Published: 31st January 2018


Of relevance to: All firms involved in securitisation of assets such as loans
Key date: Applicable from 1 January 2019

The Securitisation Regulation (EU) 2017/2402 (the “SR”) entered into force on 17 January 2018 and applies throughout Europe on all securitisations the securities of which are issued on or after 1 January 2019.

Securitisation is an important element of well-functioning financial markets, involving transactions that enable a lender or a creditor – typically a credit institution or a corporation – to refinance a set of loans, exposures or receivables, such as residential loans, car loans or leases, consumer loans, credit cards or trade receivables, by transforming them into tradable securities. The lender pools and repackages a portfolio of its loans, and organises them into different risk categories for different investors, thus giving investors access to investments in loans and other exposures to which they normally would not have direct access. Returns to investors are generated from the cash flows of the underlying loans.

The SR establishes a general framework for securitisation and creates a specific framework for simple, transparent and standardised (“STS”) securitisation and constitutes a building block of the Capital Markets Union (“CMU”).

The European Securities and Markets Authority (“ESMA”) has published three consultation papers on draft technical standards implementing the SR.

The SR requires certain information to be reported about securitisations to repositories, including

  • details of their underlying exposures,
  • details of the securitisation structure itself, and
  • information on the securitisation cash flows.

The securitisation repositories will be registered and supervised by ESMA. In addition, securitisations seeking to be designated as STS must fulfil additional criteria and notify ESMA of their fulfilment of these criteria.

Finally, third party entities may seek to be authorised by a national competent authority (including the FCA) to assess the compliance of securitisations with the STS criteria.

The SR impact on Alternative Investment Funds (“AIFs”):

  • Currently the AIF Manager (“AIFM”), under the Alternative Investment Fund Managers Directive 2011/61/EU (“AIFMD”), must determine that the originators / sponsors / lenders of the securitisation have complied.  Under the SR, originators / sponsors / lenders must meet the requirements on all securitisations.
  • The SR repeals current due diligence, transparency and risk retention requirements in the AIFMD with respect to investment in securitisation positions. Specifically, Article 17 of the AIFMD will be replaced by Article 41 of the SR as from 1 January 2019. The new provision states that, where AIFMs are exposed to securitisation positions which do not meet the requirements of the SR, the AIFM shall take corrective action.

The SR impact on UCITS:

  • UCITS are not currently subject to due diligence, transparency and risk retention requirements with respect to investment in securitisation positions. Article 50a of the UCITS Directive will be replaced by Article 38 of the SR as from 1 January 2019. The new provision states that, where UCITS are exposed to securitisation positions which do not meet the requirements of the SR, the UCITS shall take corrective action.
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