Securitisation

EUSR Article 9

FCA

PRA

Criteria for credit-granting

1. Originators, sponsors and original lenders shall apply to exposures to be securitised the same sound and well-defined criteria for credit-granting which they apply to non-securitised exposures. To that end, the same clearly established processes for approving and, where relevant, amending, renewing and refinancing credits shall be applied. Originators, sponsors and original lenders shall have effective systems in place to apply those criteria and processes in order to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness taking appropriate account of factors relevant to verifying the prospect of the obligor meeting his obligations under the credit agreement.

8.2 Granting of credit

8.2.1 R

Originators, sponsors and original lenders shall apply to exposures to be securitised (unless they are trade receivables not originated in the form of a loan) the same sound and well-defined criteria for credit-granting which they apply to non-securitised exposures. To that end, the same clearly established processes for approving and (where relevant) amending, renewing and refinancing credits shall be applied.

8.2.2 R

Originators, sponsors and original lenders shall have effective systems in place to apply those criteria and processes in order to ensure credit granting is based on a thorough assessment of the obligor’s creditworthiness, taking appropriate account of factors relevant to verifying the prospect of the obligor meeting the obligor’s obligations under the credit agreement.

ARTICLE 9 CRITERIA FOR CREDIT-GRANTING

1. Originators, sponsors and original lenders shall apply to exposures to be securitised (unless they are trade receivables not originated in the form of a loan) the same sound and well-defined criteria for credit-granting which they apply to non-securitised exposures. To that end, the same clearly established processes for approving and, where relevant, amending, renewing and refinancing credits shall be applied. Originators, sponsors and original lenders shall have effective systems in place to apply those criteria and processes in order to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness taking appropriate account of factors relevant to verifying the prospect of the obligor meeting the obligor’s obligations under the credit agreement.

By way of derogation from the first subparagraph, with regard to underlying exposures that were non-performing exposures at the time the originator purchased them from the relevant third party, sound standards shall apply in the selection and pricing of the exposures.

[No equivalent]

[No equivalent]

The UK rules give effect to recital (14) of the EUSR, i.e. that the credit-granting criteria do not apply to the origination of trade receivables not in the form of a loan.

2. Where the underlying exposures of securitisations are residential loans made after the entry into force of Directive 2014/17/EU, the pool of those loans shall not include any loan that is marketed and underwritten on the premise that the loan applicant or, where applicable, intermediaries were made aware that the information provided by the loan applicant might not be verified by the lender.

8.3 Verification arrangements

8.3.1 R

Where the underlying exposures of securitisations are residential loans made on or after 20 March 2014, the pool of those loans shall not include any loan that is marketed and underwritten on the premise that the loan applicant or, where applicable, intermediaries were made aware that the information provided by the loan applicant might not be verified by the lender.

2. Where the underlying exposures of securitisations are residential loans made on or after 20 March 2014, the pool of those loans shall not include any loan that is marketed and underwritten on the premise that the loan applicant or, where applicable, intermediaries were made aware that the information provided by the loan applicant might not be verified by the lender.

3. Where an originator purchases a third party’s exposures for its own account and then securitises them, that originator shall verify that the entity which was, directly or indirectly, involved in the original agreement which created the obligations or potential obligations to be securitised fulfils the requirements referred to in paragraph 1.

8.3.2 R

Where an originator purchases a third party’s exposures for its own account and then securitises them, that originator shall verify that the entity which was, directly or indirectly, involved in the original agreement which created the obligations or potential obligations to be securitised fulfils the requirements referred to in SECN 8.3.1R (or equivalent PRA rules).

3. Where an originator purchases a third party’s exposures for its own account and then securitises them, that originator shall verify that the entity which was, directly or indirectly, involved in the original agreement which created the obligations or potential obligations to be securitised fulfils the requirements referred to in paragraph 1 of this Article (or equivalent FCA rules).

4. Paragraph 3 does not apply if;

8.3.3 R

SECN 8.3.2R does not apply if:

4. Paragraph 3 of this Article does not apply if;

(a) the original agreement, which created the obligations or potential obligations of the debtor or potential debtor, was entered into before the entry into force of Directive 2014/17/EU; and

(1) the original agreement, which created the obligations or potential obligations of the debtor or potential debtor, was entered into before 20 March 2014; and

(a) the original agreement which created the obligations or potential obligations of the debtor or potential debtor was entered into before 20 March 2014; and

(b) the originator that purchases a third party’s exposures for its own account and then securitises them meets the obligations that originator institutions were required to meet under Article 21(2) of Delegated Regulation (EU) No 625/2014 before 1 January 2019.

(2) the originator that purchases a third party’s exposures for its own account and then securitises them meets the obligations that originator institutions were required to meet under Article 21(2) of Commission Delegated Regulation (EU) No 625/2014 before 1 January 2019.

(b) the originator that purchases a third party’s exposures for its own account and then securitises them meets the obligations that originators were required to meet under Article 21(2) of Commission Delegated Regulation (EU) No 625/2014 before 1 January 2019.

EUSR Article 5

FCA SECN 4.2 to 4.5

PRA Chapter 2, Article 5

Securitisation Regulations 2024, as amended by the Securitisation (Amendment) Regulations 2024

Applies to EU investors

Applies to FCA-regulated firms

Applies to PRA-regulated firms

Applies to the trustees and managers of UK occupational pension schemes

Due-diligence requirements for institutional investors

SECN 4.2 Before holding a securitisation position

Article 5 Due-diligence requirements for institutional investors

Securitisation Regulations 2024 regulation 32B

1. Prior to holding a securitisation position, an institutional investor, other than the originator, sponsor or original lender, shall verify that:

4.2.1 R

(1) Prior to holding a securitisation position, an institutional investor, other than the originator, sponsor or original lender, shall verify that:

1. Prior to holding a securitisation position, an institutional investor, other than the originator, sponsor or original lender, shall verify that:

32B. (1) Before holding a securitisation position, the trustees or managers of an occupational pension scheme who are not the originator, sponsor or original lender must verify the following matters —

(a) where the originator or original lender established in the Union is not a credit institution or an investment firm as defined in points (1) and (2) of Article 4(1) of Regulation (EU) No 575/2013, the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes in accordance with Article 9(1) of this Regulation;

(a) where the originator or original lender is established in the United Kingdom and is not a CRR firm or FCA investment firm, the originator or original lender grants all the credits giving rise to the underlying exposures (unless they are trade receivables not originated in the form of a loan) on the basis of:

(i) sound and well-defined criteria; and

(ii) clearly established processes for approving, amending, renewing and financing those credits, and has effective systems in place to apply those criteria and processes, in accordance with SECN 8.2 (or equivalent PRA rules);

(a) where the originator or original lender is established in the UK and is not a CRR firm institution or an FCA investment firm as defined in points (2A) and (2AB) of Article 4(1) of CRR, the originator or original lender grants all the credits giving rise to the underlying exposures (unless they are trade receivables not originated in the form of a loan) on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes in accordance with Article 9(1) of this Chapter (or equivalent FCA rules);

(a) where the originator or original lender is established in the United Kingdom and is not a CRR firm or an FCA investment firm, that the originator or original lender —

(i)  grants all the credits giving rise to the underlying exposures, unless they are trade receivables not originated in the form of a loan, on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits in accordance with any applicable FCA or PRA rules relating to credit-granting requirements, and

(ii)  has effective systems in place to apply those criteria and processes in accordance with any applicable FCA or PRA rules relating to credit-granting requirements;

(b) where the originator or original lender is established in a third country, the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness;

(b) where the originator or original lender is not established in the United Kingdom, the originator or original lender grants all the credits giving rise to the underlying exposures (unless they are trade receivables not originated in the form of a loan) on the basis of:

(i) sound and well-defined criteria; and

(ii) clearly established processes for approving, amending, renewing and financing those credits, and has effective systems in place to apply those criteria and processes, to ensure that credit granting is based on a thorough assessment of the obligor’s creditworthiness;

(b) where the originator or original lender is not established in the UK, the originator or original lender grants all the credits giving rise to the underlying exposures (unless they are trade receivables not originated in the form of a loan) on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness;

(b) where the originator or original lender is not established in the United Kingdom, that the originator or original lender —

(i)  grants all the credits giving rise to the underlying exposures, unless they are trade receivables not originated in the form of a loan, on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits, and

(ii)  has effective systems in place to apply those criteria and processes to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness;

(c) if established in the Union, the originator, sponsor or original lender retains on an ongoing basis a material net economic interest in accordance with Article 6 and the risk retention is disclosed to the institutional investor in accordance with Article 7;

(c) if established in the United Kingdom, the originator, sponsor or original lender retains on an ongoing basis a material net economic interest in accordance with SECN 5 (or equivalent PRA rules) and the risk retention is disclosed to the institutional investor in accordance with SECN 6, SECN 11 and SECN 12 (or equivalent PRA rules);

(c) if established in the UK, the originator, sponsor or original lender retains on an ongoing basis a material net economic interest in accordance with Article 6 of this Chapter and Chapter 4 (or equivalent FCA rules) and the risk retention is disclosed to the institutional investor in accordance with Article 7 of this Chapter and Chapters 5 and 6 (or equivalent FCA rules);

(c) where the originator, sponsor or original lender is established in the United Kingdom, that —

(i)  the originator, sponsor or original lender continually retains a material net economic interest in accordance with any applicable FCA or PRA rules relating to risk retention requirements, and

(ii)  that risk retention is disclosed to the trustees or managers of the occupational pension scheme in accordance with any applicable FCA or PRA rules relating to transparency requirements;

(d) if established in a third country, the originator, sponsor or original lender retains on an ongoing basis a material net economic interest which, in any event, shall not be less than 5 %, determined in accordance with Article 6, and discloses the risk retention to institutional investors;

(d) if not established in the United Kingdom, the originator, sponsor or original lender retains on an ongoing basis a material net economic interest which, in any event, must not be less than 5%, determined in accordance with SECN 5 (or equivalent PRA rules), and discloses the risk retention to institutional investors; and

(d) if not established in the UK, the originator, sponsor or original lender retains on an ongoing basis a material net economic interest which, in any event, shall not be less than 5%, determined in accordance with Article 6 of this Chapter and Chapter 4 (or equivalent FCA rules), and discloses the risk retention to institutional investors;

(d) where the originator, sponsor or original lender is not established in the United Kingdom —

(i)  that the originator, sponsor or original lender continually retains a material net economic interest which, in any event, must not be less than 5%, determined in accordance with rules made by the FCA or PRA relating to risk retention requirements which would be applicable FCA or PRA rules were the originator, sponsor or original lender to be established in the United Kingdom, and

(ii)  that the originator, sponsor or original lender discloses the risk retention to the trustees or managers of the occupational pension scheme;

(e) the originator, sponsor or SSPE has, where applicable, made available the information required by Article 7 in accordance with the frequency and modalities provided for in that Article;

(e) the originator, sponsor or SSPE has made available sufficient information to enable the institutional investor independently to assess the risks of holding the securitisation position, and has committed to make further information available on an ongoing basis, as appropriate.

(e) the originator, sponsor or SSPE has made available sufficient information to enable the institutional investor independently to assess the risks of holding the securitisation position and has committed to make further information available on an ongoing basis, as appropriate.

(e) that the originator, sponsor or securitisation special purpose entity —

(i)  has made available sufficient information to enable the trustees or managers of the occupational pension scheme independently to assess the risks of holding the securitisation position, and

(ii) has committed to make available further information on an ongoing basis as appropriate.

(2) In paragraph (1)(a) —

“CRR firm” has the meaning given in Article 4(1)(2A) of the Capital Requirements Regulation(6);

“FCA investment firm” has the meaning given in Article 4(1)(2AB) of the Capital Requirements Regulation(7).

[(3) is set out below.]

That information must include at least the following:

That information must include at least the following:

(4) The information referred to in paragraph (1)(e) must include at least the information specified in the first column of Schedule A1, which must be provided at least with the frequency, or on the occasions, specified in the corresponding entry in the second column of that Schedule.

[Schedule A1 is in substance identical to the wording of the FCA and PRA rules. There is one minor clarification, in sub-paragraphs 4 and 6, viz., that, as regards secondary markets investments, the reference to “before pricing” does not apply.

Information

Frequency

[see Article 7 of the EUSR for the corresponding details]

1  In the case of a securitisation which is not an ABCP programme or an ABCP transaction, details of the underlying exposures.

At least quarterly.

(i) in the case of a securitisation which is not an ABCP programme or an ABCP transaction, details of the underlying exposures, which is to be provided on at least a quarterly basis;

[see Schedule A1]

2  In the case of an ABCP programme or an ABCP transaction, information on the underlying receivables or credit claims.

At least monthly.

(ii) in the case of an ABCP programme or an ABCP transaction, information on the underlying receivables or credit claims, which is to be provided on at least a monthly basis;

[see Schedule A1]

3  Investor reports providing periodic updates on:

(i) the credit quality and performance of the underlying exposures;

(ii) any relevant financial or other triggers contained in the transaction documentation, including information on events which trigger changes to the priority of payments or a substitution of any counterparty to the transaction;

(iii) data on the cash flows generated by the underlying exposures and by the liabilities of the securitisation; and

(iv) the calculation and modality of retention of a material net economic interest in the transaction by the originator, sponsor or original lender.

(i) At least quarterly in the case of a securitisation which is not an ABCP programme or an ABCP transaction.

(ii) At least monthly in the case of an ABCP programme or an ABCP transaction.

(iii) investor reports providing periodic updates on the credit quality and performance of the underlying exposures, any relevant financial or other triggers contained in the transaction documentation including information on events which trigger changes to the priority of payments or a substitution of any counterparty to the transaction, data on the cash flows generated by the underlying exposures and by the liabilities of the securitisation and the calculation and modality of retention of a material net economic interest in the transaction by the originator, sponsor or original lender, which is to be provided on at least a quarterly basis in the cases referred to in point (i) and on at least a monthly basis in the cases referred to in point (ii);

[see Schedule A1]

4  All information on the legal documentation needed to understand the transaction, including detail of the legal provisions governing the structure of the transaction, any credit enhancement or liquidity support features, the cash flows and loss waterfalls, investors’ voting rights, and any triggers or other events that could result in a material impact on the performance of the securitisation position.

In the case of primary market investments:

(i) before pricing or commitment to invest in draft or initial form;

(ii) no later than 15 days after closing of the transaction in final form;

and

(iii) an updated version as soon as practicable following any material change.

In the case of secondary market investments:

(i) before a commitment to invest in final form; and

(ii) an updated version as soon as practicable following any material change.

(iv) all information on the legal documentation needed to understand the transaction, including detail of the legal provisions governing the structure of the transaction, any credit enhancement or liquidity support features, the cash flows and loss waterfalls, investors’ voting rights and any triggers or other events that could result in a material impact on the performance of the securitisation position, which is to be provided:

for primary market investments, in draft or initial form before pricing or commitment to invest and in final form no later than 15 days after closing of the transaction, or

for secondary market investments, in final form before a commitment to invest,

and for both primary and secondary market investments an updated version as son as practicable following any material change;

[see Schedule A1]

5

Information describing any changes or events materially affecting the transaction, including breaches of obligations under the transaction documents.

As soon as practicable following that material change or event.

(v) information describing any changes or events materially affecting the transaction, including breaches of obligations under the transaction documents, which is to be provided as soon as practicable following the material change or event;

[see Schedule A1]

6

Any approved prospectus or other offering or marketing document prepared with the cooperation of the originator or sponsor.

In the case of primary market investments:

(i) before pricing or commitment to invest in draft or initial form; and

(ii) no later than 15 days after closing of the transaction in final form.

In the case of secondary market investments, before a commitment to invest in final form.

(vi) any approved prospectus or other offering or marketing document prepared with the cooperation of the originator or sponsor which is to be provided:

for primary market investments, in draft or initial form before pricing or commitment to invest and in final form no later than 15 days after closing of the transaction, or

for secondary market investments, in final form before a commitment to invest; and

[see Schedule A1]

7

If there is an STS notification or a notification falling within regulation 12(3)(b) of the Securitisation Regulations 2024 in respect of the transaction, that STS notification or that notification falling within regulation 12(3)(b) of the Securitisation Regulations 2024.

n the case of primary market investments:

(i) before pricing or commitment to invest in draft or initial form;

(ii) no later than 15 days after closing of the transaction in final form; and

(iii) an updated version as soon as practicable following any material change.

In the case of secondary market investments:

(i) before a commitment to invest in final form; and

(ii) an updated version as soon as practicable following any material change.

(vii) if there is an STS notification or a notification falling with regulation 12(3)(b) of the Securitisation Regulations in respect of the transaction, that STS notification, which is to be provided:

for primary market commitment to invest and in draft or initial form before pricing or commitment to invest and in final form no later than 15 days after closing of the transaction, or

for secondary market investments, in final form before a commitment to invest, and

for both primary and secondary market investments an updated version as soon as practicable following any material change.

[see Schedule A1]

Comment:

Article 5(1)(e) and (f) of the EUSR are replaced in the UK by a “more principles-based and proportionate approach” which requires that investors must verify that the sell-side “has made available sufficient information to enable the institutional investor independently to assess the risks of holding the securitisation position and has committed to make further information available on an ongoing basis, as appropriate”.

The UK rules specify a minimum level of disclosure (which follows the Basel Committee requirements), but do not require UK investors to obtain disclosures which match the UK transparency obligations which are binding on the sell side, and so they need not be on prescribed templates, and not necessarily loan-level.

This is a material difference from the EUSR position. The EU position must be assumed, as a result of the EC’s October 2022 Article 46 report, to require reporting on the EU templates.

See further, “Do EU investors need loan level data to invest in non-EU issues?”.

This was one of the five reforms heralded by H.M. Treasury’s December 2022 policy note.

The UK rules now refer to information provided “before pricing or commitment to invest” so as to address the lack of a concept of “pricing” in private securitisations, and distinguish between primary and secondary market investments, so that secondary market investors are not required to conduct due diligence on documents and information that are no longer relevant.

(f) in the case of non-performing exposures, sound standards are applied in the selection and pricing of the exposures.

[no equivalent]

[no equivalent]

[no equivalent]

[no equivalent]

[no equivalent]

[no equivalent]

(3) In the case of a fully-supported ABCP transaction, the trustees or managers of an occupational pension scheme are not required to verify the matters referred to in paragraph (1)(a).

2. By derogation from paragraph 1, as regards fully supported ABCP transactions, the requirement specified in point (a) of paragraph 1 shall apply to the sponsor. In such cases, the sponsor shall verify that the originator or original lender which is not a credit institution or an investment firm grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes in accordance with Article 9(1).

[covered by Rule 4.3 below]

2. As regards fully supported ABCP transactions, the requirement specified in point (a) of paragraph 1 of this Article shall apply to the sponsor and not to the institutional investor. In such cases, the sponsor shall verify that the originator or original lender which is not a CRR firm or an FCA investment firm as defined in points (2A) and (2AB) of Article 4(1) of CRR grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes in accordance with Article 9(1) of this Chapter (or equivalent FCA rules).

[see 32B(3) above]

[(4) appears below.]

