On November 30, 2018, the European Banking Authority, the European Securities and Markets Authority ("ESMA") and the European Insurance and Occupational Pensions Authority (collectively, the "European Supervisory Authorities" or "ESA") published a joint statement (the "Joint Statement") related to (i) the reporting templates used for the quarterly underlying exposure and investor reports under Article 7 of the Securitization Regulation and (ii) the amendment to Article 14 of the Capital Requirements Regulation and its impact on the consolidated application of obligations in the Securitization Regulation. As described more fully in a Cadwalader Memorandum, this Joint Statement illuminates two of the most critical issues regarding the new Securitization Regime and indicates the approach that competent authorities are likely to take when supervising compliance with respect to aspects of the Securitization Regulation in its initial application stage.

In the Joint Statement, the ESA indicated that the reporting template being prepared by ESMA for purposes of fulfilling the disclosure requirements under the Securitization Regulation (the "ESMA Disclosure Templates") are not likely to be adopted by January 1, 2019, and, consequently, the Securitization Regulation transition provisions will apply for the period following January 1, 2019. The Joint Statement stated that ESMA and the Commission are still considering how to deal with market concerns brought about by certain aspects of the ESMA Disclosure Templates. Annexes I to VIII in Delegated Regulation (EU) 2015/3 (the "CRA3 Delegated Regulation") contain certain templates for reporting structured finance instruments backed by particular underlying asset classes, including residential mortgages and commercial mortgages, among others.

The Joint Statement said that the ESAs have been aware of operational challenges for reporting entities in their having to report using the CRA3 Templates. The ESA explained in the Joint Statement that they do not have any formal legal power to allow the disapplication of applicable EU law. According to Cadwalader attorneys, the reasoning of the Joint Statement is to give scope to the competent authorities to permit a margin of appreciation regarding how securitizations subject to the Securitization Regulation provide underlying exposure and investor reporting during the period up to the date of application of the Disclosure Technical Standards.

Cadwalader attorneys urged market participants to engage with their competent authorities in regards to compliance with the transparency obligations considering the contents of the Joint Statement.

The memorandum was authored by Stephen Day, Claire Puddicombe, David Quirolo, Nick Shiren, Daniel Tobias, Jeremiah Wagner, Suzanne Bell, Robert Cannon, Assia Damianova, Neil Macleod and Sabah Nawaz.

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