Since the Global Financial Crisis, the European commercial mortgage-backed securities (CMBS) market has struggled to re-establish itself as a core component of the wider CRE debt landscape. Challenging regulatory treatment under Solvency II has no doubt contributed to low issuance volumes, which themselves limit demand.
The specific regulatory challenge that is most current relates to the disclosure regime for all securitisations issued after the end of 2018. ESMA, the European Securities and Markets Authority, has proposed mandatory reporting templates and associated standards. While industry feedback (including from CREFC Europe) means these are a big improvement on the drafts ESMA had initially published, they have nevertheless caused alarm in the CMBS industry (among other affected parts of the ABS world).
CREFC Europe is convinced that Europe, its real estate markets and financial stability would be well served by a healthy and sustainable CMBS market. It was to that end that, in November 2012, we published Market Principles for Issuing European CMBS 2.0, a paper produced by a CREFC Europe committee chaired by Nassar Hussain, Brookland Partners.
The CMBS 2.0 committee had been formed in May 2011 to help CMBS market participants learn from the crisis and develop practices and standards for new CMBS issuance. The committee’s market principles brought together the contributions of working groups covering:
- pre-issuance disclosure
- excess spread structures
- improved investor reporting
- transaction structure features and issues
- servicing and transaction counterparty roles
- investor identification
European Investor Reporting Package (E-IRP)
In 2004, CREFC Europe formed this committee to create a transparent and standardised bond, loan and property level reporting package for European CMBS transactions, the E-IRP. Since the release of version 1 of the E-IRP templates in 2005, the committee has been responsible for maintaining and updating them.
E-IRP version 2.0, released in 2011, was used by the Bank of England and the European Central Bank as a basis for developing their respective CMBS loan level reporting requirements for their ABS collateral programmes. It was also adapted to create the CMBS template used by the European Data Warehouse.
In August 2013 the committee released watchlist criteria as part of the E-IRP to promote consistent flagging by servicers of loans that may be running into difficulty.