A key objective of the Securitisation Regulation is to reduce the information asymmetry between originator and investor that contributed to the financial crisis. The rules attack the problem from two sides: extensive disclosure obligations on the originator and mirror-image due diligence duties on the institutional investor.
Key points
- The originator, sponsor and SSPE must disclose detailed information on the underlying exposures, the transaction documentation and material events.
- Disclosures are made either through a registered securitisation repository (currently two ESMA-registered repositories) or, for private securitisations, via a dedicated website.
- Institutional investors must independently verify risk-retention, disclosure and credit-underwriting compliance before investing.
- Written policies and procedures for monitoring the exposure throughout its life are required.
- Investors may not rely solely on third-party assessments such as credit ratings.
The disclosure side — what the originator owes
The originator (together with the sponsor and SSPE) must provide potential and existing investors with detailed information about the securitised pool and the transaction itself. For public transactions with a prospectus, much of this information already flows from the prospectus regime; for private placements and deals without a prospectus, a transaction summary must be prepared.
The continuing disclosure obligations include material events during the life of the transaction — such as material changes to the transaction documentation or the structure, and changes to the risk characteristics of the pool. Specific content and formats are regulated by RTS and ITS; disclosures are made either through an ESMA-registered securitisation repository or, for private transactions, on a dedicated website.
The due diligence side — what the investor owes
For institutional investors, the Regulation replaces the old "reliance on others" model with an active verification duty. Before investing, an institutional investor must verify that:
- the risk-retention requirement is met;
- the required disclosures have been made and are consistent;
- the originator applies sound credit-granting criteria equivalent to those applied to non-securitised exposures; and
- the structure of the transaction is understood and consistent with the investor's risk profile.
The investor must maintain written policies and procedures for the ongoing risk management of its securitisation positions and must document its verification. These requirements prevent investors from relying solely on external assessments — particularly credit ratings.
The re-securitisation ban
A re-securitisation is a securitisation in which at least one of the underlying exposures is itself a securitisation position. As a rule, re-securitisations are prohibited under the Regulation — they are only permitted in narrowly drawn cases, in particular in the context of a liquidation or restructuring of an existing securitisation.