3. Prior to holding a securitisation position, an institutional investor, other than the originator, sponsor or original lender, shall carry out a due-diligence assessment which enables it to assess the risks involved. That assessment shall consider at least all of the following:

4.2.2 R

Prior to holding a securitisation position, an institutional investor, other than the originator, sponsor or original lender, shall carry out a due diligence assessment, which enables it to assess the risks involved. That assessment shall consider at least all of the following:

3. Prior to holding a securitisation position, an institutional investor, other than the originator, sponsor or original lender, shall carry out a due-diligence assessment which enables it to assess the risks involved. That assessment shall consider at least all of the following:

(5) Before holding a securitisation position, the trustees or managers of an occupational pension scheme who are not the originator, sponsor or original lender must carry out a due-diligence assessment which enables them to assess the risks involved and consider at least all of the following —

(a) the risk characteristics of the individual securitisation position and of the underlying exposures;

(a) the risk characteristics of the individual securitisation position and of the underlying exposures;

(a) the risk characteristics of the individual securitisation position and of the underlying exposures;

(a) the risk characteristics of the individual securitisation position and of the underlying exposures;

(b) all the structural features of the securitisation that can materially impact the performance of the securitisation position, including the contractual priorities of payment and priority of payment-related triggers, credit enhancements, liquidity enhancements, market value triggers, and transaction-specific definitions of default;

(b) all of the structural features of the securitisation that can materially impact the performance of the securitisation position, including the contractual priorities of payment and priority of payment-related triggers, credit enhancements, liquidity enhancements, market value triggers, and transactionspecific definitions of default;

(b) all the structural features of the securitisation that can materially impact the performance of the securitisation position, including the contractual priorities of payment and priority of payment-related triggers, credit enhancements, liquidity enhancements, market value triggers, and transaction-specific definitions of default;

(b) any of the structural features of the securitisation that could materially impact the performance of the securitisation position, including the contractual priorities of payment and priority of payment-related triggers, credit enhancements, liquidity enhancements, market value triggers, and transaction-specific definitions of default;

(c) with regard to a securitisation notified as STS in accordance with Article 27, the compliance of that securitisation with the requirements provided for in Articles 19 to 22 or in Articles 23 to 26, and Article 27.

(c) with regard to a securitisation included on the list maintained under regulation 10(2) of the Securitisation Regulations 2024, compliance with SECN 2;

(c) with regard to a securitisation included on the list maintained under regulation 10(2) of the Securitisation Regulations, compliance with the STS criteria and with any applicable designated activity rules relating to the notification mentioned in regulation 10(1) of the Securitisation Regulations;

(c) with regard to a securitisation included on the list maintained under regulation 10(2), compliance with the STS criteria and with any applicable designated activity rules relating to the notification mentioned in regulation 10(1);

No EU equivalent – the UK rules relate to the recognition of an EU STS as being equivalent

(d) with regard to a securitisation that appears to the institutional investor to be an overseas STS securitisation as defined in regulation 12(2) of the Securitisation Regulations 2024, whether the securitisation falls within a description of securitisation specified in regulations made from time to time under regulation 13(1) of the Securitisation Regulations 2024

in relation to a country or territory designated under such regulations;

(d) with regard to a securitisation that appears to the institutional investor to be an overseas STS securitisation as defined in regulation 12(2) of the Securitisation Regulations, whether the securitisation falls within a description of securitisation specified in regulations made from time to time under regulation 13(1) of the Securitisation Regulations in relation to a country or territory designated under such regulations;

(d) with regard to a securitisation that appears to the trustees or managers to be an overseas STS securitisation—

(i) whether the securitisation falls within a description of securitisation specified in regulations under regulation 13(1) in relation to a country or territory designated under those regulations, and

(ii) any matters specified for the purposes of regulation 13(7A)(a) in regulations under regulation 13(1);

(e) with regard to a securitisation falling within paragraph (3)(b) and (c) of regulation 12 of the Securitisation Regulations 2024, compliance with the requirements referred to in paragraph (3)(a) of that regulation and with Article 27 of the Securitisation Regulation as it had effect in relation to the EU at the time of the notification mentioned in paragraph (3)(b) of that regulation;

(e) with regard to a securitisation falling within paragraph (3)(b) and (c) of regulation 12 of the Securitisation Regulations, compliance with the requirements referred to in paragraph (3)(a) of that regulation and with Article 27 of Regulation (EU) 2017/2402 as it had effect in relation to the European Union at the time of the notification mentioned in paragraph (3)(b) of that regulation;

(e) with regard to a securitisation falling within paragraph (3)(b) and (c) of regulation 12, compliance with the requirements referred to in paragraph (3)(a) of that regulation and with Article 27 of the EU Securitisation Regulation 2017 as it had effect in relation to the European Union at the time of the notification mentioned in paragraph (3)(b) of that regulation.

[see 4.2.3 below]

[see 3A below]

(7) The duty in paragraph (5)(c) applies whether or not a third party verifier has assessed compliance of the securitisation with the STS criteria.

Institutional investors may rely to an appropriate extent on the STS notification pursuant to Article 27(1) and on the information disclosed by the originator, sponsor and SSPE on the compliance with the STS requirements, without solely or mechanistically relying on that notification or information.

(f) in considering the matter referred to in point (c), an

institutional investor may rely to an appropriate extent on the STS notification and on the information disclosed by the originator, sponsor and SSPE concerning compliance with the STS criteria, without solely or mechanistically relying on that notification or information; and

(f) in considering the matter referred to in point (c), an institutional investor may rely to an appropriate extent on the STS notification and on the information disclosed by the originator, sponsor and SSPE concerning compliance with the STS criteria, without solely or mechanistically relying on that notification or information;

(8) In considering the matter referred to in paragraph (5)(c), the trustees or managers of an occupational pension scheme may rely to an appropriate extent on the STS notification and on the information disclosed by the originator, sponsor and securitisation special purpose entity concerning compliance with the STS criteria, without solely or mechanistically relying on that notification or information.

[no equivalent]

[no equivalent]

[no equivalent]

(9) In relation to an overseas STS securitisation, the trustees or managers of an occupational pension scheme may rely on a matter specified under regulation 13(7A)(b) to such extent as regulations under regulation 13(1) provide.

[grandfathered EU STS]

(g) in considering the matter referred to in point (d), an institutional investor may rely to an appropriate extent on the notification referred to in regulation 12(3)(b) of the Securitisation Regulations 2024 and on the information disclosed by the originator, sponsor and SSPE to ESMA concerning compliance with the requirements referred to in regulation 12(3)(a) of the Securitisation Regulations 2024, without solely or mechanistically relying on that notification or information.

(g) in considering the matter referred to in point (e), an institutional investor may rely to an appropriate extent on the notification referred to in regulation 12(3)(b) of the Securitisation

Regulations and on the information disclosed by the originator, sponsor and SSPE to the European Securities and Markets Authority concerning compliance with the requirements

referred to in regulation 12(3)(a) of the Securitisation Regulations, without solely or mechanistically relying on that notification or information; and

(10) In considering the matter referred to in paragraph (5)(e), the trustees or managers of an occupational pension scheme may rely to an appropriate extent on the notification referred to in regulation 12(3)(b) and on the information disclosed by the originator, sponsor and securitisation special purpose entity to the European Securities and Markets Authority concerning compliance with the requirements referred to in regulation 12(3)(a), without solely or mechanistically relying on that notification or information.

Notwithstanding points (a) and (b) of the first subparagraph, in the case of a fully supported ABCP programme, institutional investors in the commercial paper issued by that ABCP programme shall consider the features of the ABCP programme and the full liquidity support.

(2) Notwithstanding (1)(a) and (b), in the case of a fully supported ABCP programme, institutional investors in the commercial paper issued by that ABCP programme shall consider the features of the ABCP programme and the full liquidity support.

Notwithstanding points (a) and (b) of the first subparagraph, in the case of a fully supported ABCP programme, institutional investors in the commercial paper issued by that ABCP programme shall consider the features of the ABCP programme and the full liquidity support.

(6) In addition to the matters specified in paragraph (5)(a) and (b), in the case of a fully-supported ABCP programme, the trustees or managers of an occupational pension scheme investing in the commercial paper issued by that ABCP programme must consider the features of the ABCP programme and the full liquidity support.

[No equivalent]

4.2.3 R

The requirements in SECN 4.2.1R and SECN 4.2.2R continue to apply where a third party verifier has provided services under SECN 2.5.2R.

3A. the requirements in paragraphs 1 and 3 of this Article continue to apply where a third party has provided services under SECN 2.5.2R of the FCA Handbook.

[see (7) above.]

[see Article 5(2) above]

4.3 Requirements on sponsors

4.3.1 R

(1) As regards fully supported ABCP transactions the requirement specified in SECN 4.2.1R(1)(a) shall apply to the sponsor and not to the institutional investor.

(2) In such cases, the sponsor must verify that the originator or original lender which is not a CRR firm or an FCA investment firm grants all the credits giving rise to the underlying exposures (other than any underlying exposures that are trade receivables not in the form of a loan) on the basis of:

(a) sound and well-defined criteria; and

(b) clearly established processes for their approving, amending, renewing and financing those credits, and has effective systems in place to apply those criteria and processes, in accordance with SECN 8.2 (or equivalent PRA rules).

[see Article 5(2) above]

[No equivalent but c.f. 32B(3) above]

4. An institutional investor, other than the originator, sponsor or original lender, holding a securitisation position, shall at least:

4.4 While holding a securitisation position

4.4.1 R

An institutional investor, other than the originator, sponsor or original lender, holding a securitisation position, shall at least:

4. An institutional investor, other than the originator, sponsor or original lender, holding a securitisation position, shall at least:

(a) establish appropriate written procedures that are proportionate to the risk profile of the securitisation position and, where relevant, to the institutional investor’s trading and non-trading book, in order to monitor, on an ongoing basis, compliance with paragraphs 1 and 3 and the performance of the securitisation position and of the underlying exposures.

(1) establish appropriate written procedures that are proportionate to the risk profile of the securitisation position and, where relevant, to the institutional investor’s trading and non-trading book in order to

monitor, on an ongoing basis, compliance with SECN 4.2.1R and SECN 4.2.2R and the performance of the securitisation position and of the underlying exposures.

(a) establish appropriate written procedures that are proportionate to the risk profile of the securitisation position and, where relevant, to the institutional investor’s trading and non-trading book, in order to monitor, on an ongoing basis, compliance with paragraphs 1 and 3 of this Article and the performance of the securitisation position and of the underlying exposures.

Due-diligence requirements for occupational pension schemes: ongoing requirements

32C.

(1) Where the trustees or managers of an occupational pension scheme hold a securitisation position in relation to which they are not the originator, sponsor or original lender, the trustees or managers must at least establish appropriate written procedures that are proportionate to the risk profile of the securitisation position and, where relevant, to their trading and non-trading book, in order to monitor on an ongoing basis—

(a) compliance with regulation 32B in relation to matters arising while the securitisation position is held, and

(b) the performance of the securitisation position and of the underlying exposures.

Where relevant with respect to the securitisation and the underlying exposures, those written procedures shall include monitoring of the exposure type, the percentage of loans more than 30, 60 and 90 days past due, default rates, prepayment rates, loans in foreclosure, recovery rates, repurchases, loan modifications, payment holidays, collateral type and occupancy, and frequency distribution of credit scores or other measures of credit worthiness across underlying exposures, industry and geographical diversification, frequency distribution of loan to value ratios with band widths that facilitate adequate sensitivity analysis.

Where relevant with respect to the securitisation and the underlying exposures, those written procedures shall include monitoring of:

(a) the exposure type;

(b) the percentage of loans more than 30, 60 and 90 days past due;

(c) default rates;

(d) prepayment rates;

(e) loans in foreclosure;

(f) recovery rates;

(g) repurchases;

(h) loan modifications;

(i) payment holidays;

(j) collateral type and occupancy; and

(k) frequency distribution of credit scores or other measures of creditworthiness across underlying exposures, industry and geographical diversification, frequency distribution of loan-to value ratios with bandwidths that facilitate adequate sensitivity

analysis;

Where relevant with respect to the securitisation and the underlying exposures, those written procedures shall include monitoring of the exposure type, the percentage of loans more than 30, 60 and 90 days past due, default rates, prepayment rates, loans in foreclosure, recovery rates, repurchases, loan modifications, payment holidays, collateral type and occupancy, and frequency distribution of credit scores or other measures of credit worthiness across underlying exposures, industry and geographical diversification, frequency distribution of loan to value ratios with band widths that facilitate adequate sensitivity analysis.

(2) The written procedures referred to in paragraph (1) must, where relevant to the securitisation and the underlying exposures, include –

(a) monitoring of the exposure type,

(b) the percentage of loans more than 30, 60 and 90 days past due,

(c) default rates,

(d) prepayment rates,

(e) loans in foreclosure,

(f) recovery rates,

(g) repurchases,

(h) loan modifications,

(i) payment holidays,

(j) collateral type and occupancy, and

(k) frequency distribution of credit scores or other measures of credit worthiness across underlying exposures, industry and geographical diversification, frequency distribution of loan to value ratios with band widths that facilitate adequate sensitivity analysis.

Where the underlying exposures are themselves securitisation positions, as permitted under Article 8, institutional investors shall also monitor the exposures underlying those positions;

[see 4.4.2 below]

Where the underlying exposures are themselves securitisation positions, in accordance with Article 8 of this Chapter or SECN 7.2.1(2)(b) of the FCA Handbook, institutional investors shall also monitor the exposures underlying those positions;

(3) Where the underlying exposures are themselves securitisation positions, in a case where this is not prohibited in relation to the originator, sponsor or original lender by applicable FCA or PRA rules, the trustees or managers must also monitor the exposures underlying those positions.

(b) in the case of a securitisation other than a fully supported ABCP programme, regularly perform stress tests on the cash flows and collateral values supporting the underlying exposures or, in the absence of sufficient data on cash flows and collateral values, stress tests on loss assumptions, having regard to the nature, scale and complexity of the risk of the securitisation position;

(2) in the case of a securitisation other than a fully supported ABCP programme, regularly perform stress tests on the cash flows and collateral values supporting the underlying exposures or, in the absence of sufficient data on cash flows and collateral values, stress tests on loss assumptions, having regard to the nature, scale and complexity of the risk of the securitisation position;

(b) in the case of a securitisation other than a fully supported ABCP programme, regularly perform stress tests on the cash flows and collateral values supporting the underlying exposures or, in the absence of sufficient data on cash flows and collateral values, stress tests on loss assumptions, having regard to the nature, scale and complexity of the risk of the securitisation position;

(4) The trustees or managers of an occupational pension scheme who are not the originator, sponsor or original lender holding a securitisation position must at least —

(a) in the case of a securitisation other than a fully-supported ABCP programme, regularly perform stress tests on the cash flows and collateral values supporting the underlying exposures or, in the absence of sufficient data on cash flows and collateral values, stress tests on loss assumptions, having regard to the nature, scale and complexity of the risk of the securitisation position;

(c) in the case of fully supported ABCP programme, regularly perform stress tests on the solvency and liquidity of the sponsor;

(3) in the case of fully supported ABCP programmes, regularly perform stress tests on the solvency and liquidity of the sponsor;

(c) in the case of fully supported ABCP programmes, regularly perform stress tests on the solvency and liquidity of the sponsor;

(b) in the case of a fully-supported ABCP programme, regularly perform stress tests on the solvency and liquidity of the sponsor;

(d) ensure internal reporting to its management body so that the management body is aware of the material risks arising from the securitisation position and so that those risks are adequately managed;

(4) ensure internal reporting to its management body so that the management body is aware of the material risks arising from the securitisation position and so that those risks are adequately managed;

(d) ensure internal reporting to its management body so that the management body is aware of the material risks arising from the securitisation position and so that those risks are adequately managed;

(c) ensure internal reporting to the trustees or managers so that they are aware of the material risks arising from the securitisation position and so that those risks are adequately managed;

(e) be able to demonstrate to its competent authorities, upon request, that it has a comprehensive and thorough understanding of the securitisation position and its underlying exposures and that it has implemented written policies and procedures for the risk management of the securitisation position and for maintaining records of the verifications and due diligence in accordance with paragraphs 1 and 2 and of any other relevant information; and

(5) be able to demonstrate to the FCA, upon request, that it has a comprehensive and thorough understanding of the securitisation position and its underlying exposures and that it has implemented

written policies and procedures for the risk management of the securitisation position and for maintaining records of the verifications and due diligence in accordance with SECN 4.2.1R and SECN 4.3 and of any other relevant information; and

(e) be able to demonstrate to the PRA, upon request, that it has a comprehensive and thorough understanding of the securitisation position and its underlying exposures and that it has implemented written policies and procedures for the risk management of the securitisation position and for maintaining records of the verifications and due diligence in accordance with paragraphs 1 and 2 of this Article and of any other relevant information; and

(d) be able to demonstrate to the Pensions Regulator, upon request, that they have a comprehensive and thorough understanding of the securitisation position and its underlying exposures and that they have implemented written policies and procedures for the risk management of the securitisation position and for maintaining records of the verifications and due diligence in accordance with regulation 32B and of any other relevant information; and

(f) in the case of exposures to a fully supported ABCP programme, be able to demonstrate to its competent authorities, upon request, that it has a comprehensive and thorough understanding of the credit quality of the sponsor and of the terms of the liquidity facility provided.

(6) in the case of exposures to a fully supported ABCP programme, be able to demonstrate to the FCA, upon request, that it has a comprehensive and thorough understanding of the credit quality of the sponsor and of the terms of the liquidity facility provided.

(f) in the case of exposures to a fully supported ABCP programme, be able to demonstrate to the PRA, upon request, that it has a comprehensive and thorough understanding of the credit quality of the sponsor and of the terms of the liquidity facility provided.

(e) in the case of exposures to a fully-supported ABCP programme, be able to demonstrate to the Pensions Regulator, upon request, that they have a comprehensive and thorough understanding of the credit quality of the sponsor and of the terms of the liquidity facility provided.

[see 4(a) above for EUSR equivalent]

4.4.2 R

Where the underlying exposures of a securitisation are themselves securitisation positions, in accordance with SECN 7 or Article 8 of Chapter 2 of the Securitisation Part of the PRA Rulebook, institutional investors shall also monitor the exposures underlying those securitisation positions

[see 4(a) above for PRA equivalent]

[see 32C(2) above for Securitisation Regulations 2024 equivalent]

5. Without prejudice to paragraphs 1 to 4 of this Article, where an institutional investor has given another institutional investor authority to make investment management decisions that might expose it to a securitisation, the institutional investor may instruct that managing party to fulfil its obligations under this Article in respect of any exposure to a securitisation arising from those decisions.

4.4 Institutional investor delegation

4.4.1 R

Without prejudice to SECN 4.2 and SECN 4.4, where the managing party has been given authority by the institutional investor described below to make investment management decisions that might expose it to a securitisation, the following paragraphs apply in respect of any exposure to a securitisation arising from those decisions. Unless specified below the responsibility for fulfilling the obligations under SECN 4.2 and SECN 4.4 shall remain with the institutional investor:

5. Without prejudice to paragraphs 1 to 4 of this Article, where an institutional investor has been given authority by the institutional investor described below to make investment management decisions that might expose it to a securitisation, the following paragraphs apply in respect of any exposure to a securitisation arising from those decisions. Unless specified below, the responsibility for fulfilling the obligations under paragraphs 1,3 and 4 shall remain with the institutional investor.

Due-diligence requirements for occupational pension schemes: delegation of investment management decisions

32D.

(1) Paragraph (2) applies where—

(a) the trustees or managers of an occupational pension scheme —

(i) have given a relevant institutional investor (“the managing party”) authority to make investment management decisions that might expose the trustees or managers to a securitisation, and

(ii) instruct the managing party to fulfil any of their obligations under regulations 32B and 32C in respect of any exposure to a securitisation arising from those decisions, and

(b) the managing party fails to fulfil an obligation to which those instructions relate.

