On 27 March, the European Securities and Markets Authority (ESMA) published a Peer Review Report assessing how National Competent Authorities’ (NCAs) supervise compliance with the Simple, Transparent and Standardised (STS) securitisation requirements. The report highlights variations and shortcomings in supervisory practices across the EU and provides recommendations to address these.

The review, which was mandated by the Securitisation Regulation (SECR), focused on the NCAs for France, Germany, Portugal and the Netherlands.  The report finds that the NCAs follow different approaches, praising the activities of Portugal and the Netherlands:

• In Germany, STS supervision centres on the role of external auditors, which are required to determine the compliance of firms with requirements under the SECR as part of their annual audits.
• In France, the NCA only performed ad hoc limited supervisory activities to ensure that the securitisation transactions notified as STS complied with the STS criteria.
• In Portugal, the NCAs board is required to approve each public and private securitisation transaction issuance, which ensures that each transaction is verified for compliance with STS requirements before issuance.
• In the Netherlands, two STS ‘deep-dive inspections’ are conducted per year, involving a combination of entity-level and transaction-level scrutiny.

The report recommended that to ensure effective supervision NCAs should:

• Combine transaction-based and entity-based supervision tailored to the size of their securitisation market.
• Build on their existing efforts and expand their approach to ensure the risks arising from STS securitisation transactions are adequately identified, assessed and addressed; and
• Introduce a more structured supervisory framework following a well-defined risk-based approach, as well as allocate sufficient resources for STS supervision.

The recommendations are intended to support all EU NCAs, particularly those designated more recently or still awaiting designation. The NCAs are encouraged to continue monitoring the evolution of their STS markets and to adapt their supervisory approach and resource allocation as needed.

ESMA added that its recommendations are particularly relevant considering the ongoing fundamental review of the securitisation regulatory framework aimed at reviving the EU’s securitisation market.

For further information please contact Guillermo Perez Molina, Private Credit Associate ([email protected]).