishment of backup facilities.

3.  A securitisation repository from which registration has been withdrawn shall ensure orderly substitution including the transfer of data to other securitisation repository.

Article 22c

Safeguarding and recording

1.  A securitisation repository shall ensure the confidentiality, integrity and protection of the information received under Article 5(1).

2.  A securitisation repository may only use the information it receives under this Regulation for commercial purposes if the originator, sponsor or SSPE have provided their consent.

3.  A securitisation repository shall promptly record the information received under Article 5(1) and shall maintain it for at least 10 years following the termination of the relevant contracts. It shall employ timely and efficient record keeping procedures to document changes to recorded information.

4.  A securitisation repository shall allow the originator, sponsor or SSPE to access and correct the information on that contract in a timely manner.

5.  A securitisation repository shall take all reasonable steps to prevent any misuse of the information maintained in its systems.

A natural person who has a close link with a securitisation repository or a legal person that has a parent undertaking or a subsidiary relationship with the securitisation repository shall not use confidential information recorded in a securitisation repository for commercial purposes.

Article 22d

Transparency and data availability

1.  A securitisation repository shall regularly, and in an easily accessible way, publish information pursuant to Article 5(1) of this Regulation on the standardised templates reported to it.

2.  A securitisation repository shall collect and maintain data and shall ensure that the entities referred to in paragraph 3 have direct and immediate access to the information referred to in paragraph 1(a) and (d) of Article 5 of this Regulation to enable them to fulfil their respective responsibilities and mandates.

3.  A securitisation repository shall report aggregate data according to a standardised template provided by ESMA. That information shall be published by ESMA in accordance with paragraph 2a of Article 5 of this Regulation.

4.  A securitisation repository shall make the necessary information available to the following entities to enable them to fulfil their respective responsibilities and mandates:

(a)  ESMA;

(b)  the competent authority as designated under Article 15 of this Regulation;

5.  ESMA shall share the information necessary for the exercise of their duties with other relevant Union authorities.

6.  ESMA, in close cooperation with EBA and EIOPA, shall develop draft regulatory technical standards, including standardised templates, to specify the information and the format thereof, that the originator, sponsor and SSPE are to provide in order to comply with their obligations under paragraph 1(a) and (d) of Article 5 of this Regulation .

ESMA shall submit those draft regulatory technical standards to the Commission by [one year from date of entry into force of this Regulation].

The Commission is empowered to adopt the regulatory technical standards referred to in this paragraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 22e

Exercise of the delegation

1.  The power to adopt delegated acts is conferred to the Commission subject to the conditions laid down in this Article.

2.  The power to adopt delegated acts referred to in Article 5i(7), Article 5p(3) and Article 22f(1) shall be conferred to the Commission for an indeterminate period of time from … [the date of entry into force of this Regulation].

3.  A delegation of power referred to in Article 5i(7), Article 5p(3) and Article 22f(1) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of power specified in that decision. It shall take effect the day following that of its publication in the Official Journal of the European Union or on a later date specified therein. It shall not affect the validity of any delegated acts already in force.

4.  Before adopting a delegated act, the Commission shall consult ESMA.

5.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

6.  A delegated act adopted pursuant to Article 5i(7), Article 5p(3) and Article 22f(1) shall enter into force only if no objection has been expressed by either the European Parliament or the Council within a period of three months of notification of the act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament or the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.

Chapter 4b (new)

Third-country regime

Article 22f

Equivalence and recognition of regulatory framework

1.  The Commission is empowered to adopt delegated acts in accordance with Article 22e to supplement this Regulation by determining that the legal, supervisory and enforcement arrangements of a third country:

(a)  are equivalent to the requirements laid down in Articles 7 to 10 for a non-ABCP securitisation and Articles 11 to 13 for an ABCP securitisation and to the supervisory powers and sanctions laid down in Chapter 4; and

(b)  are being effectively applied and enforced in an equitable and non-distortive manner in order to ensure effective supervision and enforcement in that third country.

