3 minute read | July.14.2023
On 11 July 2023, HM Treasury published an updated, near-final draft of the regulations (the Securitisation Regulations) that will, when adopted, replace the retained EU Securitisation Regulation that has been in force in the UK since the end of the Brexit transition period (the Retained Securitisation Regulation).
The updated draft Securitisation Regulations include a number of changes from the previous version, including:
The Securtisation Regulations are part of Edinburg Reforms, a broader UK regulatory initiative to reform the regulation of financial services in the UK, and bring the regulation of securitisations in line with the UK's general approach to financial regulation, which is to establish a perimeter of regulatory oversight in primary and secondary legislation and allow regulators to develop rules designed to achieve specific outcomes.
As such, many provisions of the Retained Securitisation Regulation are not specified in the Securitisation Regulations, such as the requirement for certain entities to retain a material net economic interest in securitisation transactions and applicable transparency and reporting requirements. The FCA and/or the PRA will instead issue rules on those topics (the SR Rules)
Authorities have not released drafts of the SR Rules, but a policy note accompanying the Securitisation Regulations suggests that the SR Rules will implement recommendations of a report published by HM Treasury in December 2021. That report concluded that regulators should consider reforms in areas that include:
The Securitisation Regulations are expected to come into force before the end of 2023. While the changes introduced thus far are for the most part not substantive, we expect regulators to address some long-standing concerns expressed by market participants when formulating the SR Rules. However, any such changes are likely to increase the regulatory divergence between the UK and the EU and could increase the compliance burden for issuers and investors.