UK Regulations Implementing the EU Securitization Regulation Made
12/04/2018The U.K. Securitization Regulations 2018 have been laid before Parliament and will come into force on January 1, 2019. The Regulations implement the EU Securitization Regulation (also known as the STS Regulation) into U.K. law.
The EU Securitization Regulation provides the criteria for identifying which securitizations will be designated as simple, transparent and standardized securitizations, a system to monitor the application of those criteria and common requirements on risk retention, due diligence and disclosure. It also allows (but does not require) originators, sponsors and securitization special purpose entities to use third-party firms to assess whether a securitization meets the STS criteria, provided that those firms are authorized by the relevant national regulator. Originators, sponsors or original lenders of a securitization will be required to retain on an ongoing basis a material net economic interest in the securitization of at least 5%. Related amendments to the Capital Requirements Regulation set out preferential regulatory treatment for investors, in particular, for bank investors, of their exposures to securitizations that are deemed to be STS securitizations.
The Securitization Regulation is directly applicable across the EU to securities issued under securitizations on or after January 1, 2019. Securitizations issued before that date may be referred to as STS securitizations provided that they meet certain conditions. The amendments to the CRR will apply from January 1, 2019 as well but, for securitizations issued before January 1, 2019, the existing CRR provisions will apply until December 31, 2019.
Certain U.K. legislative amendments are required to align provisions of U.K. law with the EU Regulation and ensure that it is effective and enforceable in the U.K. In particular, the U.K. Securitisation Regulations 2018 designate the Financial Conduct Authority and Prudential Regulation Authority as the competent authorities responsible for supervising compliance with the EU Securitization Regulation and confer the requisite powers on the two regulators to fulfil that function.
View the U.K. Securitization Regulations 2018.
View the related Explanatory Memorandum.
Return to main website.