2.  Where the Commission has adopted an delegated act on equivalence with regard to a third country, as referred to in paragraph 1 of this Article, a securitisation shall be deemed to have fulfilled the requirements laid down in Articles 7 to 10 for a non-ABCP securitisation and Articles 11 to 13 for an ABCP securitisation, where the originator, sponsor or SSPE of that securitisation is established in that third country and the originator, sponsor and SSPE, as applicable, have complied with the relevant obligations of that third country in relation to that securitisation.

3.  The Commission shall, in cooperation with ESMA, monitor the effective implementation of the requirements equivalent to those laid down in Article 6 to 14, by third countries in respect of which a delegated act on equivalence has been adopted and shall report regularly to the European Parliament and to the Council thereon. Where the report reveals an insufficient or inconsistent application of the equivalent requirements by third-country authorities, the Commission shall consider, within 30 calendar days of the presentation of the report, whether to withdraw the recognition as equivalent of the third-country legal framework in question.

TITLE III

AMENDMENTS

Article 23

Amendment to Directive 2009/65/EC

Article 50a of Directive 2009/65/EC is deleted

Article 24

Amendment to Directive 2009/138/EC

Directive 2009/138/EC is amended as follows:

(1)  in Article 135, paragraphs 2 and 3 are replaced by the following

"2. The Commission shall adopt delegated acts in accordance with Article 301a laying down the specifications for the circumstances under which a proportionate additional capital charge may be imposed when the requirements laid down in Articles 3 and 4 of Regulation [the securitisation Regulation] have been breached, without prejudice to Article 101(3).

3. In order to ensure consistent harmonisation in relation to paragraph 2, EIOPA shall, subject to Article 301b, develop draft regulatory technical standards to specify the methodologies for the calculation of a proportionate additional capital charge referred to therein.

▌The Commission is empowered to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1094/2010."

(2)  Article 308b(11) is deleted.

Article 25

Amendment to Regulation (EC) No 2009/1060

Regulation (EC) No 2009/1060 is amended as follows:

(1)  In recitals 22 and 41, in Articles 8c and in Annex II, point 1, "structured finance instrument" is replaced by "securitisation instrument".

(2)  In recitals 34 and 40, in Articles 8(4), 8c, 10(3), 39(4) as well as in Annex I, section A, point 2, paragraph 5, Annex I, section B, point 5, Annex II (title and point 2), Annex III, Part I, points 8, 24 and 45, Annex III, Part III, point 8, "structured finance instruments" is replaced by "securitisation instruments".

(3)  in Article 1 the second subparagraph is replaced by the following

"This Regulation also lays down obligations for issuers and related third parties established in the Union regarding securitisation instruments."

(4)  in Article 3, point (l) is replaced by the following:

"(l) ‘securitisation instrument’ means a financial instrument or other assets resulting from a securitisation transaction or scheme referred to in Article 2 (1) of Regulation [this Regulation];

(5)  Article 8b is deleted."

Article 26

Amendment to Directive 2011/61/EU

Article 17 of Directive 2011/61/EU is deleted.

Article 27

Amendment to Regulation (EU) 648/2012

Regulation 648/2012/EU is amended as follows:

(1)  in Article 2 points 30 and 31 are added:

"(30) “covered bond” means a bond meeting the requirements of Article 129 of Regulation (EU) No 575/2013."

(31) “covered bond entity” means the covered bond issuer or cover pool of a covered bond."

(2)  in Article 4 the following paragraphs 5 and 6 are added:

"5. Article 4(1) shall not apply with respect to OTC derivative contracts that are concluded by covered bond entities in connection with a covered bond, or by a Securitisation Special Purpose Entity in connection with a securitisation, within the meaning of Regulation [the Securitisation Regulation] provided that:

(a) in the case of Securitisation Special Purpose Entities, the Securitisation Special Purpose Entity shall solely issue securitisations that meet the requirements of Articles 7 to 10 or Articles 11 to 13 and Article 6 of Regulation [the Securitisation Regulation];

(b) the OTC derivative contract is used only to hedge interest rate or currency mismatches under the covered bond or securitisation; and

(c) the arrangements under the covered bond or securitisation adequately mitigate counterparty credit risk with respect to the OTC derivative contracts concluded by the covered bond entity or Securitisation Special Purpose Entity in connection with the covered bond or securitisation.

