Our new ESMA reporting services
On 3 September 2020, the European Union published the final technical standards for the new securitisation regulation, laying down a general framework for securitisation and a specific framework for simple, transparent, and standardised (STS) securitisation.
The regulation came into effect on 23 September 2020, and applies to all securitisations issued on or after 1 January 2019. A key part of the regulation revolves around transparency and disclosure requirements for securitisation transactions – which also apply to CLOs. The European Securities and Markets Authority (ESMA) has been appointed as the governing authority for this, and quarterly reporting templates can be found on their website.
We now provide tailored ESMA reporting services to help clients comply with these new disclosure requirements. We work closely with the originator, collateral manager, or collateral administrator during the set-up phase of a transaction in order to gather all necessary source data – and follow this with a thorough ‘data gap analysis’ to ensure all information is captured.
Our service covers:
- Compilation and verification of quarterly reporting templates – these can also be made available to relevant stakeholders in a range of formats.
- Annex 4: Underlying exposures – corporate.
- Annex 12: Investor report – non-asset-backed commercial paper (ABCP) securitisation.
- Annex 14: Inside information or significant event information – non-ABCP securitisation (applicable for public transactions).
- Disclosure of quarterly reporting templates, in the appropriate format, to an eligible website or competent securitisation repository.
What activity are we seeing?
With the launch of the Netherlands’ new VAT bill, Ireland’s set to become a CLO hotspot. Dutch tax authorities sent shockwaves through the market in February 2020 when they revoked their ruling that collateral and administration fees would be exempt from VAT. This means that a 21% VAT rate now applies to them and, surprisingly, this has been applied retrospectively from 1 April 2019.
Experts expect collateral managers to relocate their investment vehicles into other jurisdictions, to avoid these increased costs, and Ireland may be a popular choice with its gold-standard ecosystem for servicing CLO structures. Currently, about 20% of all European CLOs are incorporated in the Netherlands, with Ireland accounting for over 70% of the market.
Clarity is still needed from Dutch tax authorities, and to determine which deals will be grandfathered until 1 January 2021. We are currently liaising with business partners to ascertain which legal mechanisms can streamline the migration of CLOs from the Netherlands to other jurisdictions. A number of different strategies are being considered, and these will be tailored to specific deals according to their lifecycle and specific structure. With a favourable issuer regime, a minimal share capital requirement of one Euro for incorporation purposes, and a reputable listing exchange (Euronext Dublin), Ireland is an attractive business jurisdiction.