[JC 2023 02 ] Joint Committee Q&As relating to the Securitisation Regulation

The three ESAs – ESMA, EIOPA, and EBA – have published a revised version of their questions and answers (Q&As) in connection with the securitization of assets. Specifically, the ESAs added Questions 7-17, which we would like to present in full as follows:
>Q7: The inclusion of early amortisation provisions or trigger for termination of the revolving period in the transaction documentation In the case of private STS non-ABCP securitisations, is it also required to include all the items mentioned under subparagraphs (a) to (d) of Article 21(6) SECR in the transaction documentation?
>Q8: Existence of different classes of investors
In the EBA Guidelines on the STS criteria for non-ABCP securitisation the following is stated: “For the purposes of Article 21(10) of Regulation (EU) 2017/2402, provisions of the transaction documentation that ‘facilitate the timely resolution of conflicts between different classes of investors’, should include provisions with respect to all of the following:
a) the method for calling meetings or arranging conference calls;
b) the maximum timeframe for setting up a meeting or conference call;
c) the required quorum;
d) the minimum threshold of votes to validate such a decision, with clear differentiation between the minimum thresholds for each type of decision;
e) where applicable, a location for the meetings which should be in the Union.” In a transaction where there is one class of external investors (e.g., senior loan noteholders) and where there is the retention holder that holds a claim for repayment of a subordinated loan (e.g., the originator), should this be considered as two different classes of investors and should therefore the specific items in the EBA Guidelines all be included in the transaction documentation?
>Q9: Whether a step-up margin to be paid to investors could apply in the event the securitisation is no longer STS
Is it allowed to include a step-up margin in an STS securitisation, whereby the interest rate paid to investors will increase in case the STS label is no longer applicable?
>Q10: Whether mortgages secured by non-owner occupied residential and real estate properties can be homogeneous
(a) Can mortgages that are secured by non-owner occupied residential real estate (RRE) and mortgages that are secured by mixed-use real estate properties considered to be both residential mortgages and thus can a combination of these two types considered to be homogeneous in accordance with Article 1(a)(i) of Commission Delegated Regulation (EU) 2019/1851 (the ‘RTS on homogeneity’)?
(b) Could alternatively buy-to-let mortgages, in this case consisting of both mortgages that are secured by non-owner occupied residential and mortgages that are secured by mixed-use real estate properties, be considered as an asset type within the meaning of Article 1(a)(viii) of the RTS on homogeneity?
>Q11: The application of the homogeneity criteria to branches
Considering the homogeneity factor in a transaction is „jurisdiction“, is it allowed under Article 2(4)(b) on the RTS on homogeneity to view obligors that are branches of a legal entity in a Rome I Country (e.g., a Dutch branch of an Italian entity) as an obligor with residence in the same jurisdiction as, for example, a legal entity in that jurisdiction (e.g., a Dutch private limited company (besloten vennootschap))?
Any Member State to which Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) applies.
>Q12: Replacement of the liquidity providers
According to Article 21(7)(c) of SECR, the transaction documentation shall clearly specify provisions that ensure the replacement of, amongst others, liquidity providers in the case of their default, insolvency, and other specified events, where applicable. In the case of a securitisation where there is a Reserves Funding Provider or Subordinated Loan Provider that fulfils a role as a liquidity provider, the role of these parties is to make available the relevant reserve advances, including a liquidity reserve advance to provide the issuer with additional liquidity in order to make interest payments on the notes. For these transactions, it is being argued that there is no back-up party in place because additional reserves will be funded when the rating of the Reserves Funding Provider or Subordinated Loan Provider respectively is downgraded. The funding of these reserves will occur before a potential default of the Reserves Funding Provider or Subordinated Loan Provider and therefore it is argued that a back-up party would not be necessary.
>Q13: Which reporting templates should apply to a securitisation backed by project finance loan receivables
Which reporting templates should apply to a securitisation backed by project finance loan receivables?
>Q14: Securitisation exposures backed by several collaterals
(a) What annexes need to be used to report a mortgage securities portfolio backed by collateral of several types (commercial, residential, industrial …), would the Property Type (RREC9 and CREC12) be a proper delimiter?
(b) Could an exposure be reported in several annexes based on the Property Type? If an exposure has as collateral a Residential House, a Pub and a personal guarantee, should the exposure be reported in Annexes 2, 3 and 9?
>Q15: The application of EMIR to securitisation transactions
Are securitisation transactions covered by the EMIR regulation?
>Q16: Institutional investors’ reporting obligations
Are investors subject to any reporting obligations under the SECR?
>Q17: Use of estimated Energy Performance Certificate values
Is the usage of estimated Energy Performance Certificate values allowed if exact information is not available from any publicly accessible sources? Specifically, and in particular for the building stock across countries.