LUXEMBOURG Trends and Developments Contributed by: Arnaud Arrecgros, Yann Hilpert, David De Pasquale, Beatriz Garcia and Antoine Becker, Maples and Calder
ritisation activity, as market participants seek listings outside the EU. Simplification of Article 7 transparency requirements The reform to the investors’ due diligence reporting requirements under Article 7 of the EU Securitisa- tion Regulation introduces a proportionate approach tailored to the specific risk features of each transac- tion. This includes adjusting the due diligence pro- cess according to tranche seniority (the lower the tranche, the deeper the due diligence), streamlining requirements for repeated transactions where the main elements such as structure and parties remain unchanged, and exempting investors from verifying compliance with EU regulatory obligations where sponsors, lenders and originators are EU entities. The above ensures a 35% reduction in mandatory reporting fields, introduces exemptions for certain types of assets, allows aggregated reporting instead of detailed loan-level disclosures (which are often out- dated quickly and burdensome to maintain), thereby easing the compliance burden for private deals. At the same time, however, the reform introduces a new obligation for private transactions to report through securitisation repositories, a development that has raised concerns among securitisation market players. For private securitisations, the European Commission has instructed the European Banking Authority (EBA) to lead the development and revision of new simplified reporting templates. These will build on those already used in the Securitisation Specialised Segment and will set out technical reporting standards, expected also to take into account the findings of the European Securities and Markets Authority (ESMA) consultation on revising the disclosure framework for private secu- ritisations launched on 13 February 2025. While the market broadly welcomes the proportion- ality and efficiency offered by these reforms, there is concern that they risk once again blurring the line between public and private transactions. Moreover, excluding non-EU securitisations from the lighter due diligence regime could create a more cumber- some framework, running counter to the objective of enhancing the competitiveness of the EU market.
Reallocation of due diligence responsibilities (amend- ments to Articles 5 and 6 of the EU Securitisation Regulation) Institutional investors in EU securitisations will no longer be required to verify originator compliance with risk retention and reporting rules both prior and during the investment in a securitisation, including the verifi- cation of sell entities’ compliance with the STS criteria if the sell-side entity is based and subject to EU regu- latory supervision. This change removes duplicative checks and lowers barriers to investment. The shift, however, places greater legal account- ability on originators, who must now ensure robust documentation and internal controls. Although due diligence and risk assessment may still be delegated to other institutional investors, ultimate liability for ful - filling these obligations can no longer be outsourced. As mentioned above, for non-EU transactions, full due diligence remains mandatory, reinforcing the need for legal clarity in third-country equivalence and inves- tor protection frameworks. While the Commission regards this reform as a highly effective way of stream- lining compliance, it could also have the unintended effect of encouraging activity to shift outside the EU securitisation market. STS eligibility for unfunded credit protection One of the most notable changes is the extension of Simple, Transparent, and Standardised (STS) eligibility to unfunded credit protection provided by EU-based insurers and reinsurers. This reform is expected to expand the Significant Risk Transfer (SRT) market, enabling banks to access more diverse and cost- effective protection mechanisms, and introducing new counterparties into the STS framework, potentially attracting long-term institutional investors and lower- ing funding costs for originators. This opens the door to more flexible and cost-effective ways for banks to manage risk. Notwithstanding, the exclusion of this change to non- EU insurers may limit competitive diversification, mar- ket access and increase concentration risk.
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