Member States shall ensure that, where an institutional investor is instructed under this paragraph to fulfil the obligations of another institutional investor and fails to do so, any sanction under Articles 32 and 33 may be imposed on the managing party and not on the institutional investor who is exposed to the securitisation.

(1) Where an institutional investor who is subject to SECN 4.5.1R (‘the managing party’) is instructed under SECN 4.5.1R to fulfil any of the obligations of another institutional investor who is also subject to SECN 4.5.1R and fails to do so, the managing party is responsible for the failure to comply with the relevant obligation and not the institutional investor who is exposed to the securitisation.

Where an institutional investor who is subject to this Article (‘the managing party’) is instructed under this paragraph to fulfil any of the obligations of another institutional investor who is subject to this Article and fails to do so, the managing party is responsible for the failure to comply with the relevant obligation and not the institutional investor who is exposed to the securitisation.

(2) The trustees or managers of the occupational pension scheme are not to be regarded as responsible for the failure to comply with the obligation in question.

(2) Where an institutional investor who is subject to SECN 4.5.1R (‘the managing party’) is instructed under SECN 4.5.1R to fulfil any of the obligations of another institutional investor who is subject to Article 5 of Chapter 2 of the Securitisation Part of the PRA Rulebook or to regulation 32A to 32D of the Securitisation Regulations 2024 and fails to do so, the managing party is responsible for the failure to comply with the relevant obligation.

Where an institutional investor who is subject to this Article (‘the managing party’) is instructed under this paragraph to fulfil any of the obligations of another institutional investor who is subject to equivalent rules made by the FCA or to regulations 32A to 32D of the Securitisation

Regulations and fails to do so, the managing party is responsible for the failure to comply with the relevant obligation.

(3) Where an institutional investor (‘the managing party’) who is subject to Article 5 of Chapter 2 of the Securitisation Part of the PRA Rulebook is instructed under SECN 4.5.1R to fulfil any of the obligations of another institutional investor who is subject to SECN 4.5.1R and fails to do so, the institutional investor who is exposed to the securitisation is not responsible for the failure to comply.

Where an institutional investor who is subject to equivalent rules made by the FCA is instructed under this paragraph to fulfil any of the obligations of another institutional investor who is

subject to this Article and fails to do so, the institutional investor who is exposed to the securitisation is not responsible for the failure to comply.

(3) In this regulation “relevant institutional investor” means an institutional investor which is an authorised person.

EUSR Article 5(5) provides that an institutional investor which has given another institutional investor authority to make investment management decisions that might expose it to a securitisation may instruct it to fulfil its Article 5 due diligence obligations (e.g. a pension fund could delegate the investment decisions to an FCA-authorised asset manager). Article 5(5) is ambiguous as to whether the responsibility for doing proper due diligence may be delegated. However, the FCA and PRA rules, and Article 32D, are clear that it can be. However, the transfer of responsibilityfor compliance with the due diligence requirements under the FCA rules does not occur except as expressly permitted. The FCA and PRA rules, and Article 32D, do not permit institutional investors to delegate responsibility to AIFMs which are not authorised in the UK, as they no longer fall within the definition of “institutional investor” (the exclusion of AIFMs which are not authorised in the UK from the definition of “institutional investor” is a change expressly made by the Securitisation Regulations 2024, and is reflected in the FCA and PRA rulebook definitions).

EUSR Article 2

Securitisation Regulations 2024

Regulation 3(1)

Comments

“credit institution” (EUSR cross-refers to EU CRR definition)

“credit institution” means an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account;

The UK has the same definition of “credit institution” as the EUSR had at the time of Brexit. The EUSR cross-refers to the definition in Article 4(1)(1) of the EU CRR, and this has since been amended by the Investment Firms Regulation, but this was not part of retained EU law and was not onshored.

[No EU equivalent]

“established in the United Kingdom” means constituted under the law of a part of the United Kingdom –

(a) with a registered office in any part of the United Kingdom, or

(b) if the person does not have a registered office, with a head office in any part of the United Kingdom;

No EU equivalent.

The UK Regulations make it clear that the UK branch of a non-UK incorporated firm is not established in the UK. The FCA and PRA rules cross-refer to this and repeatedly use it to define the geographical scope of the FCA and PRA rules.

See also “The meaning of "established" and of "the Union"”

“institutional investor” means an investor which is one of the following:

“institutional investor” means an investor which is one of the following -

(a) an insurance undertaking as defined in point (1) of Article 13 of Directive 2009/138/EC;

(a) an insurance undertaking as defined in section 417(1) of FSMA 2000;

(b) a reinsurance undertaking as defined in point (4) of Article 13 of Directive 2009/138/EC;

(b) a reinsurance undertaking as defined in section 417(1) of FSMA 2000;

(c) an institution for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 of the European Parliament and of the Council in accordance with Article 2 thereof, unless a Member States has chosen not to apply that Directive in whole or in parts to that institution in accordance with Article 5 of that Directive; or an investment manager or an authorised entity appointed by an institution for occupational retirement provision pursuant to Article 32 of Directive (EU) 2016/2341;

(c) the trustees or managers of an occupational pension scheme;

(d) a fund manager of an occupational pension scheme appointed under section 34(2) of the Pensions Act 1995 that, in respect of activity undertaken pursuant to that appointment, is authorised for the purposes of section 31 of FSMA 2000;

(d) an alternative investment fund manager (AIFM) as defined in point (b) of Article 4(1) of Directive 2011/61/EU that manages and/or markets alternative investment funds in the Union;

(e) an AIFM (as defined in regulation 4 of the Alternative Investment Fund Managers Regulations 2013) -

(i) with permission under Part 4A of FSMA 2000(f) in respect of the activity specified by article 51ZC of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001(g) (managing an AIF), and

(ii) which markets or manages an AIF (as defined in regulation 3 of the 2013 Regulations) in the United Kingdom,

and for the purposes of sub-paragraph (ii), an AIFM markets an AIF when the AIFM makes a direct or indirect offering or placement of units or shares of an AIF managed by it to or with an investor domiciled or with a registered office in the United Kingdom, or when another person makes such an offering or placement at the initiative of, or on behalf of, the AIFM;

The UK definition excludes from scope unauthorised non-UK AIFMs which market or manage an AIF in the UK (and the FCA and PRA rules cross-refer to this definition), so the only AIFMs covered by the UK due diligence requirements are UK-authorised ones.

The EU definition does not exclude non-EU AIFMs.

This was one of the five reforms heralded by H.M. Treasury’s December 2022 policy note.

[included in [d) above]

(f) a small registered UK AIFM;

Small UK AIFMs are registered with, but not authorised by, the FCA. They were in scope pre-Brexit.

(e) an undertaking for the collective investment in transferable securities (UCITS) management company, as defined in point (b) of Article 2(1) of Directive 2009/65/EC;

(g) a management company as defined in section 237(2) of FSMA 2000;

(f) an internally managed UCITS, which is an investment company authorised in accordance with Directive 2009/65/EC and which has not designated a management company authorised under that Directive for its management;

(h) a UCITS, as defined in section 236A of FSMA 2000(i), which is an authorised open ended investment company as defined in section 237(3) of FSMA 2000;

(g) a credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013 for the purposes of that Regulation or an investment firm as defined in point (2) of Article 4(1) of that Regulation;

(i) a CRR firm as defined in Article 4(1)(2A) of the Capital Requirements Regulation;

(j) an FCA investment firm as defined in Article 4(1)(2AB) of the Capital Requirements Regulation;

“original lender” means an entity which, itself or through related entities, directly or indirectly, concluded the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposures being securitised;

“original lender”, in relation to a securitisation, means an entity which, itself or through related entities, directly or indirectly, concluded the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposures being securitised;

Same in UK and EU

“originator” means an entity which:

(a) itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposures being securitised; or

(b) purchases a third party’s exposures on its own account and then securitises them;

“originator”, in relation to a securitisation, means an entity which -

(a) itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposures being securitised, or

(b) purchases a third party’s exposures on its own account and then securitises them;

Same in UK and EU

“securitisation” means a transaction or scheme, whereby the credit risk associated with an exposure or a pool of exposures is tranched, having all of the following characteristics:

(a) payments in the transaction or scheme are dependent upon the performance of the exposure or of the pool of exposures;

(b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme;

(c) the transaction or scheme does not create exposures which possess all of the characteristics listed in Article 147(8) of Regulation (EU) No 575/2013.

“securitisation” means a transaction or scheme, whereby the credit risk associated with an exposure or a pool of exposures is tranched, having all of the following characteristics —

(a) payments in the transaction or scheme are dependent upon the performance of the exposure or of the pool of exposures,

(b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme, and

(c) the transaction or scheme does not create exposures which possess all of the following characteristics —

(i) the exposure is to an entity which was created specifically to finance or operate physical assets or is an economically comparable exposure;

(ii) the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate;

(iii) the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise;

Same in UK and EU (the UK spells out the three “specialised lending” characteristics contained in Article 147(8) of the CRR but in the same terms).

If Article 147(8) of the CRR were to be amended, this could lead to divergence, but there is no reason to think this is likely.

See also “The definition of securitisation”.

“sponsor” means a credit institution, whether located in the Union or not, as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013, or an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU other than an originator, that:

(a) establishes and manages an asset-backed commercial paper programme or other securitisation that purchases exposures from third-party entities, or

(b) establishes an asset-backed commercial paper programme or other securitisation that purchases exposures from third-party entities and delegates the day-to-day active portfolio management involved in that securitisation to an entity authorised to perform such activity in accordance with Directive 2009/65/EC, Directive 2011/61/EU or Directive 2014/65/EU;

“sponsor” means a credit institution or an investment firm as defined in paragraph 1A of Article 2 of Regulation 600/2014/EU, whether located in the United Kingdom or in a country or territory outside the United Kingdom, which -

(a) is not an originator, and

(b) either -

(i) establishes and manages an ABCP programme or other securitisation that purchases exposures from third party entities, or

(ii) establishes an ABCP programme or other securitisation that purchases exposures from third party entities and delegates the day-to-day active portfolio management involved in that securitisation to an entity which is authorised to manage assets belonging to another person in accordance with the law of the country or territory in which the entity is established;

The UK version clearly includes non-UK investment firms, whereas the EUSR is ambiguous about non-EU ones.

See also “Who can be a sponsor”.

“tranche” means a contractually established segment of the credit risk associated with an exposure or a pool of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in another segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments;

“tranche” means a contractually established segment of the credit risk associated with an exposure or a pool of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in another segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments;

Same in UK and EU

EU

FCA 2024/18 Annex I Securitisation sourcebook (SECN)

Article 18

Use of the designation ‘simple, transparent and standardised securitisation’

2.2 STS criteria: Simple, transparent and standardised non-ABCP securitisation

Originators, sponsors and SSPEs may use the designation ‘STS’ or ‘simple, transparent and standardised’, or a designation that refers directly or indirectly to those terms for their securitisation, only where:

(a) the securitisation meets all the requirements set out in Section 1, 2 or 2a of this Chapter, and ESMA has been notified pursuant to Article 27(1); and]

(b) the securitisation is included in the list referred to in Article 27(5).

The originator, sponsor and SSPE involved in a securitisation considered STS shall be established in the Union.

2.2.1 R

A securitisation which is not an ABCP programme or an ABCP transaction

must fulfil the following requirements to be considered an STS

securitisation:

(1) those in SECN 2.2.2R to SECN 2.2.29R; and

(2) the FCA must have received an STS notification in respect of that securitisation and the securitisation must appear on the list it publishes under regulation 10(2) of the Securitisation Regulations 2024; and

(3) the originator and sponsor involved in the securitisation must be established in the United Kingdom.

Commentaries: Brexit - impacts and changes for securitisations in the UK and Europe; The meaning of "established" and of "the Union".

Article 19

Simple, transparent and standardised non-ABCP traditional securitisation

1. Traditional securitisations, except for ABCP programmes and ABCP transactions, that meet the requirements set out in Articles 20, 21 and 22, shall be considered to be STS.

2. By 18 October 2018, the EBA, in close cooperation with ESMA and EIOPA, shall adopt, in accordance with Article 16 of Regulation (EU) No 1093/2010, guidelines and recommendations on the harmonised interpretation and application of the requirements set out in Articles 20, 21 and 22.

Article 20 Requirements relating to simplicity

Simplicity requirements

1. The title to the underlying exposures shall be acquired by the SSPE by means of a true sale or assignment or transfer with the same legal effect in a manner that is enforceable against the seller or any other third party. The transfer of the title to the SSPE shall not be subject to severe clawback provisions in the event of the seller’s insolvency.

2.2.2 R

(1) Any SSPE must acquire title to the underlying exposures in a manner enforceable against the seller or any other third party, whether transfer of title is by means of:

(a) true sale;

(b) assignment; or

(c) another transfer with the same legal effect as (a) or (b).

(2) If the seller becomes insolvent, the transfer of the title to the SSPE must not be subject to severe clawback provisions.

Related recitals: Recital (22), Recital (23).

Commentaries: Synthetics; Severe clawback

EBA Guidelines
Background and rationale para. 16
Guidelines para. 10-12
Q&A 1-2

2. For the purpose of paragraph 1, any of the following shall constitute severe clawback provisions:

2.2.3 R

For the purposes of SECN 2.2.2R(2), the following are severe clawback provisions:

(a) provisions which allow the liquidator of the seller to invalidate the sale of the underlying exposures solely on the basis that it was concluded within a certain period before the declaration of the seller’s insolvency;

(1) those allowing the seller’s liquidator to invalidate the sale of the underlying exposures solely because it was concluded within a certain period before the declaration of the seller’s insolvency;

(b) provisions where the SSPE can only prevent the invalidation referred to in point (a) if it can prove that it was not aware of the insolvency of the seller at the time of sale.

(2) provisions where the SSPE can prevent the invalidation referred to in (1) only if it can prove it was unaware of the seller’s insolvency at the time of sale.

EBA Guidelines
Background and rationale para. 18-19
Q&A 2

3. For the purpose of paragraph 1, clawback provisions in national insolvency laws that allow the liquidator or a court to invalidate the sale of underlying exposures in the case of fraudulent transfers, unfair prejudice to creditors or transfers intended to improperly favour particular creditors over others shall not constitute severe clawback provisions.

2.2.4 R

For the purposes of SECN 2.2.2R(1), if provisions of national insolvency laws allow a liquidator or court to invalidate the sale of underlying exposures in the following circumstances, such provisions are not severe clawback provisions:

(1) fraudulent transfers; or

(2) unfair prejudice to creditors or transfers intended to improperly favour particular creditors over others.

4. Where the seller is not the original lender, the true sale or assignment or transfer with the same legal effect of the underlying exposures to that seller, whether that true sale or assignment or transfer with the same legal effect is direct or through one or more intermediate steps, shall meet the requirements set out in paragraphs 1 to 3.

2.2.5 R

If the seller is not the original lender, the transfer of the underlying exposures to that seller by any of the means in SECN 2.2.2R(1) (whether direct or through one or more intermediate steps) must meet the requirements in SECN 2.2.1 to SECN 2.2.3.

EBA Guidelines
Background and rationale para. 19

5. Where the transfer of the underlying exposures is performed by means of an assignment and perfected at a later stage than at the closing of the transaction, the triggers to effect such perfection shall include at least the following events:

2.2.6 R

If the transfer of the underlying exposures is performed by assignment and perfected after the transaction’s closing, the triggers to effect such perfection must be set broadly enough to require perfection in all of the following events:

(a) severe deterioration in the seller credit quality standing;

(1) severe deterioration in the seller’s credit quality standing;

(b) insolvency of the seller; and

(2) the seller’s insolvency; and

(c) unremedied breaches of contractual obligations by the seller, including the seller’s default.

(3) unremedied breaches of the seller’s contractual obligations, including the seller’s default.

EBA Guidelines
Background and rationale para. 20
Guidelines para. 13-14
Q&A 4

Commentary: Minimum perfection triggers

6. The seller shall provide representations and warranties that, to the best of its knowledge, the underlying exposures included in the securitisation are not encumbered or otherwise in a condition that can be foreseen to adversely affect the enforceability of the true sale or assignment or transfer with the same legal effect.

2.2.7 R

The seller must provide representations and warranties that, to the best of its knowledge, the underlying exposures included in the securitisation are not encumbered or otherwise in a condition that can be foreseen to adversely affect the enforceability of the transfer by the means in SECN 2.2.2R(1).

EBA Guidelines
Background and rationale para. 21
Q&A 5

Commentary: Underlying exposures unencumbered and enforceable

7. The underlying exposures transferred from, or assigned by, the seller to the SSPE shall meet predetermined, clear and documented eligibility criteria which do not allow for active portfolio management of those exposures on a discretionary basis. For the purpose of this paragraph, substitution of exposures that are in breach of representations and warranties shall not be considered active portfolio management. Exposures transferred to the SSPE after the closing of the transaction shall meet the eligibility criteria applied to the initial underlying exposures.

2.2.8 R

(1) The underlying exposures the seller transfers to the SSPE (if an SSPE is used) or that are otherwise securitised must meet predetermined, clear and documented eligibility criteria prohibiting active portfolio management of those exposures on a discretionary basis.

(2) For the purposes of SECN 2.2.8R(1), substitution of exposures that are in breach of representations and warranties is not considered active portfolio management.

(3) Exposures transferred to the SSPE (if an SSPE is used) or otherwise added to the securitisation after the closing of the transaction must meet the eligibility criteria applied to the initial underlying exposures.

Related recital: Recital (25)

EBA Guidelines
Background and rationale para. 23-26
Guidelines para. 15-19
Q&A 6-7

8. The securitisation shall be backed by a pool of underlying exposures that are homogeneous in terms of asset type, taking into account the specific characteristics relating to the cash flows of the asset type including their contractual, credit-risk and prepayment characteristics. A pool of underlying exposures shall comprise only one asset type. The underlying exposures shall contain obligations that are contractually binding and enforceable, with full recourse to debtors and, where applicable, guarantors.

2.2.9 R

(1) The securitisation must be backed by a pool of underlying exposures that are homogeneous in terms of asset type, considering the specific characteristics relating to the asset type’s cash flows, including their contractual, credit-risk and prepayment characteristics.

(2) Further details specifying which underlying exposures are homogeneous for the purposes of (1) are set out at SECN 2.4.

(3) The underlying exposures must contain contractually binding and enforceable obligations, with full recourse to debtors and, where applicable, guarantors.

The underlying exposures shall have defined periodic payment streams, the instalments of which may differ in their amounts, relating to rental, principal, or interest payments, or to any other right to receive income from assets supporting such payments. The underlying exposures may also generate proceeds from the sale of any financed or leased assets.

(4) The underlying exposures must have defined periodic payment streams (the instalments of which may differ in their amounts) relating to rental, principal, or interest payments, or to any other right to receive income from assets supporting such payments. The underlying exposures may also generate proceeds from the sale of any financed or leased assets.

The underlying exposures shall not include transferable securities, as defined in point (44) of Article 4(1) of Directive 2014/65/EU [MiFID II]], other than corporate bonds that are not listed on a trading venue.

(5) The underlying exposures must not include any transferable security, other than corporate bonds not listed on a trading venue.

EBA Guidelines
Background and rationale para. 27-30
Guidelines para. 20-21
Q&A 8-9

The FCA rules provide, similar to the EU Homogeneity RTS, that “loans to certain corporates will be treated as homogeneous with loans to individuals if the relevant underwriting approaches and servicing procedures… are the same or similar”.

