Securitisation

Overview: 

EU regulatory basis

In 2018, two EU Regulations setting out a new framework for European securitisation entered into force.

  1. Regulation (EU) 2017/2402 (the Securitisation Regulation) which introduced a new framework for simple, transparent and standardised (STS) securitisations.
  2. Regulation (EU) 2017/2401 (the Securitisation Prudential Regulation, or SPR) replaces certain provisions of the Capital Requirements Regulation (CRR) and sets out the framework under which certain institutional investors can benefit potentially from more favourable regulatory capital treatment for STS securitisation exposures.

UK regulatory basis

  1. The EU Securitisation Regulation has been amended by the Securitisation (Amendment) (EU Exit) Regulations 2019 and as so amended is entitled the 'UK Securitisation Regulation' below

Current work: 

Capital Markets Union – High-Level Forum recommendations

The ACC welcomes the initiative of the CMU HLF to make the securitisation framework more efficient and better aligned with established industry practices, as part of the 17 interconnected recommendations issued in the final report. The ACC supports the seven key recommendations proposed by the HLF, in particular the recommendation regarding reducing the cost of SME financing and differentiating between disclosure and due diligence requirements for public and private securitisations.

CLOs and STS certification

Collateral Loan Obligations (CLOs) fall within the remit of the Securitisation Regulation, but they are not eligible for STS certification as they are deemed to be ‘actively managed’ for the purposes of the Regulation.

The exclusion of CLOs from the STS framework acts as a brake on the provision of finance to European borrowers, while also limiting the ability of banks to de-leverage their balance sheets. The ACC and AIMA would urge policymakers to amend the STS criteria to encompass transactions where active management can only occur within the portfolio criteria established by the CLO manager and their investors. This would align with the Securitisation Regulation’s existing requirements for new exposures into revolving pools to meet the initial eligibility criteria and for proven servicer experience level.

ESAs Joint Opinion on the jurisdiction scope of the Securitisation Regulation

The ESAs Joint Opinion has been issued to identify areas of uncertainty which exist regarding scope/interpretation of the Securitisation Regulation The Opinion calls for the European Commission to either issue interpretative guidance or amend the Regulation.

The ACC and AIMA is submitting a position on the ESAs opinion to the ESAs and other stakeholders in due course.

European Commission consultation on the EU Securitisation Framework.

The European Commission published a consultation on the EU Securitisation Framework, covering the following key areas:

  • The general impact of the regulation;
  • Private securitisations;
  • Due diligence and jurisdictional scope;
  • The need for an simple, transparent and standardised (STS) equivalence regime;
  • ESG disclosure;
  • The potential role of limited licensed banks performing the functions of securitisation special purpose entities (SSPEs); and
  • Supervision.

The consultation closes for responses on 17 September. The ACC and AIMA will be responding to this consultation and a working group is being formed to guide our submission.

Call for evidence on the UK Securitisation Regulation

The UK Treasury has published a call for evidence on the Securitisation Regulation seeking views on the Regulation and how the UK market compares to other countries.  

The ACC and AIMA have submitted a response to this call for evidence providing comments on the following key areas:

  • Scope of the regulation;
  • Simple, Transparent and Standardised (STS) cetification for Collateralised Loan Obligations;
  • ESG and securitsations;
  • Disclosure of private securitisations; and
  • Risk retention modalities.

EBA public consultation on draft RTS specifying requirements for originators, sponsors, original lenders and servicers relating to risk retention

The European Banking Authority (EBA) launched a public consultation on draft Regulatory Technical Standards (RTS) specifying the requirements for originators, sponsors, original lenders and servicers related to risk retention, in line with the Securitisation Regulation.

The RTS carry over a substantial amount of provisions from the EBA RTS on risk retention  submitted to the European Commission in July 2018 but addresses a number of new provisions, such as:

  • Specifying modalities of risk retention in traditional NPE securitisations;
  • Specifying requirements for the expertise of servicers acting as a retainers in NPE securitisations;
  • Impact of fees payable to the retainer on risk retention;
  • Risk retention in re-securitisations or in securitisations of own issued debt instruments; and
  • Clarification on the treatment of synthetic excess spread.

The ACC and AIMA will submitting a response to this consultation which closes on 30 September 2021.

Upcoming actions:

The European Commission is due to review the EU Securitisation Regulation in the course of 2022. 

HM Treasury is due to review the UK Securitisation Regulation and publish a report to Parliament by 1 January 2022.

(Last updated: 13 September 2021)