At the end of last week, the Chancellor of the Exchequer unveiled the
government’s roadmap to a new regulatory framework for British finance.
There are quite a few highly technical drafting changes the
implications of which are still somewhat unclear. But here are the
highlights.
The definition of “securitisation” remains unchanged.
The STS regime remains in place. However, the STS criteria have
disappeared from the legislative text altogether and are now entirely
delegated to the FCA. Presumably, the FCA will have a consultation to
determine what these should be.
Intriguingly enough, with the criteria for STS having disappeared
from the draft legislation and, in the absence of a definition of
“non-ABCP securitisation”, the proposed text appears to leave open the
possibility of synthetic securitisations being STS. This seems now to
be in the gift of the FCA.
The third-party verification and data repositories regimes are kept broadly unchanged.
In line with the free-trade approach of the Treasury, an equivalence
regime for STS is set out, with the Treasury to decide which
jurisdictions will be so treated. This was explicitly rejected by the
European Commission in their recent report.
In a similar vein, the removal of the requirement for the special
purpose vehicle having to be in the UK is maintained. The originator
and sponsor though need to be UK located. (However, the concession that
allows EU STS to be treated as STS in the UK until December 2024
remains in place.)
The text allows for re-securitisations – which are banned in the EU.
However, any re-securitisation transaction will need to be pre-approved
by the regulatory authorities on a deal-by-deal basis.
Retention and disclosure requirements are still in place but the text
seems to allow non-UK issuers to sell to UK investors provided they
comply with substantially the same standards. The total identity of
standards required by the EU has been abandoned.
This is merely a summary of the high points and it should be noted the document is still only a draft.