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The UK and Europe have released a number of updated requirements for securitisations that, while not effecting material changes, are notable in their scope and number. Below, we give a brief guide to these changes and their implementation schedules.
Following the publication of the Final Draft Regulatory Technical Standards (the “RTS”) specifying the requirements for originators, sponsors and original lenders in relation to risk retention (see our previous Client and Friends memo from April 2022), on 7 July 2023, the European Commission has endorsed and adopted the final text of the risk retention RTS (the “Final Text”).
As little of substance has changed between the RTS and the Final Text, we thought it helpful to briefly recap on the more substantive elements covered by the RTS:
Notable changes in the Final Text are:
The Final Text is subject to review by the EU Council and Parliament, and once approved will come into force 20 days after publication in the Official Journal.
Originally published as an illustrative version of a statutory instrument as part of the Edinburgh Reforms (see our note from December 2022 for a brief outline), HM Treasury has now published a ‘near-final’ version of The Securitisation Regulations 2023 (“UK SecReg”) along with a Policy Note.
As with EU measures to date, there is little of substance to distinguish this version of the UK SecReg from the existing Financial Services and Markets Act 2000 (Securitisation) Regulations 2018 and the UK SecReg’s Edinburgh predecessor, but those changes that are there do include an amended definition of ‘Institutional Investor’ to include only UK alternative investment fund managers. Rules relating to: (a) risk retention in NPE securitisations; (b) transfers of the retention; (c) the definitions of public and private securitisations; (d) disclosures for private securitisations; and (e) due diligence requirements for UK institutional investors investing in non-UK securitisations remain to be made by the UK’s Financial Conduct Authority and Prudential Regulatory Authority.
The final version of UK SecReg will be laid before Parliament following Royal Assent of the Financial Services and Markets Bill.
The European Securities and Markets Authority (“ESMA”) has updated its Questions and Answers on the Securitisation Regulation. There are a number of modified responses (including on delegation of reporting, prepayments and shortfalls) and new questions, including on amending transaction documents, self-securitisation, balances, non-payments and underlying exposures.