Recent legislative and regulatory developments in the UK have signalled the openness of regulators and policymakers to reviewing the UK securitisation regulatory framework.  While the Financial Conduct Authority’s (“FCA”) Policy Statement 24/4¹ and the Securitisation (Amendment) Regulations 2024² are a welcome and productive start to the review, particularly around due diligence rules, we believe that there is more work to be done.  

There is a broad political consensus within the EU regarding the need to reform the securitisation framework.  The recent Letta³ and Noyer Reports⁴, as well as Eurogroup and European Council conclusions on the CMU⁵, all indicate that substantive reforms will be made to the Securitisation Regulation as well as within the relevant banking and insurance frameworks.  If the UK stands still it will fall behind.   

The new Labour government has highlighted its ambitions to attract private capital⁶.  We believe that a comprehensive revision of the securitisation regulatory framework can help boost SME lending while also helping to channel capital into large scale infrastructure, energy and defence projects.  This position paper presents a clear analysis of the key regulatory barriers that restrict the market, particularly from the perspective of asset managers, and identifies the crucial reforms needed to revive the UK securitisation market.   

As with all financial products, there are inherent risks to securitisation products and markets that need to be managed. Rather the seeking to eliminate risk entirely, policy should seek to identify a proportionate approach to risk management that is consistent with other financial markets, products and jurisdictions, while also taking into account the impact of wider regulatory frameworks like the Alternative Investment Fund Managers Regulations (“AIFMD”).  Legislators and regulators have an opportunity to reset the Securitisation framework against this standard to ensure that private capital is able to play its full part in the UK’s economy. 

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[1] https://www.fca.org.uk/publication/policy/ps24-4.pdf

[2] https://www.legislation.gov.uk/ukdsi/2024/9780348260670/contents

[3] https://www.consilium.europa.eu/media/ny3j24sm/much-more-than-a-market-report-by-enrico-letta.pdf

[4] https://www.tresor.economie.gouv.fr/Articles/2024/04/25/developing-european-capital-markets-to-finance-the-future

[5] https://www.consilium.europa.eu/es/press/press-releases/2024/03/11/statement-of-the-eurogroup-in-inclusive-format-on-the-future-of-capital-markets-union/

https://www.consilium.europa.eu/media/m5jlwe0p/euco-conclusions-20240417-18-en.pdf

[6] https://www.bloomberg.com/news/articles/2024-06-27/labour-expects-billions-of-private-investment-after-uk-election