Consultant Zone

Securitisation and due diligence

The Joint Committee of the three European Supervisory Authorities has recently issued recommendations around disclosure requirements and obligations relating to due diligence and supervisory reporting within existing EU law on Structured Financial Instruments.

One of the main recommendations that came out of the report was the need to establish a harmonised due diligence and disclosure framework together with a comprehensive regime for supervision and enforcement. It is suggested that this will help the securitisation markets to function properly, although some market commentators have criticised that, quoting the US market as significantly larger, with less regulatory supervision.

The European securitisation market actually slowed down in the last year, with issuances dropping since 2011, according to data from Nomura, but we believe the appetite from investors in RMBS and CMBS continues to improve.

What the report does highlight though is the need for more consistency in the provision of data by issuers and that reflects our own opinion as due diligence providers.

We believe a robust common platform of data provision at loan level will help all parties in the process and ultimately provide consistent reporting and a speedier process.

In the meantime, it is still important to ensure investors have the correct information at hand to make the appropriate decisions. The process can start with a vendor due diligence to ensure that the accurate information is available for any prospective buyer. But it is now apparent that the “one-size-fits-all” due diligence approach is not appropriate. We are seeing increasing trends of potential investors and debt purchasers looking for their own independent reviews, tailored to their specific requirements.

As the market considers funding options, including securitisation, Rockstead is well positioned to help with any due diligence project, irrespective of whether it is for an originator, issuer or investor.

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