SECN 2.2.9 expressly states that the pool of securitised exposures may include unlisted corporate bonds (this appears in recital (27) of the EUSR), and SECN 2.4.3 states that BTL and owner-occupied mortgages are generally not homogenous unless underwritten and serviced with similar standards.

Related recital: Recital (27)

Related RTS: RTS on homogeneity

Commentaries: What is homogeneity and how do we know it when we see it?; A brief history of homogeneity

9. The underlying exposures shall not include any securitisation position.

2.2.10 R

The underlying exposures must not include any securitisation position.

EBA Guidelines
Background and rationale para. 31-32

Commentary: Resecuritisations

10. The underlying exposures shall be originated in the ordinary course of the originator’s or original lender’s business pursuant to underwriting standards that are no less stringent than those that the originator or original lender applied at the time of origination to similar exposures that are not securitised. The underwriting standards pursuant to which the underlying exposures are originated and any material changes from prior underwriting standards shall be fully disclosed to potential investors without undue delay.

2.2.11 R

(1) The underlying exposures must be originated:

(a) in the ordinary course of the originator’s or original lender’s business; and

(b) following underwriting standards at least as rigorous as those the originator or original lender applied at the time of origination to similar unsecuritised exposures, to the extent there are any.

(2) The originator or the original lender (as the case may be) must fully disclose to potential investors, without undue delay:

(a) the underwriting standards pursuant to which the underlying exposures are originated; and

(b) any material changes from former underwriting standards.

In the case of securitisations where the underlying exposures are residential loans, the pool of loans shall not include any loan that was marketed and underwritten on the premise that the loan applicant or, where applicable, intermediaries were made aware that the information provided might not be verified by the lender.

(3) For securitisations with residential loans as underlying exposures, the pool of loans must not include any loan that was marketed and underwritten on the premise that the loan applicant or, where applicable, intermediaries were made aware that the lender might not verify the information provided.

The assessment of the borrower’s creditworthiness shall meet the requirements set out in Article 8 of Directive 2008/48/EC or paragraphs 1 to 4, point (a) of paragraph 5, and paragraph 6 of Article 18 of 2014/17/EU [Mortgage Credits Directive] or, where applicable, equivalent requirements in third countries.

(4) The assessment of the borrower’s creditworthiness must meet the requirements in:

(a) CONC 5.2A.7R;

(b) MCOB 11.6.2R(1)(a), MCOB 11.6.2R(1)(b), MCOB 11.6.2R(2), MCOB 11.6.5R(1), MCOB 11.6.60R and MCOB 11A.2.1R; or

(c) where applicable, equivalent requirements in a third country.

The originator or original lender shall have expertise in originating exposures of a similar nature to those securitised.

(5) The originator or original lender must have expertise in originating exposures of a similar nature to those securitised.

Related recitals: Recital (11); Recital (28)

11. The underlying exposures shall be transferred to the SSPE after selection without undue delay and shall not include, at the time of selection, exposures in default within the meaning of Article 178(1) of Regulation (EU) No 575/2013 [CRR] or exposures to a credit-impaired debtor or guarantor, who, to the best of the originator’s or original lender’s knowledge:

(a) has been declared insolvent or had a court grant his creditors a final non-appealable right of enforcement or material damages as a result of a missed payment within three years prior to the date of origination or has undergone a debt-restructuring process with regard to his non-performing exposures within three years prior to the date of transfer or assignment of the underlying exposures to the SSPE, except if:

(i) a restructured underlying exposure has not presented new arrears since the date of the restructuring, which must have taken place at least one year prior to the date of transfer or assignment of the underlying exposures to the SSPE; and

(ii) the information provided by the originator, sponsor and SSPE in accordance with points (a) and (e)(i) of the first subparagraph of Article 7(1) explicitly sets out the proportion of restructured underlying exposures, the time and details of the restructuring as well as their performance since the date of the restructuring;

(b) was, at the time of origination, where applicable, on a public credit registry of persons with adverse credit history or, where there is no such public credit registry, another credit registry that is available to the originator or original lender; or

(c) has a credit assessment or a credit score indicating that the risk of contractually agreed payments not being made is significantly higher than for comparable exposures held by the originator which are not securitised.

2.2.12 R

(1) After the underlying exposures have been selected, they must be transferred to the SSPE (if an SSPE is used) or otherwise securitised without undue delay.

(2) At the time of selection, the underlying exposures must not include exposures in default within the meaning of Article 178(1) of the UK CRR or exposures to a credit-impaired debtor or guarantor who, to the best of the originator’s or original lender’s knowledge:

(a) was, at the time of origination, where applicable:

(i) on a public credit registry of persons with adverse credit history; or

(ii) if there is no such public credit registry, another credit registry that is available to the originator or original lender;

(b) has a credit assessment or a credit score indicating that the risk of contractually agreed payments not being made is significantly higher than for comparable unsecuritised exposures the originator holds, if any;

(c) has been declared insolvent;

(d) had a court grant its creditors a final non-appealable right of enforcement or material damages as a result of a missed payment within 3 years before the date of origination; or

(e) has undergone a debt restructuring process with regard to its non-performing exposures within 3 years before the date of transfer of the underlying exposures to the SSPE (if an SSPE is used) or other means of securitising the underlying exposure.

(3) If a credit-impaired debtor or guarantor has undergone a debt restructuring process as described in (2)(e), the underlying exposures may include exposures to that credit-impaired debtor or guarantor if:

(a) the restructured underlying exposure has not presented new arrears since the date of the restructuring, which must have taken place at least 1 year before the date the underlying exposures were transferred to the SSPE (if an SSPE is used) or otherwise securitised; and

(b) the information the originator, sponsor and SSPE have provided in accordance with SECN 6.2.1R(1) and SECN 6.2.1R(5)(a) explicitly sets out:

(i) the proportion of total underlying exposures, which have been restructured;

(ii) the time and details of the restructuring; and

(iii) their performance since the date they were restructured.

Related recital: Recital (26)

EBA Guidelines
Background and rationale para. 39-40
Guidelines para. 37-45
Q&A 13-15

12. The debtors shall, at the time of transfer of the exposures, have made at least one payment, except in the case of revolving securitisations backed by exposures payable in a single instalment or having a maturity of less than one year, including without limitation monthly payments on revolving credits.

2.2.13 R The debtors must, at the time the exposures are transferred, have made at least one payment, except in the case of revolving securitisations backed by exposures payable in a single instalment or with a maturity of less than 1 year (including, without limitation, monthly payments on revolving credits).

EBA Guidelines
Background and rationale para. 41-42
Guidelines para. 46-47
Q&A 16

13. The repayment of the holders of the securitisation positions shall not have been structured to depend predominantly on the sale of assets securing the underlying exposures. This shall not prevent such assets from being subsequently rolled-over or refinanced.

The repayment of the holders of the securitisation positions whose underlying exposures are secured by assets the value of which is guaranteed or fully mitigated by a repurchase obligation by the seller of the assets securing the underlying exposures or by another third party shall not be considered to depend on the sale of assets securing those underlying exposures.

2.2.14 R

(1) A securitisation must not be structured so that repayment of investors depends predominantly on the sale of the assets securing the underlying exposures.

(2) Paragraph (1) must not prevent such assets from subsequently being rolled over or refinanced.

(3) If a securitisation’s underlying exposures are secured by assets, and the value of those assets is guaranteed or fully mitigated by an obligation on the seller or another third party to repurchase them, that securitisation does not contravene the prohibition in (1).

Related recitals: Recital (29)

Commentaries: Reliance on asset sales; CMBS - a cinderella asset class?

EBA Guidelines
Background and rationale para. 43-46
Guidelines para. 48-50

14. The EBA, in close cooperation with ESMA and EIOPA, shall develop draft regulatory technical standards further specifying which underlying exposures referred to in paragraph 8 are deemed to be homogeneous.

The EBA shall submit those draft regulatory technical standards to the Commission by 18 July 2018.]

The Commission is empowered to supplement this Regulation by adopting the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.]

Article 21

Requirements relating to standardisation

Standardisation requirements

1. The originator, sponsor or original lender shall satisfy the risk-retention requirement in accordance with Article 6.

2.2.15 R The originator, sponsor or original lender must satisfy the risk-retention requirement in accordance with SECN 5.

EBA Guidelines
Background and rationale para. 47-48

2. The interest-rate and currency risks arising from the securitisation shall be appropriately mitigated and any measures taken to that effect shall be disclosed. Except for the purpose of hedging interest-rate or currency risk, the SSPE shall not enter into derivative contracts and shall ensure that the pool of underlying exposures does not include derivatives. Those derivatives shall be underwritten and documented according to common standards in international finance.

2.2.16 R

(1) The interest rate and currency risks arising from the securitisation must be appropriately mitigated. Any measures taken to that effect must be disclosed.

(2) The securitisation must be structured such that:

(a) the SSPE does not enter into derivative contracts, unless to hedge interest rate or currency risk; and

(b) the pool of underlying exposures does not include derivatives.

(3) Any derivatives into which the SSPE does enter in accordance with (2)(a) must be underwritten and documented according to common standards in international finance.

Commentary: Standard reference rates

EBA Guidelines
Background and rationale para. 49-52
Guidelines para. 51-56
Q&A 19

3. Any referenced interest payments under the securitisation assets and liabilities shall be based on generally used market interest rates, or generally used sectoral rates reflective of the cost of funds, and shall not reference complex formulae or derivatives.

2.2.17 R

Any referenced interest payments under the securitisation assets and liabilities must:

(1) be based on generally used market interest rates or generally used sectoral rates reflective of the cost of funds; and

(2) not reference complex formulae or derivatives.

EBA Guidelines
Background and rationale para. 53-54
Guidelines para. 57-58
Q&A 20

4. Where an enforcement or an acceleration notice has been delivered:

2.2.18 R

If an enforcement or an acceleration notice has been delivered:

(a) no amount of cash shall be trapped in the SSPE beyond what is necessary to ensure the operational functioning of the SSPE or the orderly repayment of investors in accordance with the contractual terms of the securitisation, unless exceptional circumstances require that an amount be trapped to be used, in the best interests of investors, for expenses in order to avoid the deterioration in the credit quality of the underlying exposures;

(1) no cash may be trapped in the SSPE above what is needed to ensure the SSPE’s operational functioning or the orderly repayment of investors under the securitisation’s contractual terms. However, an amount of cash may be so trapped if exceptional circumstances require it to be used (in the investors’ best interests) to pay expenses to prevent deterioration in the underlying exposures’ credit quality;

(b) principal receipts from the underlying exposures shall be passed to investors via sequential amortisation of the securitisation positions, as determined by the seniority of the securitisation position;

(2) principal receipts from the underlying exposures must be passed to investors via sequential amortisation of the securitisation positions, as determined by the securitisation positions’ seniority;

(c) repayment of the securitisation positions shall not be reversed with regard to their seniority; and

(3) repayment of the securitisation positions must not be reversed with regard to their seniority; and

(d) no provisions shall require automatic liquidation of the underlying exposures at market value.

(4) no provisions may require automatic liquidation of the underlying exposures at market value.

EBA Guidelines
Background and rationale para. 55-58
Guidelines para. 59-65
Q&A 21

5. Transactions which feature non-sequential priority of payments shall include triggers relating to the performance of the underlying exposures resulting in the priority of payments reverting to sequential payments in order of seniority. Such performance-related triggers shall include at least the deterioration in the credit quality of the underlying exposures below a predetermined threshold.

2.2.19 R

Transactions featuring non-sequential priority of payments must include triggers relating to the performance of the underlying exposures resulting in the priority of payments reverting to sequential payments in order of seniority. Such performance-related triggers must include the deterioration in the credit quality of the underlying exposures below a predetermined threshold.

EBA Guidelines
Background and rationale para. 59-60
Guidelines para. 66
Q&A 22

6. The transaction documentation shall include appropriate early amortisation provisions or triggers for termination of the revolving period where the securitisation is a revolving securitisation, including at least the following:

2.2.20 R

The transaction documentation must include appropriate early amortisation provisions or, in the case of a revolving securitisation, triggers for termination of the revolving period, including in the following circumstances:

(a) a deterioration in the credit quality of the underlying exposures to or below a predetermined threshold;

(1) the underlying exposures’ credit quality deteriorating to or below a predetermined threshold;

(b) the occurrence of an insolvency-related event with regard to the originator or the servicer;

(2) an insolvency-related event with regard to the originator or the servicer occurring;

(c) the value of the underlying exposures held by the SSPE falls below a predetermined threshold (early amortisation event); and

(3) the value of the underlying exposures falling below a predetermined threshold (early amortisation event); and

(d) a failure to generate sufficient new underlying exposures that meet the predetermined credit quality (trigger for termination of the revolving period).

(4) failing to generate sufficient new underlying exposures meeting the predetermined credit quality (trigger for termination of the revolving period).

EBA Guidelines
Background and rationale para. 61-62
Guidelines para. 67
Q&A 23

7. The transaction documentation shall clearly specify:

2.2.21 R

The transaction documentation must clearly specify:

(a) the contractual obligations, duties and responsibilities of the servicer and the trustee, if any, and other ancillary service providers;

(1) the servicer’s, any trustee’s and other ancillary service providers’ contractual obligations, duties and responsibilities;

(b) the processes and responsibilities necessary to ensure that a default by or an insolvency of the servicer does not result in a termination of servicing, such as a contractual provision which enables the replacement of the servicer in such cases; and

(2) the processes and responsibilities necessary to ensure that the servicer’s default or insolvency does not result in servicing terminating, such as a contractual provision enabling the servicer to be replaced in such cases; and

(c) provisions that ensure the replacement of derivative counterparties, liquidity providers and the account bank in the case of their default, insolvency, and other specified events, where applicable.

(3) provisions ensuring derivative counterparties, liquidity providers and the account bank are replaced in the case of their default, insolvency and other specified events, where applicable.

Related recital: Recital (25)

EBA Guidelines
Background and rationale para. 63-64
Q&A 24

8. The servicer shall have expertise in servicing exposures of a similar nature to those securitised and shall have well-documented and adequate policies, procedures and risk-management controls relating to the servicing of exposures.

2.2.22 R

The servicer must have:

(1) expertise in servicing exposures of a similar nature to those securitised; and

(2) well-documented and adequate policies, procedures and risk management controls relating to the exposures’ servicing.

EBA Guidelines
Background and rationale para. 65-67
Guidelines para. 68-72
Q&A 25-26

9. The transaction documentation shall set out in clear and consistent terms definitions, remedies and actions relating to delinquency and default of debtors, debt restructuring, debt forgiveness, forbearance, payment holidays, losses, charge offs, recoveries and other asset performance remedies. The transaction documentation shall clearly specify the priorities of payment, events which trigger changes in such priorities of payment as well as the obligation to report such events. Any change in the priorities of payments which will materially adversely affect the repayment of the securitisation position shall be reported to investors without undue delay.

2.2.23 R

(1) The transaction documentation must clearly and consistently set out definitions, remedies and actions relating to:

(a) delinquency and default of debtors;

(b) debt restructuring;

(c) debt forgiveness;

(d) forbearance;

(e) payment holidays;

(f) losses;

(g) charge offs;

(h) recoveries; and

(i) other asset performance remedies.

(2) The transaction documentation must clearly specify:

(a) the priorities of payment and events triggering any change to these; and

(b) the obligation to report such events.

(3) Any change in the priorities of payments which will materially adversely affect a securitisation position’s repayment must be reported to investors without undue delay.

Related recital: Recital (26)

EBA Guidelines
Background and rationale para. 70-71
Guidelines para. 73
Q&A 27

10. The transaction documentation shall include clear provisions that facilitate the timely resolution of conflicts between different classes of investors, voting rights shall be clearly defined and allocated to bondholders and the responsibilities of the trustee and other entities with fiduciary duties to investors shall be clearly identified.

2.2.24 R

The transaction documentation must include clear:

(1) provisions facilitating timely resolution of conflicts between different classes of investors;

(2) definitions of voting rights;

(3) allocation of voting rights to classes of investor; and

(4) identification of responsibilities of the trustee and other entities with fiduciary duties to investors.

EBA Guidelines
Background and rationale para. 70-71
Guidelines para. 74
Q&A 28

Article 22

Requirements relating to transparency

Transparency requirements

1. The originator and the sponsor shall make available data on static and dynamic historical default and loss performance, such as delinquency and default data, for substantially similar exposures to those being securitised, and the sources of those data and the basis for claiming similarity, to potential investors before pricing. Those data shall cover a period of at least five years.

2.2.25 R

Before pricing or original commitment to invest, the originator and the sponsor must make available to potential investors:

(1) data covering a period of at least 5 years about static and dynamic historical default and loss performance, such as delinquency and default data, for substantially similar exposures to those being securitised; and

(2) the sources of the data in (1) and the reasons those exposures are substantially similar exposures to those being securitised.

EBA Guidelines
Background and rationale para. 72-73
Guidelines para. 75-77
Q&A 29

2. A sample of the underlying exposures shall be subject to external verification prior to issuance of the securities resulting from the securitisation by an appropriate and independent party, including verification that the data disclosed in respect of the underlying exposures is accurate.

2.2.26 R

(1) An appropriate and independent external party must verify a sample of the underlying exposures before the securities resulting from the securitisation are issued.

(2) That verification must confirm that the data disclosed in respect of the underlying exposures is accurate.

EBA Guidelines
Background and rationale para. 74-75
Guidelines para. 78-81
Q&A 30

3. The originator or the sponsor shall, before the pricing of the securitisation, make available to potential investors a liability cash flow model which precisely represents the contractual relationship between the underlying exposures and the payments flowing between the originator, sponsor, investors, other third parties and the SSPE, and shall, after pricing, make that model available to investors on an ongoing basis and to potential investors upon request.

2.2.27 R

(1) Before pricing or original commitment to invest, the originator or the sponsor must make available to potential investors a liability cashflow model precisely representing the contractual relationship between the underlying exposures and the payments flowing between:

(a) the originator;

(b) the sponsor;

(c) the investors;

(d) other third parties; and

(e) the SSPE.

(2) After pricing or original commitment to invest, the originator or the sponsor must continually make that model available to investors and potential investors on request.

EBA Guidelines
Background and rationale para. 76-77
Guidelines para. 82-83
Q&A 31

4. In the case of a securitisation where the underlying exposures are residential loans or auto loans or leases, the originator and sponsor shall publish the available information related to the environmental performance of the assets financed by such residential loans or auto loans or leases, as part of the information disclosed pursuant to point (a) of the first subparagraph of Article 7(1).

2.2.28 R

For a securitisation whose underlying exposures are residential loans or auto loans or leases, the originator and sponsor must publish the available information about the environmental performance of the assets financed by such residential loans or auto loans or leases as part of the information disclosed pursuant to SECN 6.2.1R(1).

By way of derogation from the first subparagraph, originators may, from 1 June 2021, decide to publish the available information related to the principal adverse impacts of the assets financed by underlying exposures on sustainability factors.

Related recital: Recital (30)

Commentary: Environmental disclosures

EBA Guidelines
Background and rationale para. 78-79
Guidelines para. 84
Q&A 32-33

5. The originator and the sponsor shall be responsible for compliance with Article 7. The information required by point (a) of the first subparagraph of Article 7(1) shall be made available to potential investors before pricing upon request. The information required by points (b) to (d) of the first subparagraph of Article 7(1) shall be made available before pricing at least in draft or initial form. The final documentation shall be made available to investors at the latest 15 days after closing of the transaction.

2.2.29 R

(1) Before pricing or original commitment to invest, the following information must be made available to potential investors:

(a) that required by SECN 6.2.1R(1); and

(b) at least in draft or initial form, that required by SECN 6.2.1R(2) to SECN 6.2.1R(4).

