UK publishes proposed amendments to the Securitisation Regulation

At the end of last week, the Chancellor of the Exchequer unveiled the government’s roadmap to a new regulatory framework for British finance.

Although overlooked by most commentators, the announcement contained detailed proposals to revise the Securitisation Regulation inherited from the EU.  These proposals may be found in a draft statutory instrument.

There are quite a few highly technical drafting changes the implications of which are still somewhat unclear.  But here are the highlights.

The definition of “securitisation” remains unchanged.

The STS regime remains in place.   However, the STS criteria have disappeared from the legislative text altogether and are now entirely delegated to the FCA.  Presumably, the FCA will have a consultation to determine what these should be.

Intriguingly enough, with the criteria for STS having disappeared from the draft legislation and, in the absence of a definition of “non-ABCP securitisation”, the proposed text appears to leave open the possibility of synthetic securitisations being STS.  This seems now to be in the gift of the FCA.

The third-party verification and data repositories regimes are kept broadly unchanged.

In line with the free-trade approach of the Treasury, an equivalence regime for STS is set out, with the Treasury to decide which jurisdictions will be so treated.  This was explicitly rejected by the European Commission in their recent report.

In a similar vein, the removal of the requirement for the special purpose vehicle having to be in the UK is maintained.  The originator and sponsor though need to be UK located.  (However, the concession that allows EU STS to be treated as STS in the UK until December 2024 remains in place.)

The text allows for re-securitisations – which are banned in the EU.  However, any re-securitisation transaction will need to be pre-approved by the regulatory authorities on a deal-by-deal basis.

Retention and disclosure requirements are still in place but the text seems to allow non-UK issuers to sell to UK investors provided they comply with substantially the same standards.  The total identity of standards required by the EU has been abandoned.

This is merely a summary of the high points and it should be noted the document is still only a draft.