ESMA’s new automated register makes notification of STS securitisations in Europe easier

A new automated portal has replaced the EU regulator’s existing list, facilitating the notification of STS securitisations in Europe, say Arno Vink and Edwin van Ankeren, directors of Intertrust Group’s capital markets team in the Netherlands

The European Securities and Markets Authority (ESMA) has launched a simple, transparent, and standardised (STS) register for the notification of securitisations on the continent.

The new STS register automates the processing of securitisation notifications and replaces the existing list, which had been introduced as a temporary measure.

Since 2019, originators and sponsors have had to notify both ESMA and their national authorities that a securitisation meets the necessary criteria before being granted the STS label.

What has changed with the ESMA STS register?

Applications to designate a transaction as STS were previously transmitted to ESMA via an emailed form. From February 2022, the regulator has an automated process to facilitate notifications and record them in the new STS register.

The portal will simplify and speed up the notification process for originators and sponsors. Investors and supervisors will have improved access to individual STS securitisations to assist them during due diligence and supervisory tasks.

How does the ESMA STS register work?

To use the new platform, reporting entities first need to be registered with ESMA. The fast-track registration survey must be completed without delay, the regulator has said. Previous notifications submitted to ESMA on securitisations that are still live and meet the necessary requirements must be resubmitted to the new register.

Reporting entities had to resubmit their securitisations backlog using the new STS notification templates by 2 February 2022.

As of that date, the new STS register must be used for any new notifications for traditional securitisations. However, STS notifications for synthetic and master trust securitisations should still be made to the existing list, rather than the new register, ESMA has said.

Traditional securitisations involve the economic transfer of the assets to the issuer of the securities, the securitisation special purpose entity (SSPE). These assets are then removed from the originator’s balance sheet and the SSPE is entitled to any cash flows generated by those assets.

For synthetic securitisations, the ownership of the securitised assets stays with the originator, and the credit risk is transferred via credit derivatives or financial guarantees. In master securitisations, a trust is established as the securitisation vehicle.

What should originators do now?

Reporting entities need to submit information comprising an instrument identification code (ISIN, LEI, unique identifier); the securitisation name; the type of underlying exposures; and the geographical location of the originators, sponsors and securitisation special purpose entity.

Once reporting entities submit this information, to confirm the transaction meets the STS criteria, it is officially recorded and designated as such.

What are the benefits of the ESMA STS register?

The main benefit for reporting entities is that the register is a central point for managing all traditional STS notifications. The new system has embedded validation rules and automatically informs the relevant country regulator once a submission is made.

For the authorities the register provides a central point of information, enabling them to supervise traditional STS notifications. It also enables securitisations to be removed from the public list if they are no longer deemed STS, and for sanctions to be applied to securitisations on the public list.

ESMA will be in charge of maintaining the register, updating the STS list when securitisations are no longer valid and conducting completeness checks to ensure data quality is sufficient.

The regulator’s aim is to synchronize the process for all types of securitization.

How Intertrust Group can help

• We proactively communicate with clients to make them aware of the new register and the new filing process, as well as alerting them they have to re-register previous transactions on the platform.
• We continue to assist clients during the submission of loan tapes, and ensure they are sent using the correct format.
• Intertrust Group has the ability to offer a wide range of corporate solutions, empowering businesses to navigate the complexity of ever-changing rules and regulations.