Securitisation Regulations 2023 – Draft SI and Policy Note

On July 11, 2023, the HM Treasury released a near final version of the Draft Securitisation Regulations 2023 (referred to as the draft SI), accompanied by a corresponding Policy Note. This draft SI would introduce a new regulatory framework for securitization, intended to replace the existing EU Retained Securitization Regulation and associated legislation. The draft was originally presented last year as part of the Edinburgh Reforms and can now be advanced following the implementation of the Financial Services and Markets Act 2023 and the assignment of corresponding powers to UK supervisory authorities. The content of both documents is briefly discussed below.
#### Draft Securitisation Regulations 2023
This Regulation would present the basic framework for regulating all aspects of securitizations in UK. Among others, it would
– designate any securitization-related activities as „designated activities“ under the Financial Services and Markets Act 2000, which would include activities performed by originators, sponsors, original lenders, securitisation special purpose entities, and sellers of securitisation positions.
– specify those securitization issues that the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) shall regulate via their Hand- or Rulebook, respectively, (activity-related rules) and the factors they shall consider in making those rules.
– set out the general framework for securitizations, including
– restrictions on the establishment of a securitisation special purpose entity (third-country issues, FATF high-risk country limitations);
– the criteria for being considered a simple, transparent and standardised securitisation (STS) and corresponding use und notification requirements;
– the rules applying to securitization repositories, including rules relating to licensing, registration, and associated application requirements,
– the rules applying to third-parties verifying STS compliance, including rules relating to registration and notification obligations;
– the due diligence requirements of occupational pension schemes, institutional investors, and alternative investment fund managers (AIFMs) in relation to the holding of STS positions;
– the obligations of supervisory authorities in relation to the monitoring of specified activities and persons; and
– penalty provisions in case of violations under the new regulation.
#### Policy Note
The Policy Note may be viewed as sort of a „guidance“ as it provides a set of frequently asked questions (FAQs) and answers in relation to the new Draft Securitisation Regulations 2023 to address the most relevant issues that may arise from the new securitization framework. Some of the key FAQs are briefly noted below; for more detailed, comprehensive information, please refer to the enclosed document.
– What did any law do before the changes to be made by this instrument?
– What will change in comparison to the previous retained EU law?
– What will not change in comparison to the previous retained EU law?
– What are the firm-facing impacts going to be?
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Comments on the Draft Regulations may be submitted to the Treasury up to August 21, 2023.