(2) The final documentation must be made available to investors at the latest 15 days after closing of the transaction.

6. By 10 July 2021, the ESAs shall develop, through the Joint Committee of the European Supervisory Authorities, draft regulatory technical standards in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010 on the content, methodologies and presentation of information referred to in the second subparagraph of paragraph 4 of this Article, in respect of the sustainability indicators in relation to adverse impacts on the climate and other environmental, social and governance-related adverse impacts.

Where relevant, the draft regulatory technical standards referred to in the first subparagraph shall mirror or draw upon the regulatory technical standards developed pursuant to the mandate given to the ESAs in Regulation (EU) 2019/2088 [Sustainable Finance Disclosure Regulation], in particular in Article 2a and Article 4(6) and (7) thereof.

The Commission is empowered to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

References

EBA Guidelines
Background and rationale para. 80-81
Q&A 34

The STS criteria for ABCP are not set out here

The STS criteria for ABCP are not set out here

The homogeneity RTS

2.4 STS criteria: Homogeneity of underlying exposures

[These are not set out here; they correspond to SECN 2.4]

[SECN 2.4 is not set out here; it corresponds to the homogeneity RTS]

Article 27

STS notification

2.5 STS notification

1. Originators and sponsors shall jointly notify ESMA by means of the template referred to in paragraph 7 of this Article where a securitisation meets the requirements set out in Articles 19 to 22, Articles 23 to 26 or Articles 26a to 26e (“STS notification”)...

2.5.1 R (1) If a securitisation which is not an ABCP programme or an ABCP transaction meets the relevant STS criteria, the originator and sponsor jointly may notify the FCA of that fact as described in SECN 2.6.

This extract is shown to highlight one small helpful divergence in the wording between Article 27 and SECN 2.5.1. Article 27(1) on the face of it requires notification if the STS criteria are met even if the originator or sponsor does not wish to have the issue registered as STS. The FCA rules clarifies (“may” rather than “shall”) that notification is not required unless the originator or sponsor wishes to have the issue registered as STS.

EUSR Article 6 and Risk Retention RTS (CDR 2023/2175)

FCA SECN 5

PRA Chapter 1, Chapter 2, Article 6 and Chapter 4 

RTS Article 1 (Definitions)

For the purposes of this Regulation, the following definitions shall apply:

(a) ‘synthetic form of retention’ means the retention of a material net economic interest through the use of derivative instruments;

(b) ‘contingent form of retention’ means the retention of a material net economic interest through the use of credit support that ensures an immediate enforcement of the retention, including by guarantees, letters of credit, or similar forms of credit support.

5.1 Interpretation and application

5.1.3 R

(1) ‘contingent form of retention’ means retention of a material net economic interest through the use of guarantees, letters of credit and other similar forms of credit support ensuring an immediate enforcement of the retention;

(2) ‘synthetic form of retention’ means retention of a material net economic interest through the use of derivative instruments; and

(3) ‘UK Solvency II Firm’ has the same definition as in Article 2.1 of Chapter 2, Solvency II Firms: Insurance General Application of the PRA Rulebook.

1. Applications and definitions

contingent form of retention

means retention of a material net economic interest through the use of guarantees, letters of credit and other similar forms of credit support ensuring an immediate enforcement of the retention.

synthetic form of retention

means retention of a material net economic interest through the use of derivative instruments.

Article 6 Risk retention

1. The originator, sponsor or original lender of a securitisation shall retain on an ongoing basis a material net economic interest in the securitisation of not less than 5 %. That interest shall be measured at the origination and shall be determined by the notional value for off-balance-sheet items.

5.2 Retention of a material net economic interest

5.2.1 R

The originator, sponsor or original lender of a securitisation shall retain on an ongoing basis a material net economic interest in the securitisation of not less than 5%. That interest shall be measured at the origination and shall be determined by the notional value for off-balance-sheet items.

Chapter 2, Article 6 Risk retention

1. The originator, sponsor or original lender of a securitisation shall retain on an ongoing basis a material net economic interest in the securitisation of not less than 5%. That interest shall be measured at the origination and shall be determined by the notional value for off-balance-sheet items.

Where the originator, sponsor or original lender have not agreed between them who will retain the material net economic interest, the originator shall retain the material net economic interest.

5.2.2 R

Where the originator, sponsor or original lender have not agreed between them who will retain the material net economic interest, the originator shall

retain the material net economic interest.

Where the originator, sponsor or original lender have not agreed between them who will retain the material net economic interest, the originator shall retain the material net economic interest.

There shall be no multiple applications of the retention requirements for any given securitisation.

5.2.3 R

There shall be no multiple applications of the retention requirements for any given securitisation.

There shall be no multiple applications of the retention requirements for any given securitisation.

The material net economic interest shall not be split amongst different types of retainers and not be subject to any credit-risk mitigation or hedging.

5.2.4 R

The material net economic interest shall not be split amongst different types of retainers and shall not be subject to any credit-risk mitigation or hedging.

The material net economic interest shall not be split amongst different types of retainers and shall not be subject to any credit-risk mitigation or hedging.

For the purposes of this Article, an entity shall not be considered to be an originator where the entity has been established or operates for the sole purpose of securitising exposures.

5.2.5 R

For the purposes of SECN 5, an entity shall not be considered to be an originator where the entity has been established or operates for the sole purpose of securitising exposures.

For the purposes of this Article and Chapter 4, an entity shall not be considered to be an originator where the entity has been established or operates for the sole purpose of securitising exposures.

RTS Article 2 (Retainers of a material net economic interest)

1. The requirement laid down in Article 6(1), first subparagraph, of Regulation (EU) 2017/2402, which states that the retained material net economic interest shall not be split amongst different types of retainers, shall be fulfilled by any of the following:

(a) the originator or originators;

(b) the sponsor or sponsors;

(c) the original lender or original lenders;

(d) the servicer or servicers in a traditional NPE securitisation, provided that they meet the requirement on expertise set out in Article 19 of this Regulation.

[see 5.3.1 below]

Chapter 4, Article 2 Retainers of material net economic interest

1. The requirement that the retained material net economic interest shall not be split amongst different types of retainers under Article 6(1) of Chapter 2 shall be fulfilled by any of the following:

(a) the originator or originators;

(b) the sponsor or sponsors; or

(c) the original lender or original lenders;

[See Article 6(2) below]

5.2.6 R

Subject to SECN 5.2.7R, originators shall not select assets to be transferred to the SSPE with the aim of rendering losses on the assets transferred to the SSPE, measured over the life of the transaction, or over a maximum of 4 years where the life of the transaction is longer than 4 years, higher than the losses over the same period on comparable assets held on the balance sheet of the originator.

[See Article 6(2) below]

2. Where more than one originator is eligible to fulfil the retention requirement, each originator shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the originator.

[see 5.3.2 below]

2. Where more than one originator is eligible to fulfil the retention requirement, each originator shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the originator.

[The FCA rule tracks EUSR Recital (11):

“… However, that obligation should not prejudice in any way the right of originators or sponsors to select assets to be transferred to the SSPE that ex ante have a higher-than-average credit-risk profile compared to the average credit-risk profile of comparable assets that remain on the balance sheet of the originator, as long as the higher credit-risk profile of the assets transferred to the SSPE is clearly communicated to the investors or potential investors…”]

5.2.7 R

Originators may select assets to be transferred to the SSPE that ex ante have a higher than average credit risk profile as compared to the comparable assets, if any, that remain on the balance sheet of the originator provided that the higher credit risk profile of the assets transferred to the SSPE is clearly communicated to the investors or potential investors.

[see 2A below]

[see Article 6(3)]

5.2.8 R

[This corresponds to Article 6(3) in the EUSR and the PRA rules, and so is set out below alongside those]

[see Article 6(3)]

See Article 6(4) below]

5.2.9 R (1)

Where:

(a) a mixed financial holding company;

(b) a UK parent institution;

(c) a financial holding company that is established in the United Kingdom; or

(d) a subsidiary of such a company or institution,

as an originator or sponsor, securitises exposures from one or more CRR firms, FCA investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirements set out in SECN 5.2.1R to SECN 5.2.5R may be satisfied based on the consolidated situation of the mixed financial holding company, UK parent institution or financial holding company concerned.

See Article 6(4) below]

See Article 6(4) below]

(2) Subject to the modifications for FCA investment firms in (3), (1) applies only if CRR firms, FCA investment firms or financial institutions which created the securitised exposures:

(a) comply with the requirements in Chapter 4 of the Internal Capital Adequacy Assessment Part of the PRA Rulebook; and

(b) deliver the information needed to satisfy the requirements in SECN 4 or equivalent PRA rules, in a timely manner, to the originator or sponsor and, if the originator or sponsor is a subsidiary, to the mixed financial holding company, UK parent institution or financial holding company which is the parent undertaking of the subsidiary.

See Article 6(4) below]

[No equivalent]

(3) In the case of FCA investment firms, compliance with the requirements set out in Article 4.2 of Chapter 4 of the Internal Capital Adequacy Assessment Part of the PRA Rulebook are modified in accordance with this subparagraph:

(a) FCA investment firms must have internal methodologies that enable them to assess the credit risk of exposures to individual obligors, securities or securitisation positions and credit risk at the portfolio level;

(b) the internal methodologies must not rely solely or mechanistically on external credit ratings; and

(c) where an FCA investment firm determines the amount of own funds that it should hold by reference to a rating by an external credit assessment institution or by reference to the fact that an exposure is unrated, this does not exempt the FCA investment firm from additionally considering other relevant information for assessing its allocation of internal capital.

[No equivalent]

(4) In SECN 5.2.9R ‘subsidiary’ has the meaning given in Article 4(1)(16) of UK CRR.

5.2.10 R

[This corresponds to Article 6(5) in the EUSR and the PRA rules, and so is set out below alongside those]

5.2.11 R

[This corresponds to Article 6(6) in the EUSR and the PRA rules, and so is set out below alongside those]

[See RTS Article 2(1) above]

5.3.1 R

The requirement that the retained material net economic interest shall not be split among different types of retainers under SECN 5.2.4R shall be fulfilled by any of the following:

(1) the originator or originators;

(2) the sponsor or sponsors; or

(3) the original lender or original lenders.

[See Chapter 4, Article 2(1) above]

[See RTS Article 2(2) above]

5.3.2 R

Where more than one originator is eligible to fulfil the retention requirement each originator shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the originator.

[See Chapter 4, Article 2(2) above]

3. Where more than one original lender is eligible to fulfil the retention requirement, each original lender shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the original lender.

5.3.3 R

Where more than one original lender is eligible to fulfil the retention requirement, each original lender shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the original lender.

3. Where more than one original lender is eligible to fulfil the retention requirement, each original lender shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the original lender.

4. By way of derogation from paragraphs 2 and 3, the retention requirement may be fulfilled in full by a single originator or original lender provided that one of the following conditions is met:

5.3.4 R

By way of derogation from SECN 5.3.2R and SECN 5.3.3R, the retention requirement may be fulfilled in full by a single originator or original lender provided that either of the following conditions is met:

4. By way of derogation from paragraphs 2 and 3, the retention requirement may be fulfilled in full by a single originator or original lender provided that either of the following conditions is met:

(a) the originator or original lender has established and is managing the asset-backed commercial paper (ABCP) programme or other securitisation;

(1) the originator or original lender has established and is managing the ABCP programme or other securitisation; or

(a) the originator or original lender has established and is managing the ABCP programme or other securitisation; or

(b) the originator or original lender has established the ABCP programme or other securitisation and has contributed more than 50 % of the total securitised exposures measured by nominal value at origination.

(2) the originator or original lender has established the ABCP programme or other securitisation and has contributed over 50% of the total securitised exposures measured by nominal value at origination.

(b) the originator or original lender has established the ABCP programme or other securitisation and has contributed over 50% of the total securitised exposures measured by nominal value at origination.

5. Where more than one sponsor is eligible to fulfil the retention requirement, the retention requirement shall be fulfilled by either:

5.3.5 R

Where more than one sponsor is eligible to fulfil the retention requirement, the retention requirement shall be fulfilled by either:

5. Where more than one sponsor is eligible to fulfil the retention requirement, the retention requirement shall be fulfilled by either:

(a) the sponsor whose economic interest is most closely aligned with the investor’s interest as agreed by all involved sponsors on the basis of objective criteria, including all of the following:

(i) the transaction’s fee structure;

(ii) the sponsor’s involvement in the establishment and management of the ABCP programme or other securitisation; and

(iii) the exposure to the credit risk of the securitisations; or

(1) the sponsor whose economic interest is most appropriately aligned with investors as agreed by the multiple sponsors on the basis of objective criteria including, but not limited to, the transaction’s fee structure, the sponsor’s involvement in the establishment and management of the ABCP programme or other securitisation and exposure to credit risk of the securitisations; or

(a) the sponsor whose economic interest is most appropriately aligned with investors as agreed by the multiple sponsors on the basis of objective criteria including, but not limited to, the transaction’s fee structure, the sponsor’s involvement in the establishment and management of the ABCP programme or other securitisation and exposure to credit risk of the securitisations; or

(b) each sponsor in proportion to the total number of sponsors.

(2) by each sponsor in proportion to the total number of sponsors.

(b) by each sponsor in proportion to the total number of sponsors.

6. Where more than one servicer is eligible to fulfil the retention requirement, the retention requirement shall be fulfilled by either:

(a) the servicer with the predominant economic interest in the successful workout of the exposures of the traditional NPE securitisation, as agreed by all servicers involved on the basis of objective criteria, including the transaction’s fee structure and the servicer’s available resources and expertise to manage the exposures’ workout process; or

(b) each servicer on a pro rata basis by reference to the securitised exposures that it manages, which shall be calculated as the sum of the net value of the securitised exposures that qualify as non-performing exposures and of the nominal value of the performing securitised exposures.

[No equivalent]

[No equivalent]

Only the EUSR permits the servicer (in respect of a securitisation of NPEs) to hold the risk retention.

7. An entity shall not be considered to have been established or to operate for the sole purpose of securitising exposures as referred to in Article 6(1), second subparagraph, of Regulation (EU) 2017/2402 where all of the following applies:

5.3.6 R

The following must be taken into account when assessing whether an entity has been established or operates for the sole purpose of securitising exposures as referred to in SECN 5.2.5R:

6. The following must be taken into account when assessing whether an entity has been established or operates for the sole purpose of securitising exposures, as referred to in the fifth sub-paragraph of Article 6(1) of Chapter 2:

(a) the entity has a strategy and the capacity to meet payment obligations consistent with a broader business model that involves material support from capital, assets, fees or other sources of income, by virtue of which the entity does not rely on the exposures to be securitised, on any interests retained or proposed to be retained in accordance with Article 6 of Regulation (EU) 2017/2402, or on any corresponding income from such exposures and interests, as its sole or predominant source of revenue;

(1) the entity has a business strategy and the capacity to meet payment obligations consistent with a broader business model and involving material support from capital, assets, fees or other income available to the entity, relying neither on the exposures being securitised, nor on any interests retained or proposed to be retained in accordance with SECN 5, as well as any corresponding income from such exposures and interests; and

(a) the entity has a business strategy and the capacity to meet payment obligations consistent with a broader business model and involving material support from capital, assets, fees or other income available to the entity, relying neither on the exposures being securitised, nor on any interests retained or proposed to be retained in accordance with Article 6 of Chapter 2, as well as any corresponding income from such exposures and interests; and

(b) the members of the management body have the necessary experience to enable the entity to pursue the established business strategy, as well as adequate corporate governance arrangements.

(2) the members of the management body have the necessary experience to enable the entity to pursue the established business strategy, and the entity has adequate corporate governance arrangements.

(b) the members of the management body have the necessary experience to enable the entity to pursue the established business strategy, as well as adequate corporate governance arrangements.

The PRA and FCA broadly follow the now-superseded EBA draft risk retention RTS in requiring that it should be “taken into account” whether the entity has a business strategy and payment capacity “consistent with a broader business model” and whether the members of its management body have the necessary experience to enable the entity to pursue the established business strategy and the entity has adequate corporate governance arrangements. Article 2(7) of the EU risk retention RTS (CDR 2023/2175) has made this into a safe harbour rather than a ”take into account” requirement, and the “predominant” requirement makes the safe harbour less accessible: the securitised exposures, the retained interest, and any corresponding income, must not be its “predominant source of revenue”. This seems to mean these cannot exceed 49% of its total income (assuming that “predominant” means “main”). Of course, if it does not meet the safe harbour test, that does not necessarily mean that it fails the sole purpose test: the RTS cannot change the meaning of the level 1 text. In any event, in practice the sole purpose test seems capable of being passed.

See further “Risk retention” and “Sole purpose”.

RTS Article 3 (Fulfilment of the retention requirement through a synthetic or contingent form of retention)

1. The fulfilment of the retention requirement in a manner equivalent to one of the options set out in Article 6(3) of Regulation (EU) 2017/2402 through a synthetic or contingent form of retention shall meet all of the following conditions:

5.4 Fulfilment of the retention requirement through a synthetic form of retention or contingent form or retention

5.4.1 R

(1) The fulfilment of the retention requirement in a manner equivalent to one of the options set out in SECN 5.2.8R through a synthetic or contingent form of retention shall meet all of the following conditions:

Article 3 Fulfilment of the retention requirement through a synthetic form of retention or contingent form of retention

1. The fulfilment of the retention requirement in a manner equivalent to one of the options set out in Article 6(3) of Chapter 2 through a synthetic form of retention or contingent form of retention, shall meet all of the following conditions:

(a) the amount retained is at least equal to the amount required under the option which the synthetic or contingent form of retention corresponds to;

(a) the amount retained is at least equal to the amount required under the option which the synthetic or contingent form of retention corresponds to; and

(a) the amount retained is at least equal to the amount required under the option which the synthetic form of retention or contingent form of retention corresponds to; and

(b) the retainer has explicitly disclosed in the final offering document, prospectus, transaction summary or overview of the main features of the securitisation that it will retain a material net economic interest in the securitisation through a synthetic or contingent form on an ongoing basis.

For the purposes of point (b), the retainer shall disclose in the final offering document, prospectus, transaction summary or overview of the main features of the securitisation all the details on the applicable synthetic or contingent form of retention, including the methodology used in the determination of the material net interest retained and an explanation to which of the options set out in Article 6(3), points (a) to (e), of Regulation (EU) 2017/2402 the retention is equivalent.

(b) the retainer has explicitly disclosed in the final offering document, prospectus, transaction summary or overview of the main features of the securitisation that it will retain a material net economic interest in the securitisation through a synthetic or contingent form of retention on an ongoing basis.

(2) For the purposes of SECN 5.4.1R(1)(b) the retainer shall disclose in the final offering document, prospectus transaction summary or overview of the main features of the securitisation, all the details on the applicable synthetic form of retention or contingent form of retention, including, the methodology used in its determination of the material net interest retained and an explanation on which of the options in in SECN 5.2.8R the retention is equivalent to.

(b) the retainer has explicitly disclosed in the final offering document, prospectus, transaction summary or overview of the main features of the securitisation that it will retain a material net economic interest in the securitisation through a synthetic form of retention or contingent form of retention on an ongoing basis.

For the purposes of point (b), the retainer shall disclose in the final offering document, prospectus transaction summary or overview of the main features of the securitisation, all the details on the applicable synthetic form of retention or contingent form of retention, including the methodology used in its determination of the material net interest retained and an explanation on which of the options in Article 6(3) of Chapter 2 the retention is equivalent to.

