On 30 April, the Financial Conduct Authority (FCA) published Policy Statement PS24/4, outlining the final rules replacing the assimilated EU Securitisation Regulation.  The Prudential Regulatory Authority (PRA) also published its own Policy Statement (PS7/24), which mirrors the FCA’s and focuses on the requirements for which it has supervisory responsibility.

This Policy Statement was published in parallel to the draft Securitisation (Amendment) Regulation 2024, which were laid in Parliament on 22 April 2024.  

The new rules bear significant resemblance to the assimilated EU Securitisation Regulation, but introduced some relevant changes related to due diligence and disclosure and to risk retention:

• A more principles-based and proportionate approach to verifying disclosure made by UK and overseas manufacturers, clarifying what information is to be received by institutional investors when investing in both domestic and overseas securitisations.
• The disclosure and due diligence obligations around pricing for private deals have been adjusted so that these happen "before pricing or commitment to invest", which is potentially a helpful clarification.
• The FCA has also clarified the distinction between primary and secondary market investors.  Under the new rules, secondary market investors no longer need to check that information has been provided before pricing and merely need to check they have information before they are committed to invest.
• Institutional investors who are subject to regulatory due diligence obligations are now permitted to delegate that due diligence. However, they remain responsible for any failure to comply unless the delegation is to another UK institutional investor regulated by either the FCA or the PRA.
• The new rules facilitate risk retention on securitisations of non-performing exposures.
• The FCA has clarified that hedging is permitted where it is undertaken prior to the securitisation as part of prudent credit granting or risk management.
• A new provision considers that any entity that securitises a pool of its own debt is compliant with risk retention requirements.

Please contact Nick Smith if you have any questions regarding the regulation.

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  Nicholas Smith

  Managing Director, Private Credit, Alternative Credit Council