6. In order to ensure consistent application of this Article, and taking into account the need to prevent regulatory arbitrage, the ESAs shall develop draft regulatory technical standards specifying criteria for establishing which arrangements under covered bonds or securitisations adequately mitigate counterparty credit risk, within the meaning of paragraph 5.

The ESAs shall submit those draft regulatory technical standards to the Commission by [six months from the date of 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."

(3)  in Article 11 paragraph 15 is replaced by the following:

"15. In order to ensure consistent application of this Article, the ESAs shall develop common draft regulatory technical standards specifying:

(a) the risk-management procedures, including the levels and type of collateral and segregation arrangements, required for compliance with paragraph 3;

(b) the procedures for the counterparties and the relevant competent authorities to be followed when applying exemptions under paragraphs 6 to 10;

(c) the applicable criteria referred to in paragraphs 5 to 10 including in particular what should be considered as practical or legal impediment to the prompt transfer of own funds and repayment of liabilities between the counterparties.

The level and type of collateral required with respect to OTC derivative contracts that are concluded by covered bond entities in connection with a covered bond, or by a Securitisation Special Purpose Entity in connection with a securitisation within the meaning of [this Regulation] and meeting the conditions of paragraph 4(5) of this Regulation and the requirements of Articles 7 to 10 or Articles 11 to 13 and Article 6 of Regulation [the Securitisation Regulation] shall be determined taking into account any impediments faced in exchanging collateral with respect to existing collateral arrangements under the covered bond or securitisation.The ESAs shall submit those draft regulatory technical standards to the Commission by [six months from the date of entry into force of this Regulation].

Depending on the legal nature of the counterparty, ▌the Commission is empowered to adopt the regulatory technical standards referred to in the first subparagraph in accordance with either Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 or (EU) No 1095/2010."

Article 28

Transitional provisions

1.  This Regulation shall apply to securitisations the securities of which are issued on or after [date of entry into force of this Regulation], subject to paragraphs 2 to 6.

2.  In respect of securitisation positions outstanding as of [date of entry into force of this Regulation], originators, sponsors and SSPEs may use the designation 'STS' or a designation that refers directly or indirectly to these terms only where the requirements set out in Article 6 of this Regulation are complied with.

3.  In respect of securitisations the securities of which were issued on or after 1 January 2011 but before ... [date of entry into force of this Regulation], and in respect of securitisations issued before that date, where new underlying exposures have been added or substituted after 31 December 2014, the due diligence requirements laid down in Regulation (EU) No 575/2013, Commission Delegated Regulation (EU) 2015/35 and Commission Delegated Regulation (EU) No 231/2013 shall continue to apply in the version applicable on ... [day before date of entry into force of this Regulation].

4.  In respect of securitisation positions outstanding as of [date of entry into force of this Regulation] credit institutions or investment firms as defined in Article 4(1) and (2) of Regulation (EU) No 2013/575, insurance undertakings as defined in Article 13 (1) of Directive 2009/138/EC, reinsurance undertakings as defined in Article 13 point (4) of Directive 2009/138/EC and alternative investment fund managers (AIFM) as defined in Article 4(1)(b) of Directive 2011/61/EU shall continue to apply Article 405 of Regulation (EU) No 575/2013 and to chapter 1, 2 and 3 and Article 22 of Commission Delegated Regulation (EU) No 625/2014, Articles 254 and 255 of Commission Delegated Regulation (EU) 2015/35 and Article 51 of Commission Delegated Regulation (EU) No 231/2013, respectively, in the version applicable on [day before date of entry into force of this Regulation].

5.  Until the moment that the regulatory technical standards to be adopted by the Commission pursuant Article 4 (6) of this Regulation are of application originators, sponsors or the original lender shall for the purposes of the obligations set out in Article 4 of this Regulation, apply the provisions in Chapters 1, 2 and 3 and Article 22 of Commission Delegated Regulation (EU) No 625/2014 to securitisations the securities of which are issued on or after [date of entry into force of this Regulation].

6.  Until the moment that the regulatory technical standards to be adopted by the Commission pursuant to Article 5 (3) of this Regulation are of application, originators, sponsors and SSPE's shall, for the purposes of the obligations set out in points a) and e) of Article 5 (1) of this Regulation, make the information mentioned by Annexes I to VIII of Commission Delegated Regulation (EU) No 2015/3 available to the website referred to in Article 5 (2).