2. Where an entity other than an institution as defined in Article 4(1), point (3), of Regulation (EU) No 575/2013 and other than an insurance or reinsurance undertaking as defined in Article 13, points (1) and (4), of Directive 2009/138/EC, retains an economic interest through a synthetic or contingent form of retention, that retained interest shall be fully collateralised in cash and be held under arrangements as referred to in Article 16(9) of Directive 2014/65/EU of the European Parliament and of the Council.

(3) Where an entity other than a CRR firm or a UK Solvency II Firm retains an economic interest through a synthetic form of retention or contingent form of retention, that interest retained on a synthetic or contingent basis must be fully collateralised in cash and held on a segregated basis as client money as referred to in CASS 7.12.1R.

2. Where an entity other than a CRR firm or a UK Solvency II Firm, retains an economic interest through a synthetic form of retention or contingent form of retention, that interest retained on a synthetic or contingent basis shall be fully collateralised in cash and held on a segregated basis as client money’ as referred to in CASS 7.12.1R of the FCA Handbook.

The UK rules extend the scope of the cash collateralisation exemption from only credit institutions to all CRR and Solvency II firms.

RTS Article 4 (Retention equivalent to not less than 5% of the nominal value of each of the tranches sold or transferred to investors)

The retention referred to in Article 6(3), point (a), of Regulation (EU) 2017/2402 (vertical slice) shall be fulfilled by any of the following methods:

5.5 Retention of not less than 5% of the nominal value of each of the tranches sold or transferred to investors

5.5.1 R

The retention of not less than 5% of the nominal value of each of the tranches sold or transferred to the investors referred to in SECN 5.2.8R(1)(a) may be complied with through any of the following methods:

Article 4 Retention of not less than 5% of the nominal value of each of the tranches sold or transferred to investors

1. The retention of not less than 5% of the nominal value of each of the tranches sold or transferred to the investors as referred to in Article 6(3)(a) of Chapter 2 may be complied with through any of the following methods:

(a) direct retention of not less than 5 % of the nominal value of each of the tranches sold or transferred to investors;

[No equivalent but covered by (3) below]

[No No equivalent but covered by (c) below

[see (c) below]

(1) the retention of not less than 5% of the nominal value of each of the securitised exposures, provided that the retained credit risk ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures;

(a) the retention of not less than 5% of the nominal value of each of the securitised exposures, provided that the retained credit risk ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures;

(b) the retention of an exposure which exposes its holder to the credit risk of each issued tranche of a securitisation transaction on a pro-rata basis of not less than 5 % of the total nominal value of each of the issued tranches;

[see (3) below]

[see (c) below]

(c) the retention of not less than 5 % of the nominal value of each of the securitised exposures, provided that the retained credit risk ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures;

[see (1) above]

[see (a) above]

(d) the provision, in the context of an ABCP programme, of a liquidity facility, provided that all of the following conditions are met:

(i) the liquidity facility covers 100 % of the share of the credit risk of the securitised exposures of the securitisation transaction that is funded by the ABCP programme;

(ii) the liquidity facility covers the credit risk for as long as the retainer has to retain the material net economic interest;

(iii) the liquidity facility is provided by the originator, sponsor or original lender in the securitisation transaction;

(iv) the investors have been given access to information within the initial disclosure that enables them to verify that points (i), (ii) and (iii) are complied with.

(2) the provision, in the context of an ABCP programme, of a liquidity facility, where all the following conditions are met:

(a) the liquidity facility covers 100% of the share of the credit risk of the securitised exposures of the relevant securitisation transaction that is being funded by the respective ABCP programme;

(b) the liquidity facility covers the credit risk for as long as the retainer has to retain the material net economic interest by means of such liquidity facility for the relevant securitisation transaction;

(c) the liquidity facility is provided by the originator, sponsor or original lender in the securitisation transaction; and

(d) the investors becoming exposed to such securitisations have been given access to appropriate information with the initial disclosure to enable them to verify that (a), (b) and (c) are complied with; or

(b) the provision, in the context of an ABCP programme, of a liquidity facility, where the following conditions are met:

(i) the liquidity facility covers 100% of the share of the credit risk of the securitised exposures of the relevant securitisation transaction that is being funded by the respective ABCP programme;

(ii) the liquidity facility covers the credit risk for as long as the retainer has to retain the material net economic interest by means of such liquidity facility for the relevant securitisation transaction;

(iii) the liquidity facility is provided by the originator, sponsor or original lender in the securitisation transaction; and

(iv) the investors becoming exposed to such securitisation have been given access to appropriate information with the initial disclosure to enable them to verify that points (i), (ii) and (iii) are complied with; or

[see (b) above]

(3) the retention of an exposure which exposes its holder to the credit risk of each issued tranche of a securitisation transaction on a prorata basis (vertical tranche) of not less than 5% of the total nominal value of each of the issued tranches.

(c) the retention of an exposure which exposes its holder to the credit risk of each issued tranche of a securitisation transaction on a pro-rata basis (vertical tranche) of not less than 5% of the total nominal value of each of the issued tranches.

RTS Article 5 (Retention of the originator’s interest in a revolving securitisation or securitisation of revolving exposures)

The retention of the originator’s interest of not less than 5 % of the nominal value of each of the securitised exposures as referred to in Article 6(3), point (b), of Regulation (EU) 2017/2402 shall only be considered fulfilled where the retained credit risk of such exposures ranks pari passu with, or is subordinated to, the credit risk securitised in relation to the same exposures.

5.6 Retention of the originator’s interest in a revolving securitisation of revolving exposures

5.6.1 R

The retention of the originator’s interest of not less than 5% of the nominal value of each of the securitised exposures as referred to in SECN 5.2.8R(1)(b) shall only be considered fulfilled where the retained credit risk of such exposures ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures.

Article 5 Retention of the originator’s interest in a revolving securitisation of revolving exposures

1. The retention of the originator’s interest of not less than 5% of the nominal value of each of the securitised exposures as referred to in point (b) of Article 6(3) of Chapter 2 shall only be considered fulfilled where the retained credit risk of such exposures ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures.

RTS Article 6 (Retention of randomly selected exposures equivalent to no less than 5% of the nominal value of the securitised exposures)

1. The pool of at least 100 potentially securitised exposures from which retained non-securitised and securitised exposures are to be randomly selected, as referred to in Article 6(3), point (c), of Regulation (EU) 2017/2402, shall be sufficiently diverse to avoid an excessive concentration of the retained interest.

5.7 Retention of randomly selected exposures equivalent to not less than 5% of the nominal value of the securitised exposures

5.7.1 R

(1) The pool of at least 100 potentially securitised exposures from which retained non-securitised and securitised exposures are to be randomly selected, as referred to in SECN 5.2.8R(1)(c), shall be sufficiently diverse to avoid an excessive concentration of the retained interest.

Article 6 The retention of randomly selected exposures equivalent to not less than 5% of the nominal value of the securitised exposures

1. The pool of at least 100 potentially securitised exposures from which retained non-securitised and securitised exposures are to be randomly selected, as referred to in point (c) of Article 6(3) of Chapter 2, shall be sufficiently diverse to avoid an excessive concentration of the retained interest.

2. When selecting the exposures referred to in paragraph 1, retainers shall take into account quantitative and qualitative factors that are appropriate for the type of securitised exposures to ensure that the distinction between retained nonsecuritised and securitised exposures is random. For that purpose, and where relevant, retainers shall take into consideration the following factors when selecting exposures:

(a) the time of origination of the loan (vintage);

(b) the type of securitised exposures;

(c) the geographical location;

(d) the origination date;

(e) the maturity date;

(f) the loan to value ratio;

(g) the collateral type;

(h) the industry sector;

(i) the outstanding loan balance;

(j) any other factor deemed relevant by the retainer.

(2) When selecting the exposures, referred to in SECN 5.7.1R(1), retainers shall take into account quantitative and qualitative factors that are appropriate for the type of securitised exposures to ensure that the distinction between retained non securitised and securitised exposures is random. For that purpose, and where relevant, retainers shall take into consideration the following factors when selecting exposures:

(a) the time of the origination of the loan (vintage);

(b) the type of securitised exposures;

(c) the geographical location;

(d) the origination date;

(e) the maturity date;

(f) the loan to value ratio;

(g) the collateral type;

(h) the industry sector;

(i) the outstanding loan balance; and

(j) any other factor deemed relevant by the retainer.

2. When selecting the exposures referred to in paragraph 1, retainers shall take into account quantitative and qualitative factors that are appropriate for the type of securitised exposures to ensure that the distinction between retained non-securitised and securitised exposures is random. For that purpose, and where relevant, retainers shall take into consideration the following factors when selecting exposures:

(a) the time of the origination of the loan (vintage):

(b) the type of securitised exposures;

(c) the geographical location;

(d) the origination date;

(e) the maturity date;

(f) the loan to value ratio;

(g) the collateral type;

(h) the industry factor;

(i) the outstanding loan balance; and

(j) any other factor deemed relevant by the retainer.

3. Retainers shall not select different individual exposures at different points in time, except where that may be necessary to fulfil the retention requirement in relation to a securitisation in which the securitised exposures fluctuate over time, either due to new exposures being added to the securitisation or to changes in the level of the individual securitised exposures.

(3) Retainers shall not select different individual exposures at different points in time, except where that may be necessary to fulfil the retention requirement in relation to a securitisation in which the securitised exposures fluctuate over time, either due to new exposures being added to the securitisation or to changes in the level of the individual securitised exposures.

3. Retainers shall not select different individual exposures at different points in time, except where that may be necessary to fulfil the retention requirement in relation to a securitisation in which the securitised exposures fluctuate over time, either due to new exposures being added to the securitisation or to changes in the level of the individual securitised exposures.

4. Where the retainer is the securitisation’s servicer, the selection conducted in accordance with this Article shall not lead to a deterioration in the servicing standards applied by the retainer on the transferred exposures relative to the retained exposures.

(4) Where the retainer is the securitisation’s servicer, the selection conducted in accordance with SECN 5.7.1R must not lead to a deterioration in the servicing standards applied by the retainer on the transferred exposures relative to the retained exposures.

4. Where the retainer is the securitisation’s servicer, the selection conducted in accordance with this Article shall not lead to a deterioration in the servicing standards applied by the retainer on the transferred exposures relative to the retained exposures.

RTS Article 7 (Retention of the first loss tranche)

1. The retention of the first loss tranche referred to in Article 6(3), point (d), of Regulation (EU) 2017/2402 shall be fulfilled by any of the following methods:

(a) holding either on-balance sheet or off-balance sheet positions;

5.8 Retention of the first loss tranche

5.8.1 R (1)

The retention of the first loss tranche referred to in SECN 5.2.8R(1)(d) may be fulfilled by holding either on-balance sheet or off-balance sheet positions and by either of the following methods:

Article 7 Retention of the first loss tranche

1. The retention of the first loss tranche referred to in point (d) of Article 6(3) of Chapter 2 may be fulfilled by holding either on-balance sheet or off-balance sheet positions and by any of the following methods:

(b) holding an exposure by means of a provision of a contingent form of retention or of a liquidity facility in the context of an ABCP programme, which fulfils all of the following criteria:

(a) provision of a contingent form of retention or of a liquidity facility in the context of an ABCP programme, which fulfils all of the following criteria:

(a) provision of a contingent form of retention or of a liquidity facility in the context of an ABCP programme which fulfils all of the following criteria:

(i) the exposure covers at least 5 % of the nominal value of the securitised exposures;

(i) the exposure covers at least 5% of the nominal value of the securitised exposures;

(i) the exposure covers at least 5% of the nominal value of the securitised exposures;

(ii) the exposure constitutes a first loss position in relation to the securitisation;

(ii) the exposure constitutes a first loss position in relation to the securitisation;

(ii) the exposure constitutes a first loss position in relation to the securitisation;

(iii) the exposure covers the credit risk for the entire duration of the retention commitment;

(iii) the exposure covers the credit risk for the entire duration of the retention commitment;

(iii) the exposure covers the credit risk for the entire duration of the retention commitment;

(iv) the exposure is provided by the retainer;

(iv) the exposure is provided by the retainer; and

(iv) the exposure is provided by the retainer; and

(v) the investors have been given access within the initial disclosure to all information necessary to verify that points (i) to (iv) are complied with;

(v) the investors have been given access within the initial disclosure to all information necessary to verify that (i) to (iv) are complied with; or

(v) the investors have been given access within the initial disclosure to all information necessary to verify that points (i) to (iv) are complied with; or

(c) overcollateralisation, as defined in Article 242, point (9), of Regulation (EU) No 575/2013, if that overcollateralisation operates as a ‘first loss’ position of not less than 5 % of the nominal value of the securitised exposures.

(b) overcollateralisation, if it operates as a ‘first loss’ position of not less than 5% of the nominal value of the securitised exposures.

(b) overcollateralisation, as defined to [sic] in point (9) of Article 242 of CRR, if that overcollateralisation operates as a ‘first loss’ position of not less than 5% of the nominal value of the securitised exposures.

2. Where the first loss tranche exceeds 5 % of the nominal value of the securitised exposures, the retainer may choose to retain a pro-rata portion of such first loss tranche only, provided that that portion is equivalent to at least 5 % of the nominal value of the securitised exposures.

(2) Where the first loss tranche exceeds 5% of the nominal value of the securitised exposures, the retainer may choose to retain a pro-rata portion of such first loss tranche only, provided that portion is equivalent to at least 5% of the nominal value of the securitised exposures.

2. Where the first loss tranche exceeds 5% of the nominal value of the securitised exposures, the retainer may chose [sic] to retain a pro-rata portion of such first loss tranche only, provided that this portion is equivalent to at least 5% of the nominal value of the securitised exposures.

RTS Article 8 (Retention of a first loss exposure of not less than 5% of every securitised exposure)

1. The retention of a first loss exposure at the level of every securitised exposure as referred to in Article 6(3), point (e), of Regulation (EU) 2017/2402 shall only be considered to be fulfilled where the retained credit risk is subordinated to the credit risk securitised in relation to the same exposures.

5.9 Retention of a first loss exposure of not less than 5% of every securitised exposure

5.9.1 R

(1) The retention of a first loss exposure at the level of every securitised exposure as referred to in SECN 5.2.8R(1)(e) shall only be considered to be fulfilled where the retained credit risk is subordinated to the credit risk securitised in relation to the same exposures.

Article 8 Retention of a first loss exposure of not less than 5% of every securitised exposure

1. The retention of a first loss exposure at the level of every securitised exposure as referred to in point (e) of Article 6(3) of Chapter 2 shall only be considered to be fulfilled where the retained credit risk is subordinated to the credit risk securitised in relation to the same exposures.

2. By way of derogation from paragraph 1, the retention of a first loss exposure at the level of every securitised exposure as referred to in Article 6(3), point (e), of Regulation (EU) 2017/2402 may also be fulfilled through the sale by the originator or original lender of the underlying exposures at a discounted value where each of the following conditions is met:

(2) By way of derogation from (1), the retention of a first lost exposure at the level of every securitised exposure as referred to in SECN 5.2.8R(1)(e) may also be fulfilled through the sale by the originator or original lender of the underlying exposures at a discounted value where each of the following conditions is met:

2. By way of derogation from paragraph 1 of this Article, the retention of a first loss exposure at the level of every securitised exposure as referred to in point (e) of Article 6(3) of Chapter 2 may also be fulfilled through the sale by the originator or original lender of the underlying exposures at a discounted value where each of the following conditions is met:

(a) the amount of the discount is not less than 5 % of the nominal value of each exposure;

(a) the amount of the discount is not less than 5% of the nominal value of each exposure; and

(a) the amount of the discount is not less than 5% of the nominal value of each exposure; and

(b) the discounted sale amount is refundable to the originator or original lender only if that discounted sale amount is not absorbed by losses related to the credit risk associated to the securitised exposures.

(b) the discounted sale amount is refundable to the originator or original lender only if that discounted sale amount is not absorbed by losses related to the credit risk associated with the securitised exposures.

(b) the discounted sale amount is refundable to the originator or original lender only if that discounted sale amount is not absorbed by losses related to the credit risk associated to the securitised exposures.

RTS Article 9 (Application of the retention options on traditional NPE securitisations)

1. In the case of NPE securitisations as referred to in Article 6(3a) of Regulation (EU) 2017/2402, for the purpose of applying Article 4, point (a), and Articles 5 to 8 of this Regulation to the share of non-performing exposures in the pool of underlying exposures of a securitisation, any reference to the nominal value of the securitised exposures shall be construed as a reference to the net value of the non-performing exposures.

5.10 Application of the retention options on NPE securitisations

5.10.1 R

(1) In case of NPE securitisations as referred to in SECN 5.2.8(2), for the purposes of applying SECN 5.5.1R(1) and SECN 5.6R to SECN 5.9R to the share of non-performing exposures in the pool of underlying exposures of a securitisation, any reference to the nominal value of the securitised exposures shall be construed as a reference to the net value of the non-performing exposures.

Article 9 Application of the retention options on NPE securitisations

1. In the case of NPE securitisations as referred to in Article 6(3A) of Chapter 2, for the purposes of applying Article 4(1)(a) and Articles 5 to 8 of this Chapter to the share of non-performing exposures in the pool of underlying exposures of a securitisation, any reference to the nominal value of the securitised exposures shall be construed as a reference to the net value of the non-performing exposures.

2. For the purposes of Article 6 of this Regulation, the net value of the retained non-performing exposures shall be calculated using the same amount of the non-refundable purchase price discount that would have been applied had the retained non-performing exposures been securitised.

(2) For the purposes of SECN 5.7, the net value of the retained nonperforming exposures shall be calculated using the same amount of the non-refundable purchase price discount that would have been applied had the retained non-performing exposures been securitised.

2. For the purposes of Article 6 of this Chapter, the net value of the retained non-performing exposures shall be calculated using the same amount of the non-refundable purchase price discount that would be applied had the retained non-performing exposures been securitised.

3. For the purposes of Article 4, point (a), Article 5 and Article 8 of this Regulation, the net value of the retained part of the non-performing exposures shall be calculated using the same percentage of the non-refundable purchase price discount that applies to the part that is not retained.

(3) For the purposes of SECN 5.2.8R(1)(a), SECN 5.6 or SECN 5.9 the net value of the retained part of the non-performing exposures shall be computed using the same percentage of the non-refundable purchase price discount that applies to the part that is not retained.

3. For the purposes of Article 4(1)(a), Article 5 and Article 8 of this Chapter, the net value of the retained part of the non-performing exposures shall be computed using the same percentage of the non-refundable purchase price discount that applies to the part that is not retained.

4. Where the non-refundable purchase price discount as referred to in Article 6(3a), second subparagraph, of Regulation (EU) 2017/2402 has been agreed at the level of the pool of underlying non-performing exposures or at sub-pool level, the net value of individual securitised non-performing exposures included in the pool or sub-pool, as applicable, shall be calculated by applying a corresponding share of the non-refundable purchase price discount to each of the nonperforming securitised exposures in proportion to their nominal value or, where applicable, their outstanding value at the time of origination.

(4) Where the non-refundable purchase price discount as referred to in SECN 5.2.8(2)(b) has been agreed at the level of the pool of underlying non-performing exposures, the net value of individual securitised non-performing exposures included in the pool or subpool, as applicable, shall be calculated by applying a corresponding share of the non-refundable purchase price discount agreed at pool or sub-pool level to each of the securitised non-performing exposures in proportion to their nominal value or, where applicable, their outstanding value at the time of origination.

