The 45-page draft Securitisation Regulations 2023 were published on Tuesday morning, 11 July 2023, alongside a 26-page policy note. We saw an illustrative draft of these regulations in December 2022, alongside a policy note which remains relevant, which sets out the direction of travel for the UK. They will be brought into force alongside revised PRA and FCA rulebooks so as to replace the onshored UK Securitisation Regulation.
As we saw with the December 2022 illustrative draft, they show limited initial divergence from the existing law, and the one major point compared to December 2022 is the revised definition of “institutional investor”, which now excludes unauthorised non-UK AIFMs which market or manage an AIF in the UK, so the only AIFMs in scope are UK-authorised ones. By the end of the year, we should see more significant changes. The AIFM change was one of five reforms heralded by H.M. Treasury’s December 2022 policy note. The others concern (a) risk retention, e.g. in relation to (i) transferring the retention (of interest to CLO managers) and (ii) NPLs), (b) definitions of public and private securitisation, (c) disclosure requirements for private securitisations (more detail in this commentary) and (d) due diligence requirements for UK institutional investors when investing in non-UK securitisations (see further, “Do EU investors need loan level data to invest in non-EU issues?”).
On the same day, H.M. Treasury also published its “Plan for Delivery” of “a smarter financial services regulatory framework for the UK”, which confirms that these Regulations will be law by the end of the year. We can also expect consultation drafts of revised PRA and FCA rulebooks which will specify the detailed rules which will replace (for example) the due diligence requirements currently set out in Article 5 of the Securitisation Regulation. Paragraph 4.3 of the Plan for Delivery is encouraging for the market: it explains that the structural regulatory reform, subsuming much of the detail into rulebooks “will deliver a framework that is more agile, streamlined, and accessible” and “will turn what is essentially a static and burdensome framework inherited from the EU into an agile, workable and coherent regime, ensuring that the UK’s independent expert regulators are able to keep detailed rules up to date, and removing significant legal complexity for firms”.