On 1 January 2019 the EU Securitisation Regulation (Regulation (EU) 2017/2402) began to apply. The EU Securitisation Regulation:

• repealed the main securitisation provisions in sectoral legislation applicable to banks (the Capital Requirements Regulation, or "CRR"), insurers (Solvency II) and fund managers (the Alternative Investment Fund Managers Directive regime) and recast those provisions in a new, harmonised securitisation regime applicable to all institutional investors including UCITS and pension funds;
• as part of that harmonisation, makes risk retention and disclosure obligation applicable directly to sell side entities such as issuers (SSPEs), originators, sponsors and original lenders; and
• introduces a concept of "simple, transparent and standardised" (or "STS") securitisation into EU law and gives STS securitisations more favourable regulatory treatment compared to non-STS securitisations.

In addition to these high-level changes, the Securitisation Regulation legislative package introduced a number of other significant changes. These include a ban on resecuritisation, a ban on securitising self-certified residential mortgage loans originated after 21 March 2014 and formal restrictions on marketing securitisations to retail investors. It also introduces a much more punitive sanctions regime for non-compliance by originators, sponsors, original lenders and SSPEs than previously existed. Sanctions for non-compliance by institutional investors continue to be provided for under the sectoral prudential regimes applicable to them.

In April 2021, the Capital Markets Recovery Package made amendments to the Securitisation Regulation to facilitate the securitisation of non-performing loans (NPLs) and to introduce STS for synthetic securitisations. 

What's next?

EU: The EU Commission published its Article 46 report on the implementation of the Securitisation Regulation on 10 October 2022. See our client briefings EU Publishes Review of Securitisation Regulation (October 2022) and EU securitisation review: two months on (December 2022) for more information.

UK: HM Treasury published a report on its review of the UK Securitisation Regulation in December 2021. This followed a call for evidence launched in June 2021 and a statutory obligation under Article 46 of the Securitisation Regulation for HM Treasury to review the functioning of the Regulation and to lay a report before the UK Parliament by 1 January 2022. The UK financial services regulatory framework is in the process of being overhauled and, while significant work is being done in the background (including the development of an illustrative draft statutory instrument in the form of the draft Securitisation Regulations 2023), limited progress can be made until the Financial Services and Markets Bill receives royal assent. For more information see our client briefing UK Edinburgh Reforms: The New Securitisation Framework?

NB see the 'UK Securitisation Regulation: legislation and official documentation' section below for legislation setting out the UK securitisation regime as it applies after Brexit.