On 28 December 2017 the new Securitisation Regulation (Regulation EU 2017/2402) and the related CRR Amending Regulation (Regulation EU 2017/2401) were published in the Official Journal. Together, they represent the most significant reform of securitisation regulation in the EU for many years, by:
- harmonising and reforming existing rules on due diligence, risk retention, disclosure and credit-granting which will apply in a uniform way to all securitisations, securitising entities and all types of EU regulated institutional investors;
- creating a new framework for simple, transparent and standardised long-term securitisations and asset-backed commercial paper programmes; and
- implementing the revised Basel securitisation framework, including hierarchy of approaches and risk weights, into EU law and recalibrating the prudential treatment for credit institutions investing in STS securitisations.
The new regime will significantly impact securitising entities and investors:
- The new regime applies from 1 January 2019. Market participants will have to pay close attention to it now to ensure current transactions are grandfathered.
- The framework for the new EU securitisation regulation is fixed, but work on the technical detail is only just beginning. Market participants should fully engage with this.
- Securitising entities will have a new direct obligation to retain risk, existing approaches to risk retention disclosure and representations should be revisited.
- Securitising entities will have to make detailed disclosure to competent authorities, investors and potential investors. It is unclear how public this will be.
- The new due diligence obligations institutional investors are required to make before investing in securitisations are complex and detailed.
- Some of the criteria for the STS regime are vague. Until there is regulatory clarification, documentary compliance with them will be tricky.
Our briefing sets out the key changes and issues raised by the new securitisation regime.
The New EU Securitisation Regulation