Article 29

Reports

1.  By ... [two years from the date of entry into force of this Regulation] and every three years thereafter, ESMA , in close cooperation with EBA and EIOPA, shall publish a report on the implementation of the STS requirements as laid down by Articles 6 to 14.

2.  By ... [two years from the date of entry into force of this Regulation], the Commission, after consulting the ESAs and the ESRB, shall publish a report on the effects of this Regulation on the market for securitisations in the Union. That report shall contain in particular an assessment of all of the following:

(a)  the effects of the introduction of the STS securitisation label, including on the real economy and in particular on access to credit for SMEs,

(b)  the functioning of that market;

(c)  the effects on interconnectedness between financial institutions and the stability of the financial sector.

2a.  EBA, in close cooperation with ESMA and EIOPA, shall publish a report at least every two years from the date of entry into force of this Regulation on compliance by market participants with the requirements of this Regulation and in particular risk retention requirements and the modalities of retaining risk pursuant to Article 4(2).

3.  By ... [three years from the date of entry into force of this Regulation] ESMA, in close cooperation with EBA and EIOPA, shall publish a report on the functioning of the transparency requirements in Article 5 of this Regulation and the level of transparency of the securitisation market in the Union.

3a.  By ... [two years from the date of entry into force of this Regulation] ESMA, in close cooperation with EBA and EIOPA, shall publish a report on the feasibility of a regulatory framework, complementing the new framework on securitisation established in this Regulation, establishing a system of limited licensed banks, performing the functions of SSPEs and having the exclusive right to purchase exposures from originators and sell claims backed by the purchased exposures to investors. The report shall examine in detail the advantages and disadvantages, from a public policy and real economy perspective, of having clearly designated entities subject to a specific supervisory and insolvency regime covering the essential intermediation activities between originators and investors compared to the current highly heterogeneous situation.

3b.  By ... [one year from the date of entry into force of this Regulation], EBA, in close cooperation with ESMA and EIOPA, shall publish a report on the feasibility of a framework for simple, transparent and standardised synthetic securitisation, limited to balance sheet securitisation and including proposals for appropriate capital requirements for such securitisation

3c.  By ... [18 months from the date of entry into force of this Regulation], the Commission shall, on the basis of the EBA report referred to in paragraph 3b, submit a report to the European Parliament and the Council on the establishment of a framework for simple, transparent and standardised synthetic securitisation proposals, limited to balance sheet securitisation and including proposals for appropriate capital requirements for such securitisation, together with legislative proposals if appropriate.

Article 30

Review

By ... [three years from the date of entry into force of this Regulation] the Commission shall present a report to the European Parliament and the Council on the functioning of this Regulation, accompanied, where appropriate, by a legislative proposal.

That report shall consider in particular the findings of the reports referred to in Article 29(1) to (3c).

Article 31

Entry into Force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at ,

For the European Parliament  For the Council

The President  The President

ANNEX I

List of infringements referred to in Article 5 j

I  Infringements relating to organisational requirements or conflicts of interest:

(a)  securitisation repository infringes Article 22 a(1) by not having robust governance arrangements which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility and adequate internal control mechanisms, including sound administrative and accounting procedures, which prevent the disclosure of confidential information;

(b)  a securitisation repository infringes Article 22 a(2) by not maintaining or operating effective written organisational and administrative arrangements to identify and manage any potential conflicts of interest concerning its managers, its employees, and any person closely linked to them, whether directly or indirectly ;

(c)  a securitisation repository infringes Article 22 a(3) by not establishing adequate policies and procedures to ensure compliance with this Regulation in its entirety, including by its managers and employees;

(d)  a securitisation repository infringes Article 22 a(4) by not maintaining or operating an adequate organisational structure to ensure continuity and orderly functioning of the securitisation repository in the performance of its services and activities;

(e)  a securitisation repository infringes Article 22a(5) by not separating operationally its ancillary services from its function of centrally collecting and maintaining records of derivatives;

(f)  a securitisation repository infringes Article 22a(6) by not ensuring that its senior management and the members of the board are of sufficiently good repute and experience so as to ensure the sound and prudent management of the securitisation repository;

(g)  a securitisation repository infringes Article 22a(7) by not having objective non-discriminatory and publicly disclosed requirements for access by services providers and originators, sponsors and SSPE subject to the reporting obligation set out in Article 5 (1) of this Regulation;

(h)  a securitisation repository infringes Article 22b(8) by not publicly disclosing the prices and fees associated with services provided under this Regulation, by not allowing reporting entities to access specific services separately or by charging prices and fees that are not cost related.

