EU Overview
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- repealed the main securitisation provisions in sectoral legislation applicable to banks (the Capital Requirements Regulation, or "CRR"), insurers (Solvency II) and fund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?
The European 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. On 18 October 2023, the risk retention regulatory technical standards (RTS) specifying in greater detail the risk retention requirements for originators, sponsors, original lenders, and servicers were published in the Official Journal and came into force on 7 November 2023. See our client briefing Changing times: Recent developments in the UK and EU securitisation regulatory frameworks for more information.
ESMA held a consultation on securitisation disclosure templates, which closed in March 2024. ESMA is expected to hold a further consultation on its approach to the revision of the disclosure framework.
UK Overview
A new regime came into force on 1 November 2024, which moved the securitisation regulatory framework to a combination of The Securitisation Regulations 2024 (significantly amended by the Securitisation (Amendment) Regulations 2024) and the rulebooks of the FCA (see PS24/4) and the PRA (see PS7/24). Securitisations closed before this date are broadly grandfathered out of the new rules. For more information, see the 'New UK Regime: Smarter Regulatory Framework' section below for more information.
The new UK securitisation framework replaced the UK Securitisation Regulation or UKSR, the onshored version on the EU Securitisation Regulation, which had been in place since 1 January 2021. For more information on the previous regime, see the 'Old UK Regime: UK Securitisation Regulation' section below.
What's next?
The FCA and PRA are expected to launch further consultations in the second half of 2025, covering changes to the disclosure rules and other policy changes.
The Securitisation (Amendment) (No. 2) Regulations 2024 came into force on 22 November 2024. The legislation extends a temporary arrangement granting preferential prudential treatment for EU-origin Simple, Transparent, and Standardised (STS) securitisations. UK investors, where they are subject to prudential regulation, currently access lower capital requirements when investing in EU STS securitisations. This instrument extends the time by which such EU STS securitisations can enter the temporary arrangement, from its expiry date on 31 December 2024, to 30 June 2026: Explanatory memorandum | De minimis assessment.