4. Where the non-refundable purchase price discount as referred to in the second subparagraph of Article 6(3A) of Chapter 2 has been agreed at the level of the pool of underlying nonperforming exposures, the net value of individual securitised non-performing exposures included in the pool or sub-pool, as applicable, shall be calculated by applying a corresponding share of the non-refundable purchase price discount agreed at pool or sub-pool level to each of the securitised non-performing exposures in proportion to their nominal value or, where applicable, their outstanding value at the time of origination.

5. Where the non-refundable purchase price discount includes the difference between the nominal amount of one tranche or several tranches of an NPE securitisation underwritten by the originator for subsequent sale and the price at which that tranche or those tranches are first sold to unrelated third parties as referred to in Article 6(3a), second subparagraph, of Regulation (EU) 2017/2402, that difference shall be taken into account in the calculation of the net value of individual securitised non-performing exposures by applying a corresponding share of the difference to each of the non-performing securitised exposures in proportion to their nominal value.

(5) Where the non-refundable purchase price discount includes the difference between the nominal amount of one tranche or several tranches of a NPE securitisation underwritten by the originator for subsequent sale and the price at which that tranche or those tranches are first sold to unrelated third parties as referred to in SECN 5.2.8R(2)(c), that difference shall be taken into account in the calculation of the net value of individual securitised non-performing exposures by applying a corresponding share of the difference to each of the securitised non-performing exposures in proportion to their nominal value.

5. Where the non-refundable purchase price discount includes the difference between the nominal amount of one tranche or several tranches of a NPE securitisation underwritten by the originator for subsequent sale and the price at which that tranche or those tranches are first sold to unrelated third parties as referred to in the second subparagraph of Article 6(3A) of Chapter 2, that difference shall be taken into account in the calculation of the net value of individual securitised non-performing exposures by applying a corresponding share of the difference to each of the securitised non-performing exposures in proportion to their nominal value.

This was one of the five reforms heralded by H.M. Treasury’s December 2022 policy note. The UK rules provide that the 5% retention should be calculated based on the value, and not the nominal amount. The EUSR has already done this, and gone further, for example (Article 6(1)) by permitting the servicer to hold the risk retention. The PRA said in CP15/23 that it “does not at this point propose any other policy change relating to NPE securitisations, but may consider this in the future”.

RTS Article 10 (Measurement of the level of retention)

1. When measuring the level of retention of the net economic interest, the following criteria shall be applied:

5.11 Measurement of the level of retention

5.11.1 R (1) When measuring the level of retention of the net economic interest, the following criteria shall be applied:

Article 10 Measurement of the level of retention

1. When measuring the level of retention of the net economic interest, the following criteria shall be applied:

(a) the origination shall be the time at which the exposures were first securitised, which shall be one of the following:

(i) the date of the issuance of securities;

(ii) the date of the signature of the credit protection agreement;

(iii) the date of the agreement on a refundable purchase price discount;

(a) the origination shall be considered as the time at which the exposures were first securitised;

(a) the origination shall be considered as the time at which the exposures were first securitised;

(b) where the calculation of the level of retention is based on nominal values, the acquisition price of assets shall not be taken into account for the purpose of that calculation;

(b) where the calculation of the level of retention is based on nominal values, it shall not take into account the acquisition price of assets;

(b) where the calculation of the level of retention is based on nominal values, it shall not take into account the acquisition price of assets;

(c) the finance charge collections and other fee income received in respect of the securitised exposures in a traditional securitisation net of costs and expenses (traditional excess spread) shall not be taken into account when measuring the retainer’s net economic interest;

(c) finance charge collections and other fee income in respect of the securitised exposures net of costs (‘excess spread’) shall not be taken into account when measuring the retainer’s net economic interest; and

(c) finance charge collections and other fee income in respect of the securitised exposures net of costs (‘excess spread’) shall not be taken into account when measuring the retainer’s net economic interest; and

(d) where the originator acts as the securitisation’s retainer and applies the retention option referred to in Article 6(3), point (d), of Regulation (EU) 2017/2402, and where the exposure value of the synthetic excess spread that provides credit enhancement to all the tranches of the synthetic securitisation and serves as a first loss protection is subject to capital requirements in accordance with the prudential regulation applicable to the originator, the originator may take the exposure value of the synthetic excess spread into account when calculating the material net economic interest in accordance with Article 7 of this Regulation by treating the exposure value of the synthetic excess spread as retention of the first loss tranche, in addition to any actual retention of the first loss tranche;

[no equivalent]

[no equivalent]

(e) the retention option and methodology used to calculate the net economic interest shall not be changed during the life of a securitisation, unless exceptional circumstances require a change and that change is not used as a means to reduce the amount of the retained interest.

(d) the retention option and methodology used to calculate the net economic interest shall not be changed during the life of a securitisation transaction, unless exceptional circumstances require a change and that change is not used as a means to reduce the amount of the retained interest.

(d) the retention option and methodology used to calculate the net economic interest shall not be changed during the life of a securitisation transaction, unless exceptional circumstances require a change and that change is not used as a means to reduce the amount of the retained interest.

2. The retainer shall not be required to constantly replenish or readjust its retained interest to at least 5 % when losses are realised on its retained exposures or allocated to its retained positions.

(2) The retainer shall not be required to replenish or readjust its retained interest to at least 5% as losses are realised on its retained exposures or allocated to its retained positions.

2. The retainer shall not be required to replenish or readjust its retained interest to at least 5% as losses are realised on its retained exposures or allocated to its retained positions.

RTS Article 11 (Measurement of the material net economic interest to be retained for exposures in the form of drawn and undrawn amounts of credit facilities)

The calculation of the net economic interest to be retained for credit facilities, including credit cards, shall be based on amounts already drawn, realised or received only and shall be adjusted in accordance with changes to those amounts.

5.11A Measurement of the material net economic interest to be retained for exposures in the form of drawn and undrawn amounts of credit facilities

5.11A.1 R

The calculation of the net economic interest to be retained for credit facilities, including credit cards, shall be based on amounts already drawn, realised or received only and shall be adjusted in accordance with changes to those amounts.

Article 11 Measurement of the material net economic interest to be retained for exposures in the form of drawn and undrawn amounts of credit facilities

1. The calculation of the net economic interest to be retained for credit facilities, including credit cards, shall be based on amounts already drawn, realised or received only and shall be adjusted in accordance with changes to those amounts.

RTS Article 12 (Prohibition of hedging or selling the retained interest)

1. The obligation laid down in Article 6(1), first subparagraph, of Regulation (EU) 2017/2402 to retain on an ongoing basis a material net economic interest in the securitisation shall be deemed to have been met only where, taking into account the economic substance of the transaction, both of the following conditions are met:

5.12 Prohibition of hedging or selling the retained interest

5.12.1 R

(1) The obligation in SECN 5.2.1R to retain on an ongoing basis a material net economic interest in the securitisation shall be deemed to have been met only where, taking into account the economic substance of the transaction, both of the following conditions are met:

Article 12 Prohibition of hedging or selling the retained interest

1. The obligation in the first subparagraph of Article 6(1) of Chapter 2 to retain on an ongoing basis a material net economic interest in the securitisation shall be deemed to have been met only where, taking into account the economic substance of the transaction, both of the following conditions are met:

(a) the retained material net economic interest is not subject to any credit risk mitigation or hedging of either the retained securitisation positions or the retained exposures,

(a) the retained material net economic interest is not subject to any credit risk mitigation or hedging of either the retained securitisation positions or the retained exposures; and

(a) the retained material net economic interest is not subject to any credit risk mitigation or hedging of either the retained securitisation positions or the retained exposures; and

(b) the retainer does not sell, transfer or otherwise surrender all or part of the rights, benefits or obligations arising from the retained net economic interest.

(b) the retainer does not sell, transfer or otherwise surrender all or part of the rights, benefits or obligations arising from the retained net economic interest.

(b) the retainer does not sell, transfer or otherwise surrender all or part of the rights, benefits or obligations arising from the retained net economic interest.

By way of derogation from point (a), the retainer may hedge the net economic interest where the hedge is not against the credit risk of either the retained securitisation positions or the retained exposures.

[Paragraph 2 appears below, after recital (7).]

(2) By way of derogation from SECN 5.12.1R(1)(a), the retainer may hedge the net economic interest where the hedge:

(a) is not against the credit risk of either the retained securitisation positions or the retained exposures; or

1A. By way of derogation of [sic] paragraph 1(a) of this Article, the retainer may hedge the net economic interest where the hedge:

(a) is not against the credit risk of either the retained securitisation positions or the retained exposures; or

Recital (7) of the risk retention RTS:

… Hedging should, however, also be allowed where it is undertaken prior to the securitisation as a legitimate and prudent element of credit granting or risk management and does not create a differentiation for the retainer’s benefit between the credit risk of the retained securitisation positions or exposures and the securitisation positions or exposures transferred to investors…

(b) is undertaken prior to the securitisation as a prudent element of credit granting or risk management and does not create a differentiation for the retainer’s benefit between the credit risk of the retained securitisation positions or exposures and the securitisation positions or exposures transferred to investors.

(b) ) is undertaken prior to the securitisation as a prudent element of credit granting or risk management and does not create a differentiation for the retainer’s benefit between the credit risk of the retained securitisation positions or exposures and the securitisation positions or exposures transferred to investors

2. The retainer may use retained exposures or securitisation positions as collateral for secured funding purposes including, where relevant, funding arrangements that involve a sale, transfer or other surrender of all or part of the rights, benefits or obligations arising from the retained net economic interest, provided that such use as collateral does not transfer the exposure to the credit risk of those retained exposures or securitisation positions to a third party.

(3) The retainer may use retained exposures or securitisation positions as collateral for secured funding purposes including, where relevant, funding arrangements that involve a sale, transfer or other surrender of all or part of the rights, benefits or obligations arising from the retained net economic interest, provided that such use as collateral does not transfer the exposure to the credit risk of those retained exposures or securitisation positions to a third party.

2. The retainer may use retained exposures or securitisation positions as collateral for secured funding purposes including, where relevant, funding arrangements that involve a sale, transfer or other surrender of all or part of the rights, benefits or obligations arising from the retained net economic interest, provided that such use as collateral does not transfer the exposure to the credit risk of those retained exposures or securitisation positions to a third party.

3. Paragraph 1, point (b), shall not apply in any of the following events:

(4) SECN 5.12.1R(1)(b) shall not apply:

3. Paragraph 1(b) of this Article shall not apply:

(a) in the event of the insolvency of the retainer;

(a) in the event of the insolvency of the retainer; or

(a) in the event of the insolvency of the retainer; or

(b) where the retainer, for legal reasons beyond its control and beyond the control of its shareholders, is unable to continue acting as a retainer;

[no equivalent]

[no equivalent]

(c) in the case of retention on a consolidated basis as referred to in Article 14.

(b) in the case of retention on a consolidated basis, in accordance with SECN 5.14.

(b) in the case of retention on a consolidated basis, in accordance with Article 14 of this Chapter.

The FCA and PRA rules permit a change of the risk retainer in the event of the retainer’s insolvency. This was one of the five reforms heralded by H.M. Treasury’s December 2022 policy note.

Article 12(3) of the Risk retention RTS goes further, also permitting a change “where the retainer, for legal reasons beyond its control and beyond the control of its shareholders, is unable to continue acting as a retainer”.

The UK rules do not go this far. Instead, the PRA (in PS7/24) directs attention to its CP3/24 consultation paper, “The Prudential Regulation Authority’s approach to rule permissions and waivers”, and in PS24/4, the FCA adopts a similar approach. Both the FCA and the PRA have two types of powers under FSMA to grant waivers: under section 138BA, which was introduced by FSMA 2023, and under section 138A. The tone of both PS7/24 and the FCA’s policy statement PS24/4 is that section 138A is the preferred approach.

It is worth noting that, in both the UK and the EU, if a risk retainer goes into insolvency, it can only transfer to another willing party which is a sponsor, an originator or the original lender, and so if the now-insolvent entity had been both the originator and the original lender, there would be no possible transferee complying with the basic risk retention requirement.

This was one of the five reforms heralded by H.M. Treasury’s December 2022 policy note.

RTS Article 13 (transactions for which the retention requirement does not apply, as referred to Article 6(6) of regulation (EU) 2017/2402)

Transactions for which the retention requirement does not apply, as referred to in Article 6(6) of Regulation (EU) 2017/2402, shall include securitisation positions in the correlation trading portfolio which are either reference instruments as referred to in Article 338(1), point (b), of Regulation (EU) No 575/2013 or which are eligible for inclusion in the correlation trading portfolio.

5.13 Transactions for which the retention requirement does not apply as referred to in SECN 5.2.11R

5.13.1 R Transactions for which the retention requirement does not apply, as referred to in SECN 5.2.11R, shall include securitisation positions in the correlation trading portfolio, which are either reference instruments satisfying the criterion in Article 338(1)(b) of the UK CRR or which are eligible for inclusion in the correlation trading portfolio.

Article 13 Transactions for which the retention requirement does not apply as referred to in Article 6(6) of Chapter 2

1. Transactions for which the retention requirement does not apply, as referred to in Article 6(6) of Chapter 2, shall include securitisation positions in the correlation trading portfolio which are either reference instruments satisfying the criterion in Article 338(1)(b) of CRR or which are eligible for inclusion in the correlation trading portfolio.

RTS Article 14 (retention on a consolidated basis)

Mixed financial holding companies as defined in Article 2, point (15), of Directive 2002/87/EC of the European Parliament and of the Council, parent institutions, or financial holding companies, that are established in the Union and that satisfy the requirements referred to in Article 6(1) of Regulation (EU) 2017/2402 on the basis of their consolidated situation in accordance with paragraph 4 of that Article shall, where the retainer is no longer included in the scope of supervision on a consolidated basis, ensure that one or more of the remaining entities included in the scope of supervision on a consolidated basis fulfils the retention requirement.

5.14 Retention on a consolidated basis

5.14.1 R A mixed financial holding company, a UK parent institution or financial holding company established in the United Kingdom satisfying, in accordance with SECN 5.2.9R, the retention requirement on the basis of its consolidated situation shall, in the case the retainer is no longer included in the scope of supervision on a consolidated basis, ensure that one or more of the remaining entities included in the scope of supervision on a consolidated basis fulfils the retention requirement.

Article 14 Retention on a consolidated basis

1. A mixed financial holding company, a UK parent institution or financial holding company established in the UK (as defined in Article 6(4) of Chapter 2) satisfying, in accordance with Article 6(4) of Chapter 2, the retention requirement on the basis of its consolidated situation shall, in the case the retainer is no longer included in the scope of supervision on a consolidated basis, ensure that one or more of the remaining entities included in the scope of supervision on a consolidated basis fulfils the retention requirement.

RTS Article 15 (Requirements on the allocation of cash flows and losses to the retained interest and on fees payable to the retainer)

1. Retainers shall not use arrangements or embedded mechanisms in the securitisation by virtue of which the retained interest at origination would decline faster than the interest transferred. In the allocation of cash flows, the retained interest shall not be prioritised to preferentially benefit from being repaid or amortised ahead of the transferred interest. The amortisation of the retained interest via cash flow allocation in accordance with the first subparagraph or through the allocation of losses that, in effect, reduces the level of retention over time, shall be allowed.

5.15 Arrangements or embedded mechanisms

5.15.1 R

Retainers shall not use arrangements or embedded mechanisms in the securitisation by virtue of which the retained interest at origination would decline faster than the interest transferred. In the allocation of the cash flows, the retained interest shall not be prioritised to preferentially benefit from being repaid or amortised ahead of the transferred interest. The amortisation of the retained interest via cash flow allocation or through the allocation of losses that, in effect, reduce the level of retention over time, shall be allowed.

Article 15 Arrangements or embedded mechanisms

1. Retainers shall not use arrangements or embedded mechanisms in the securitisation by virtue of which the retained interest at origination would decline faster than the interest transferred. In the allocation of the cash flows, the retained interest shall not be prioritised to preferentially benefit from being repaid or amortised ahead of the transferred interest.

2. The amortisation of the retained interest via cash flow allocation set out in paragraph 1 or through the allocation of losses that, in effect, reduce the level of retention over time shall be allowed.

2. For the purposes of paragraph 1, arrangements on any fees, either fixed or contingent on the volume or the performance of the securitised exposures or the evolution of relevant market benchmarks, payable to the retainer on a priority basis to remunerate that retainer for any services provided to the securitisation shall only be deemed consistent with the requirements on the retained interest laid down in that paragraph where all of the following conditions are met:

(a) the amount of the fees is set on an arm’s length basis having regard to comparable transactions in the market;

(b) the fees are structured as a consideration for the provision of the service and do not create a preferential claim in the securitisation cash flows that effectively declines the retained interest faster than the transferred interest.

For the purposes of point (a), in the absence of comparable transactions in the relevant market, the amount of the fees shall comply with the requirement that those fees are set on an arm’s length basis where those fees are set by reference to fees payable in similar transactions in other markets, or are set by using valuation metrics that appropriately take into account the type of securitisation and the service being provided.

The conditions in the first subparagraph, points (a) and (b), shall not be considered to be met when the fees are guaranteed or payable up-front in any form, in full or in part in advance of the service being provided post-closing, and the effective material net economic interest after deducting the fees is lower than the minimum net economic interest required under the retention option chosen from the options laid down in Article 6(3), points (a) to (e), of Regulation (EU) 2017/2402.

[no equivalent]

[no equivalent]

Although the UK do not have any equivalent of 15(2), it is understood that the market in practice operates on this basis in any event (for example, in relation to fee sharing arrangements in respect of CLO management fees).

RTS Article 16 (Fulfilment of the retention requirement in securitisations of own issued debt instruments)

Where an entity securitises its own issued debt instruments, including covered bonds as defined in Article 3, point (1), of Directive (EU) 2019/2162 of the European Parliament and of the Council, and the underlying exposures of the securitisation comprise exclusively those own-issued debt instruments, the retention requirement in Article 6(1) of Regulation (EU) 2017/2402 shall be considered complied with.

5.16 Fulfilment of the retention requirements in securitisations of own issued debt instruments

5.16.1 R

Where an entity securitises its own issued debt instruments, including covered bonds, and the underlying exposures of the securitisation comprise exclusively those own-issued debt instruments, the retention requirement in SECN 5.2.1R to SECN 5.2.5R shall be considered complied with.

Article 16 Fulfilment of the retention requirement in securitisations of own issued debt instruments

1. Where an entity securitises its own issued debt instruments, including covered bonds as defined in the FCA Handbook, and the underlying exposures of the securitisation comprise exclusively those own-issued debt instruments, the retention requirement in Article 6(1) of Chapter 2 shall be considered complied with.

RTS Article 17 (retention requirement in resecuritisations)

1. For resecuritisations permitted by Article 8 of Regulation (EU) 2017/2402, a retainer shall retain the material net economic interest in relation to each of the respective transaction levels.

5.17 Retention requirement on resecuritisations

5.17.1 R

(1) Subject to (2), in the context of resecuritisation as far as enabled in accordance with SECN 7.2 and SECN 7.3, a retainer must retain the material net economic interest in relation to each of the respective transaction levels.

Article 17 Retention requirement on resecuritisations

1. Subject to paragraph 2 of this Article, in the context of a resecuritisation as far as enabled in accordance with Article 8 of Chapter 2, a retainer shall retain the material net economic interest in relation to each of the respective transaction levels.