II  Infringements relating to operational requirements:

(a)  a securitisation repository infringes Article 22b(1) by not identifying sources of operational risk or by not minimising those risks through the development of appropriate systems, controls and procedures;

(b)  a securitisation repository infringes Article 22b(2) by not establishing, implementing or maintaining an adequate business continuity policy and disaster recovery plan aimed at ensuring the maintenance of its functions, the timely recovery of operations and the fulfilment of the securitisation repositorys obligations;

(c)  a securitisation repository infringes Article 22c(1) by not ensuring the confidentiality, integrity or protection of the information received under Article 5 (2) of this Regulation;

(d)  a securitisation repository infringes Article 22c(2) by using the data that it receives under this Regulation for commercial purposes without the relevant counterparties having provided their consent;

(e)  a securitisation repository infringes Article 22c(3) by not promptly recording the information received under Article 5 or by not maintaining it for at least 10 years following the termination of the relevant contracts or by not employing timely and efficient record-keeping procedures to document changes to recorded information;

(f)  a securitisation repository infringes Article 22c(5) by not allowing the parties to a contract to access and correct the information on that contract in a timely manner;

(h)  a securitisation repository infringes Article 22c(6) by not taking all reasonable steps to prevent any misuse of the information maintained in its systems.

III  Infringements relating to transparency and the availability of information:

(a)  a securitisation repository infringes Article 5d(1) by not regularly publishing, in an easily accessible way, aggregate idata on the information reported to it;

(b)  a securitisation repository infringes Article 5d(2) by not allowing the entities referred to in Article 5d(3) direct and immediate access to the information referred to in Article 5 to enable them to fulfil their respective responsibilities and mandates.

IV  Infringements relating to obstacles to the supervisory activities:

(a)  a securitisation repository infringes Article 5f(1) by providing incorrect or misleading information in response to a simple request for information by ESMA in accordance with Article 5f(2) or in response to a decision by ESMA requiring information in accordance with Article 5f(3);

(b)  a securitisation repository provides incorrect or misleading answers to questions asked pursuant to Article 5g(1)(c);

(c)  a securitisation repository does not comply in due time with a supervisory measure adopted by ESMA pursuant to Article 5q.

(d)  a securitisation repository does not notify ESMA in due time of material changes to the conditions of its initial registration.

ANNEX II

List of the coefficients linked to aggravating and mitigating factors for the application of Article 22j (3)

The following coefficients shall be applicable, cumulatively, to the basic amounts referred to in Article 5j (2):

I  Adjustment coefficients linked to aggravating factors:

(a)  if the infringement has been committed repeatedly, for every time it has been repeated, an additional coefficient of 1,1 shall apply;

(b)  if the infringement has been committed for more than one month, a coefficient of 1,5 shall apply;

(c)  if the infringement has revealed systemic weaknesses in the organisation of the securitisation repository, in particular in its procedures, management systems or internal controls, a coefficient of 2,2 shall apply;

(d)  if the infringement has a negative impact on the quality of the data it maintains, a coefficient of 1,5 shall apply;

(e)  if the infringement has been committed intentionally, a coefficient of 2 shall apply;

(f)  if no remedial action has been taken since the breach has been identified, a coefficient of 1,7 shall apply;

(g)  if the securitisation repositorys senior management has not cooperated with ESMA in carrying out its investigations, a coefficient of 1,5 shall apply.

