UK FCA issues a consultation on proposed new rules for securitisation

As a consequence of the UK leaving the European Union, the shaping of the regulatory landscape for finance, including securitisation, became the responsibility of the British government and British regulatory institutions. Following the publication of HM Treasury's near final statutory instrument modifying the European Securitisation Regulation and the UK PRA's consultation on its proposed changes, it is now the turn of the UK FCA to issue its own consultation on changes it would like to see to the existing rules inherited from the EU.

A quick glance at the just issued document appears to show at attempt at fixing some technical issues and clarifying others rather than any wholesale changes to the structure of the current regulatory architecture: investor due diligence, private vs public deals, retention rules (especially around NPLs), homogeneity and resecuritisations come up.

The consultation runs until October 30th.

Final pieces of the puzzle fall into place - Data Repositories

On Friday 25th, the final pieces of the STS regulatory puzzle fell into place when ESMA registered two securitisation repositories.

The registrations of both the European Datawarehouse GmbH, based in Frankfurt, and Secrep B.V. , based in Rotterdam, were announced on the same day.

Both firms have long experience in the field, Secrep B.V. having been set up by the founders of Euro-ABS. Both will be able to operate throughout the EU.

Following this registration, originators of European Union securitisations will - as of 30th June 2021 - mandatorily have to report their data through one of these repositories.

This announcement means that the last piece of the securitisation regime that came into force on 1st January 2019 is now in place, at least in the European Union. In the UK, the FCA is expected to follow soon.

FCA STS list up and running

First, PCS wishes for all a new year more serene than the one just ended and hopes that the holiday season proved to be a source of joy and rest notwithstanding the various restrictions imposed by the pandemic.

As they had promised, the UK FCA set up their website list for UK transactions wishing to be treated as STS in the hands of UK investors.  As our attentive readers will recall, this was a necessary step for the STS regime to come into force in the United Kingdom on January 1st.  It has been done.

To save you from having to search for it and so you may bookmark it with ease, it can be found here

We have to say, we are particularly taken by the handy search function provided by the FCA.

Monday sees important announcements from the EBA on SRT and the FCA on STS

Monday saw two important announcements from European regulators.

First, the UK Financial Conduct Authority went live with its new STS notification platform.  As of 11 pm on 31st December, UK securitisations will no longer be STS in the hands of UK investors unless they appear in a new publicly available list hosted by the FCA and replacing the ESMA list to which all securitisations were previously notified.  To avoid a problematic interregnum between the time the new rules come into force at the end of the year and the time it takes for UK transactions previously notified to ESMA to be published on the new FCA website, the FCA very wisely and helpfully launched their new UK STS platform this Monday.  This will allow UK originators and sponsors to “pre-populate” the STS list in anticipation of January 1st.  Please note, though, that it is the responsibility of originators and sponsors to re-notify their transactions.  There will be no automatic transcription of the ESMA notifications on to the FCA site.   Instructions on how to access the FCA site (called Connect) and the new templates can be found here

In a separate development, the EBA just published its much anticipated report on significant risk transfer.

One of the developments of recent years has been the beginning of a return by securitisation to its roots as a capital management tool for banks.  The new legislative proposal on STS for synthetics, currently in trilogue in Brussels, is one part of this.   But another necessary component of a regulatory scheme that allows proper capital management by financial institutions is a workable set of rules for significant risk transfer or SRT.  These are the rules which must be followed before prudential regulators accept that the risk associated with securitised assets has been transferred to the securitisation investors and the bank can therefore reduce the capital allocated against those assets.  The EBA’s report sets out their proposals for the future of these rules.  It is essential, if STS synthetic securitisation is to be of any use, that the new SRT rules mesh with the proposed STS requirements to allow safe but sensible capital management.  The report is fairly long and will be examined with great care by market participants (including PCS).

United Kingdom FCA publishes a consultation on the end of the Brexit transition period

Last Friday the UK Financial Conduct Authority published a consultation on some of the changes that may be made to their Handbook.  Most important for stakeholders are the proposals for what happens at 11.00 pm London time on 31st December as the Brexit transition period comes to an end.

This consultation, which may be found here, covers a number of Brexit topics in paragraph 4.  These include (from paragraph 4.17 onwards) securitisation issues, namely data templates, data repositories, STS notifications, counterparty risks and risk retention.  The consultation period ends on October 5th.  With so many tricky issues of detail plaguing the United Kingdom's exit from the European Union, this consultation is welcome and we would advise all our United Kingdom stakeholders to take a good look at it and, if appropriate, respond.

More about the B-word: the UK FCA puts out a consultation on STS

The UK Financial Conduct Authority has just issued a consultation relating to the format of future STS notifications in a world where the United Kingdom may no longer be part of the European Union.  Entitled a “Draft technical standards on the content and format of STS notifications under the onshored Securitisation Regulation”, the consultation is the first to deal with the technical standards to be applied in the UK in the event of a departure by the UK from the EU without some transitional arrangements.  Responses are required by August 27th, so if you had not yet found a good novel to read on the beach, you now know what you can do on holiday.