PR04/2014 Peer Review of Implementation of Incentive Alignment Recommendations for Securitisation — Report of Key Preliminary Findings to the G20 Leaders' Summit

Peer Review of Implementation of Incentive Alignment Recommendations for Securitisation — Report of Key Preliminary Findings to the G20 Leaders' Summit THE BOARD OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS PR04/2014 NOVEMBER 2014 Page 2 of 11 Contents Chapter Page 1 Executive Summary 3 2 Introduction 3 3 Methodology 5 4 Summary of Key Preliminary Findings 6 5 Appendix 1 10 Page 3 of 11 1 Executive Summary This report (Report) sets out the key preliminary findings of a review (Review) by the International Organisation of Securities Commissions (IOSCO) of member progress in adopting legislation, regulation and other policies in implementing recommendations about incentive alignment for securitisations made in IOSCO's November 2012 Report Global Developments in Securitisation Regulation. The key preliminary findings set out in this Report are made solely on the basis of the self-assessments provided by participating jurisdictions. For the purposes of preparing the Report, neither the self-assessed ratings nor the supporting information provided by the participating jurisdictions have been independently verified. The only revisions made were to ensure the reporting scale as it relates to the date on which measures took effect is consistent with other information provided in the self-assessment. The key preliminary findings set out in this Report are therefore subject to confirmation (and possible change) by the Review Team following the preparation of a second, more detailed final report and analysis, which will be published in Q2 2015. Participating jurisdictions were given an opportunity to confirm the way their self-assessments have been reported in this Report, although not all participating jurisdictions had done so at the time of preparing this Report. The Review is being conducted by a review team comprising staff of ASIC, CNMV Spain, UK FCA, AFM Netherlands, US SEC, Japan FSA, South Africa FSB and the IOSCO Secretariat (Review Team). The Review Team is chaired by ASIC. 2. Introduction In May 2014, the IOSCO Board approved Terms of Reference for this Review. 2.1 IOSCO Recommendations for Incentive Alignment for Securitisation In July 2011, the Financial Stability Board (FSB), through its Standing Committee on Supervisory Regulation and Co-operation (FSB SRC) requested that IOSCO, in coordination with the Basel Committee on Banking Supervision, conduct a stock-taking exercise to review current national and international regulatory initiatives on risk retention, transparency and standardisation of securitisation, and develop policy recommendations as necessary. In response to this request, IOSCO, through its Taskforce on Unregulated Markets and Products (TFUMP), undertook a project to describe and analyse global regulatory and industry initiatives on risk retention, transparency and disclosure standardisation, and develop a series of recommendations. The project involved a survey of IOSCO members, a public consultation paper and an industry roundtable. The Final Report (Global Developments in Securitisation Regulation) (Final Report) was published by IOSCO in November 2012 and, as requested, made a number of recommendations regarding risk retention, transparency and standardisation, and also in relation to further issues for consideration. Summaries of the recommendations in the Final Report, which pertain to incentive alignment (Incentive Alignment Recommendations), are set out below. Recommendation 1: Evaluation, Formulation and Implementation Deadline of Approaches to Align Incentives, including Risk Retention Requirements Jurisdictions should evaluate and formulate approaches to aligning incentives of investors and securitisers in the securitisation value chain, including where appropriate, through mandating Page 4 of 11 retention of risk in securitisation products. Any exemptions to the risk retention requirements should be limited and warranted. They should endeavour to take any necessary steps to implement such approaches to comply with the elements set out in Recommendation 2 by mid-2014. Recommendation 2: Elements of the Incentive Alignment Approach and Risk Retention Requirements Jurisdictions should clearly set out the elements of their incentive alignment approach with risk retention being the preferred approach. Where risk retention is mandated, the applicable legislation, regulation and/or policy guidance should address the following elements:  The party on which obligations are imposed (i.e. direct and/or indirect regime, based on an assessment of the most efficient and effective way of achieving risk retention);  Perm