II  Adjustment coefficients linked to mitigating factors:

(a)  if the infringement has been committed for less than 24 hours, a coefficient of 0,9 shall apply;

(b)  if the securitisation repositorys senior management can demonstrate to have taken all the necessary measures to prevent the infringement, a coefficient of 0,7 shall apply;

(c)  if the securitisation repository has brought quickly, effectively and completely the infringement to ESMAs attention, a coefficient of 0,4 shall apply;

(d)  if the securitisation repository has voluntarily taken measures to ensure that a similar infringement cannot be committed in the future, a coefficient of 0,6 shall apply.

(1)

OJ C 82, 3.3.2016, p. 1..

(2)

OJ C 219, 17.6.2016, p. 2.

(3)

* Amendments: new or amended text is highlighted in bold italics; deletions are indicated by the symbol ▌.

(4)

  OJ C 82, 3.3.2016, p. 1..

(5)

  OJ C 219, 17.6.2016, p. 2

(6)

  Commission Delegated Regulation of 10 October 2014 to supplement Regulation (EU) No 575/2013 with regard to liquidity coverage requirement for Credit Institutions (OJ L 11, 17.1.2015, p; 1).

(7)

  Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 12, 17.1.2015, p. 1).

(8)

  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013. p. 263).

(9)

  Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32).

(10)

  Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ L 35, 11.2.2003, p. 1)

(11)

  Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, 31.12.2003, p. 64).

(12)

  Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12.6.2014, p. 1).


ANNEX: LIST OF ENTITIES OR PERSONSFROM WHOM THE RAPPORTEUR HAS RECEIVED INPUT

The following list is drawn up on a purely voluntary basis under the exclusive responsibility of the rapporteur. The rapporteur has received input from the following entities or persons in the preparation of the report:

At the first stakeholders meeting on 25 January 2016:

Entity and/or person

AFME, Richard Hopkin

AIMA, Jane Moran

APG, Johan Banard

Bank of America Merill Lynch, Alexander Batchvarov

Blackrock, Carey Evans

Deutsche Bank, Stephanie Schneider

European Association of Public Banks, Thorsten Guthke

European Banking Federation, Enrique Velazquez

Financing and Leasing Association, Edward Simpson

French Banking Federation, Antoine Garnier

HSBC, Constance Usherwood

ING, Johanneke Weitjens

Intesa Sanpaolo, Francesca Passamonti

Lease Europe, Ingrid Vermeersch

Nederlandse Vereniging van Banken, Martijn Vliegenthart

NN Investment Partners, Emanuel van Praag

PGGM, Michel De Jonge

Prime Collateralised Securities, Ian Bell

At the second stakeholders meeting on 21 June 2016:

Entity and/or person

AFME, Richard Hopkin

AIMA, Jane Moran

AmCham, Cameron Morrisy

APG, Johan Banard

Association of British Insurers, Julie Shah

Association of Danish Mortgage Banks, Jens Valdemar Krenchel

Association of German Banks, Kolja Gabriel

Autorité des Marchés Financiers, Veronique Cerneau

AXA Group, Emmanuelle Nasse-Bridier

Bank of America Merill Lynch, Alexander Batchvarov

Banking & Payments Federation Ireland, Niamh O'Donnellan

Blackrock, Carey Evans

BMW, Maurus Unsoeld

British Banking Association, Ashley Dorrington

CreditUtility, Casey Campbell & Tamar Joulia-Paris

CREFC Europe, Peter Cosmetatos

Dutch Securitisation Association, Rob Koning

EuroABS, Ben Bates

European Association of Public Banks, Thorsten Guthke

European Banking Federation, Enrique Velazquez

European Financial Services Round Table, Rémi Haumonté

European Fund and Asset Management Association, Vincent Dessard

European Investment Fund, George Passaris

Finance Watch, Frederic Hache

Financing and Leasing Association, Edward Simpson

Fleishman Hillard, Chiara Sandon

Ford Credit Europe, Eugene Scales

French Asset Management Association, Maria Goncalves

French Banking Federation, Antoine Garnier

HSBC, Constance Usherwood

ING, Johanneke Weitjens

Insurance Europe, Alois Thiant

International Capital Market Association, Patrik Karlsson

Italian banking association, Emanuela Farris

KfW Bankengruppe, Helmut von Glasenapp

Lease Europe, Ingrid Vermeersch

Loan Market Association, Nicholas Voisey

McGraw Hill Financial, David Henry Doyle

Moody’s Investors Service, Winifred Alexander-Tate

NN Investment Partners, Emanuel van Praag

PGGM, Michel De Jonge

Prime Collateralised Securities, Ian Bell

Prudential M&G, Branimira Radoslavova

Société Générale, Hugues Saillard

Standard Life Investment, Anne Schneider

The Investment Association, Pamela Gachara

TwentyFour Asset Management, Rob Ford

Verband der Automobilindustrie, Ralf Diemer

Webers Handwick, Katie LaZelle

Other persons, who were not present at one of the two stakeholders meetings:

Entity and/or person

Bundesverband der Deutschen Industrie e.V., Reinhard Kudiß

CEPS, Karel Lannoo

CFA Institute, Josina Kamerling

De Argumentenfabriek, Robin Fransman

Deutsche Bank, Stephanie Schneider

Deutscher Industrie- und Handelskammertag e.V., Susanne Lechner

Deutsches Aktieninstitut e.V., Norbert Kuhn

EURONEXT, Daphne van der Stam

European Central Bank, Vítor Constâncio

European Court of Auditors, Baudilio Tomé Muguruza

European Investment Bank, Susanne Fuhrmann

ESMA, Steven Maijoor

FESSUD, Marie Lepretre

Financial Conduct Authority, Nicholas Herbert-Young

French Association of Specialised Finance Companies, Louis-Marie Durand

Intesa Sanpaolo, Francesca Passamonti

Investment Association, Pamela Gachara

Nederlandse Vereniging van Banken, Martijn Vliegenthart

Rabobank, Bas Brouwers

Santander, Andrew Scourse

Scope Ratings AG, Torsten Hinrichs

U.S. Treasury Representative, Lawrence Norton

University of Amsterdam, Ewald Engelen

University of the West of England, Daniela Gabor

VNO-NCW, Winand Quaedvlieg


PROCEDURE – COMMITTEE RESPONSIBLE

Title

Common rules on securitisation and creating a European framework for simple, transparent and standardised securitisation

References

COM(2015)0472 – C8-0288/2015 – 2015/0226(COD)

Date submitted to Parliament

30.9.2015

 

 

 

Committee responsible

       Date announced in plenary

ECON

14.10.2015

 

 

 

Committees asked for opinions

       Date announced in plenary

ITRE

14.10.2015

IMCO

14.10.2015

JURI

14.10.2015

 

Not delivering opinions

       Date of decision

ITRE

13.10.2015

IMCO

10.11.2015

JURI

13.10.2015

 

Rapporteurs

       Date appointed

Paul Tang

26.11.2015

 

 

 

Discussed in committee

24.5.2016

13.6.2016

21.6.2016

11.10.2016

Date adopted

8.12.2016

 

 

 

Result of final vote

+:

–:

0:

44

3

2

Members present for the final vote

Burkhard Balz, Hugues Bayet, Pervenche Berès, Udo Bullmann, Esther de Lange, Anneliese Dodds, Markus Ferber, Jonás Fernández, Neena Gill, Sylvie Goulard, Roberto Gualtieri, Brian Hayes, Petr Ježek, Othmar Karas, Alain Lamassoure, Philippe Lamberts, Werner Langen, Ivana Maletić, Fulvio Martusciello, Costas Mavrides, Bernard Monot, Luděk Niedermayer, Stanisław Ożóg, Dimitrios Papadimoulis, Sirpa Pietikäinen, Dariusz Rosati, Pirkko Ruohonen-Lerner, Alfred Sant, Molly Scott Cato, Pedro Silva Pereira, Peter Simon, Theodor Dumitru Stolojan, Paul Tang, Ramon Tremosa i Balcells, Ernest Urtasun, Marco Valli, Jakob von Weizsäcker

Substitutes present for the final vote

David Coburn, Fabio De Masi, Ildikó Gáll-Pelcz, Eva Joly, Siegfried Mureşan, Joachim Starbatty, Tibor Szanyi

Substitutes under Rule 200(2) present for the final vote

Salvatore Cicu, Jan Huitema, Seán Kelly, Mairead McGuinness, Jens Nilsson

Date tabled

19.12.2016

Last updated: 12 January 2017Legal notice