2. By way of derogation from paragraph 1, the originator of a resecuritisation shall not be obliged to retain a material net economic interest at the transaction level of the resecuritisation where all of the following conditions are met:

(2) The originator of a resecuritisation is not obliged to retain a material net economic interest at the transaction level of the resecuritisations where all of the following conditions are met:

2. The originator of a resecuritisation shall not be obliged to retain a material net economic interest at the transaction level of the resecuritisation where all of the following conditions are met:

(a) the originator of the resecuritisation is also the originator and the retainer of the underlying securitisation;

(a) the originator of the resecuritisation is also the originator and the retainer of the underlying securitisations;

(a) the originator of the resecuritisation is also the originator and the retainer of the underlying securitisation;

(b) the resecuritisation is backed by a pool of exposures comprising solely exposures or positions which were retained by the originator in the underlying securitisation in excess of the required minimum net economic interest prior to the date of origination of the resecuritisation;

(b) the resecuritisation is backed by a pool of exposures comprising solely exposures or positions which were retained by the originator in the underlying securitisation in excess of the required minimum net economic interest prior to the date of origination of the resecuritisation; and

(b) the resecuritisation is backed by a pool of exposures comprising solely exposures or positions which were retained by the originator in the underlying securitisation in excess of the required minimum net economic interest prior to the date of origination of the resecuritisation; and

(c) there is no maturity mismatch between the underlying securitisation positions or exposures and the resecuritisation.

(c) there is no maturity mismatch between the underlying securitisation positions or exposures and the resecuritisation.

(c) there is no maturity mismatch between the underlying securitisation positions or exposures and the resecuritisation.

[no equivalent]

(3) A fully supported ABCP programme, which meets the requirements of SECN 7.3 is not a resecuritisation for the purposes of SECN 5.17.

3. A fully supported ABCP programme, which meets the requirements of Article 8(4) of Chapter 2 shall not be deemed a resecuritisation for the purposes of this Article.

3. For the purposes of paragraph 1 and 2, retranching by the securitisation’s originator of an issued tranche into contiguous tranches shall not constitute a resecuritisation.

(4) The retranching by the securitisation’s originator of an issued tranche into contiguous tranches shall not constitute a resecuritisation.

4. The retranching by the securitisation’s originator of an issued tranche into contiguous tranches shall not constitute a resecuritisation for the purposes of this Article.

RTS Article 18 (Assets transferred to the SSPE)

1. For the purposes of Article 6(2) of Regulation (EU) 2017/2402, assets held on the balance sheet of the originator that according to the documentation of the securitisation meet the eligibility criteria, shall be deemed to be comparable to the assets to be transferred to the SSPE where, at the time of the selection of the assets, both of the following conditions are met:

5.18 Assets transferred to SSPE

5.18.1 R

(1) For the purposes of SECN 5.2.6R, assets held on the balance sheet of the originator that according to the documentation of the securitisation meet the eligibility criteria shall be deemed to be comparable to the assets to be transferred to the SSPE where, at the time of the selection of the assets, both of the following conditions are met:

Article 18 Assets transferred to SSPE

1. For the purposes of Article 6(2) of Chapter 2, assets held on the balance sheet of the originator that according to the documentation of the securitisation meet the eligibility criteria shall be deemed to be comparable to the assets to be transferred to the SSPE where, at the time of the selection of the assets, both of the following conditions are met:

(a) the expected performance of both the assets to be further held on the balance sheet and the assets to be transferred is determined by similar factors;

(a) the expected performance of both the assets to be further held on the balance sheet and the assets to be transferred is determined by similar factors; and

(a) the expected performance of both the assets to be further held on the balance sheet and the assets to be transferred is determined by similar factors; and

(b) on the basis of indications, including past performance and applicable models, it can be reasonably expected that the performance of the assets to be further held on the balance sheet will not be significantly better during the time period referred to in Article 6(2) of Regulation (EU) 2017/2402 than the performance of the assets to be transferred.

(b) on the basis of indications including past performance and applicable models, it can be reasonably expected that the performance of the assets to be further held on the balance sheet will not be significantly better during the time period referred to in SECN 5.2.6R than the performance of the assets to be transferred.

(b) on the basis of indications including past performance and applicable models, it can be reasonably expected that the performance of the assets to be further held on the balance sheet will not be significantly better during the time period referred to in Article 6(2) of Chapter 2 than the performance of the assets to be transferred.

2. The assessment whether the originator has complied with Article 6(2) of Regulation (EU) 2017/2402 shall take into account whether the originator has taken any actions to comply with that Article, and in particular whether the originator has put in place any internal policies, procedures and controls to prevent the systematic or intentional selection for securitisation purposes of assets of a worse average credit quality than comparable assets retained on its balance sheet.

2. [Note: Provision left blank]

3. An originator shall be deemed to have complied with Article 6(2) of Regulation (EU) 2017/2402 where, after the securitisation, there are no exposures left on the originator’s balance sheet that are comparable to the securitised exposures, other than the exposures which the originator is already contractually committed to securitise, and provided that that fact has been clearly communicated to investors.

(2) An originator shall be deemed to have complied with SECN 5.2.6R where, after the securitisation, there are no exposures left on the originator’s balance sheet that are comparable to the securitised exposures, other than the exposures which the originator is already contractually committed to securitise, and provided that that fact has been clearly communicated to investors.

3. An originator shall be deemed to have complied with Article 6(2) of Chapter 2 where, after the securitisation, there are no exposures left on the originator’s balance sheet that are comparable to the securitised exposures, other than the exposures which the originator is already contractually committed to securitise, and provided that that fact has been clearly communicated to investors.

[No equivalent]

5.18.2 G In assessing whether the originator has complied with SECN 5.2.6R, the FCA would expect to take into account the actions the originator has taken to comply with that rule. In particular, the FCA would expect to take account of any internal policies, procedures and controls put in place by the originator to prevent the systematic or intentional selection for securitisation purposes of assets of a higher average credit risk profile than comparable assets retained on its balance sheet.

No equivalent]

[There are no Articles 19-21]

[There seems to be no direct equivalent of the FCA or PRA rule]

5.19 Disclosure of the level of the commitment to maintain a net economic interest

5.19.1 R

(1) The retainer shall disclose to investors within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation at least the following information regarding the level of its commitment to maintain a net economic interest in the securitisation:

Article 22 Disclosure of the level of the commitment to maintain a net economic interest

1. The retainer shall disclose to investors within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation at least the following information regarding the level of its commitment to maintain a net economic interest in the securitisation:

(a) confirmation of the retainer’s identity, whether it retains as originator, sponsor or original lender and, where the retainer is the originator, how it meets the requirement set out in SECN 5.2.5R taking into account the principles set out in SECN 5.3.6R;

(a) confirmation of the retainer's identity, whether it retains as originator, sponsor or original lender and, where the retainer is the originator, how it meets the requirements set out in the fifth subparagraph of Article 6(1) of Chapter 2 taking into account the principles set out in Article 2(6) of this Chapter;

(b) which of the modalities provided for in SECN 5.2.8R(1) has been applied to retain a net economic interest; and

(b) which of the modalities provided for in points (a), (b), (c), (d) or (e) of the second subparagraph of Article 6(3) of Chapter 2 has been applied to retain a net economic interest; and

(c) confirmation of the level of retention at origination and of the commitment to retain on an ongoing basis, which shall relate only to the continuation of fulfilment of the original obligation and shall not require data on the current nominal or market value, or on any impairments or write-downs on the retained interest.

(c) confirmation of the level of retention at origination and of the commitment to retain on an on-going basis, which shall relate only to the continuation of fulfilment of the original obligation and shall not require data on the current nominal or market value, or on any impairments or write-downs on the retained interest.

[There seems to be no direct equivalent of the FCA or PRA rules]

(2) Where the exemptions referred to in SECN 5.2.10R and SECN 5.2.11R apply to a securitisation transaction, firms acting as originator, sponsor or original lender shall disclose within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation information on the applicable exemption to investors.

2. Where the exemptions referred to in paragraph 5 or 6 of Article 6 of Chapter 2 apply to a securitisation transaction, firms acting as originator, sponsor or original lender shall disclose within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation information on the applicable exemption to investors.

[There seems to be no direct equivalent of the FCA or PRA rule]

(3) The disclosure referred to in (1) and (2) shall be appropriately documented within the final offering document, prospectus, transaction summary of overview of the main features of the securitisation and made publicly available, except in bilateral or private transactions where private disclosure is considered by the parties to be sufficient. The inclusion of a statement on the retention commitment in the prospectus for the securities issued under the securitisation programme is an appropriate means of fulfilling the requirement.

3. The disclosure referred to in paragraphs 1 and 2 of this Article shall be appropriately documented within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation and made publicly available, except in bilateral or private transactions where private disclosure is considered by the parties to be sufficient. The inclusion of a statement on the retention commitment in the prospectus for the securities issued under the securitisation programme shall be considered an appropriate means of fulfilling the requirement.

RTS Article 19 (Expertise requirement on the servicer of traditional NPE securitisations)

1. In the case of traditional NPE securitisations, servicers shall be deemed to have expertise in servicing exposures of a similar nature to those securitised, as referred to in Article 6(1), fourth subparagraph, of Regulation (EU) 2017/2402 where one of the following conditions is fulfilled:

(a) the members of the management body of the servicer and the senior staff, other than the members of the management body, responsible for servicing exposures of a similar nature to those securitised have adequate knowledge and skills in the servicing of such exposures;

(b) the business of the servicer, or of its consolidated group for accounting or prudential purposes, has included the servicing of exposures of a similar nature to those securitised for at least five years prior to the date of the securitisation;

(c) all of the following points are complied with:

(i) at least two of the members of the servicer’s management body have relevant professional experience in the servicing of exposures of a similar nature to those securitised, on a personal level, of at least five years;

(ii) senior staff, other than the members of the management body, who are responsible for managing the servicing by the servicer of non-performing exposures have relevant professional experience in the servicing of such exposures, on a personal level, of at least five years;

(iii) the servicing function of the servicer is backed up by a back-up servicer that complies with point (b).

2. Servicers shall substantiate and disclose their professional experience in sufficient detail to enable institutional investors to comply with their due diligence obligations laid down in Article 5 of Regulation (EU) 2017/2402, while respecting the applicable confidentiality requirements.

[No equivalent]

[No equivalent]

[EUSR Article 6(1) continued]

When measuring the material net economic interest, the retainer shall take into account any fees that may in practice be used to reduce the effective material net economic interest.

[No equivalent]

[No equivalent]

In the case of traditional NPE securitisations, the requirement of this paragraph may also be fulfilled by the servicer provided that the servicer can demonstrate that it has expertise in servicing exposures of a similar nature to those securitised and that it has well-documented and adequate policies, procedures and risk-management controls in place relating to the servicing of exposures.

[No equivalent]

[No equivalent]

2. Originators shall not select assets to be transferred to the SSPE with the aim of rendering losses on the assets transferred to the SSPE, measured over the life of the transaction, or over a maximum of 4 years where the life of the transaction is longer than four years, higher than the losses over the same period on comparable assets held on the balance sheet of the originator.

[see 5.2.6 above]

2. Subject to paragraph 2A of this Article, originators shall not select assets to be transferred to the SSPE with the aim of rendering losses on the assets transferred to the SSPE, measured over the life of the transaction, or over a maximum of four years where the life of the transaction is longer than four years, higher than the losses over the same period on comparable assets held on the balance sheet of the originator.

Where the competent authority finds evidence suggesting contravention of that prohibition, the competent authority shall investigate the performance of assets transferred to the SSPE and comparable assets held on the balance sheet of the originator. If the performance of the transferred assets is significantly lower than that of the comparable assets held on the balance sheet of the originator as a consequence of the intent of the originator, the competent authority shall impose a sanction pursuant to Articles 32 and 33.

[No equivalent]

[No equivalent]

[The PRA rule tracks EUSR Recital (11)]

[see 5.2.7 above]

2A. Originators may select assets to be transferred to the SSPE that ex ante have a higher than average credit risk profile as compared to the average credit risk profile of comparable assets, if any, that remain on the balance sheet of the originator provided that the higher credit risk profile of the assets transferred to the SSPE is clearly communicated to the investors or potential investors.

The corresponding provision in the RTS is Article 18 (Assets transferred to the SSPE) – see above)

The UK rules include an exception which appears in Recital (11) of the EUSR, i.e. that the rules should not restrict the ability of originators or sponsors to select assets which as a whole have a higher risk profile (e.g., non-performing corporate loans) than other asset classes on the balance sheet of the originator (e.g. corporate loans), so long as that higher risk profile is clearly communicated to the investors or potential investors.

3. Only the following shall qualify as a retention of a material net economic interest of not less than 5% within the meaning of paragraph 1:

5.2.8 R

(1) Only the following shall qualify as a retention of a material net economic interest of not less than 5% within the meaning of SECN 5.2.1R:

3. Only the following shall qualify as a retention of a material net economic interest of not less than 5% within the meaning of paragraph 1 of this Article:

(a) the retention of not less than 5 % of the nominal value of each of the tranches sold or transferred to investors;

(a) the retention of not less than 5% of the nominal value of each of the tranches sold or transferred to investors;

(a) the retention of not less than 5% of the nominal value of each of the tranches sold or transferred to investors;

(b) in the case of revolving securitisations or securitisations of revolving exposures, the retention of the originator’s interest of not less than 5 % of the nominal value of each of the securitised exposures;

(b) in the case of revolving securitisations or securitisations of revolving exposures, the retention of the originator’s interest of not less than 5% of the nominal value of each of the securitised exposures;

(b) in the case of revolving securitisations or securitisations of revolving exposures, the retention of the originator’s interest of not less than 5% of the nominal value of each of the securitised exposures;

(c) the retention of randomly selected exposures, equivalent to not less than 5 % of the nominal value of the securitised exposures, where such non-securitised exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is not less than 100 at origination;

(c) the retention of randomly selected exposures, equivalent to not less than 5% of the nominal value of the securitised exposures, where such non-securitised exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is not less than 100 at origination;

(c) the retention of randomly selected exposures, equivalent to not less than 5% of the nominal value of the securitised exposures, where such non-securitised exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is not less than 100 at origination;

(d) the retention of the first loss tranche and, where such retention does not amount to 5 % of the nominal value of the securitised exposures, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total not less than 5 % of the nominal value of the securitised exposures; or

(d) the retention of the first loss tranche and, where such retention does not amount to 5% of the nominal value of the securitised exposures, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total not less than 5% of the nominal value of the securitised exposures; or

(d) the retention of the first loss tranche and, where such retention does not amount to 5% of the nominal value of the securitised exposures, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total not less than 5% of the nominal value of the securitised exposures; or

(e) the retention of a first loss exposure of not less than 5 % of every securitised exposure in the securitisation.

(e) the retention of a first loss exposure of not less than 5% of every securitised exposure in the securitisation.

(e) the retention of a first loss exposure of not less than 5% of every securitised exposure in the securitisation.

3a. By way of derogation from paragraph 3, in the case of NPE securitisations, where a non-refundable purchase price discount has been agreed, the retention of a material net economic interest for the purposes of that paragraph shall not be less than 5 % of the sum of the net value of the securitised exposures that qualify as non-performing exposures and, if applicable, the nominal value of any performing securitised exposures.

(2) (a) By way of derogation from (1), in the case of NPE securitisations, where a non-refundable purchase price discount has been agreed, the retention of a material net economic interest for the purposes of (1) shall not be less than 5% of the sum of the net value of the securitised exposures that qualify as non-performing exposures and, if applicable, the nominal value of any performing securitised exposures.

3A. By way of derogation from paragraph 3 of this Article, in the case of NPE securitisations, where a non-refundable purchase price discount has been agreed, the retention of a material net economic interest for the purposes of that paragraph shall not be less than 5% of the sum of the net value of the securitised exposures that qualify as non-performing exposures and, if applicable, the nominal value of any performing securitised exposures.

The net value of a non-performing exposure shall be calculated by deducting the non-refundable purchase price discount agreed at the level of the individual securitised exposure at the time of origination or, where applicable, a corresponding share of the non-refundable purchase price discount agreed at the level of the pool of underlying exposures at the time of origination from the exposure’s nominal value or, where applicable, its outstanding value at the time of origination. In addition, for the purpose of determining the net value of the securitised non-performing exposures, the non-refundable purchase price discount may include the difference between the nominal amount of the tranches of the NPE securitisation underwritten by the originator for subsequent sale and the price at which these tranches are first sold to unrelated third parties.

(b) The net value of a non-performing exposure shall be calculated by deducting the non-refundable purchase price discount agreed at the level of the individual securitised exposure at the time of origination or, where applicable, a corresponding share of the non-refundable purchase price discount agreed at the level of the pool of underlying exposures at the time of origination from the exposure’s nominal value or, where applicable, its outstanding value at the time of origination.

(c) In addition, for the purpose of determining the net value of the securitised non-performing exposures, the nonrefundable purchase price discount may include the difference between the nominal amount of the tranches of the NPE securitisation underwritten by the originator for subsequent sale and the price at which these tranches are first sold to unrelated third parties.

The net value of a non-performing exposure shall be calculated by deducting the non-refundable purchase price discount agreed at the level of the individual securitised exposure at the time of origination or, where applicable, a corresponding share of the non-refundable purchase price discount agreed at the level of the pool of underlying exposures at the time of origination from the exposure’s nominal value or, where applicable, its outstanding value at the time of origination. In addition, for the purpose of determining the net value of the securitised non-performing exposures, the non-refundable purchase price discount may include the difference between the nominal amount of the tranches of the NPE securitisation underwritten by the originator for subsequent sale and the price at which these tranches are first sold to unrelated third parties.

4. Where a mixed financial holding company established in the Union within the meaning of Directive 2002/87/EC of the European Parliament and of the Council, a parent institution or a financial holding company established in the Union, or one of its subsidiaries within the meaning of Regulation (EU) No 575/2013, as an originator or sponsor, securitises exposures from one or more credit institutions, investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirements referred to in paragraph 1 may be satisfied on the basis of the consolidated situation of the related parent institution, financial holding company, or mixed financial holding company established in the Union.

[See 5.2.9 above]

4. Where:

(a) a mixed financial holding company;

(b) a UK parent institution;

(c) a financial holding company established in the UK; or

(d) a subsidiary of such a company or institution;

as an originator or sponsor, securitises exposures from one or more CRR firms, FCA investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirements set out in paragraph 1 of this Article may be satisfied on the basis of the consolidated situation of the mixed financial holding company, UK parent institution or financial holding company concerned.

The first subparagraph shall apply only where credit institutions, investment firms or financial institutions which created the securitised exposures comply with the requirements set out in Article 79 of Directive 2013/36/EU of the European Parliament and of the Council ( 5 ) and deliver the information needed to satisfy the requirements provided for in Article 5 of this Regulation, in a timely manner, to the originator or sponsor and to the Union parent credit institution, financial holding company or mixed financial holding company established in the Union.

Subject to the modifications set out in the third subparagraph of SECN 5.2.9R of the FCA Handbook to the requirements set out in Article 79 of Directive 2013/36/EU of the European Parliament and of the Council in respect of FCA investment firms, the first subparagraph applies only if CRR firms, FCA investment firms or financial institutions which created the securitised exposures comply with the requirements set out in Article 79 of Directive 2013/36/EU of the European Parliament and of the Council and deliver the information needed to satisfy the requirements provided for in Article 5 of this Chapter, in a timely manner, to the originator or sponsor and, if the originator or sponsor is a subsidiary, to the mixed financial holding company, UK parent institution or financial holding company which is the parent undertaking of the subsidiary.

In this paragraph:

(a) 'CRR firm', 'financial holding company', 'financial institution', 'FCA investment firm', 'subsidiary' and 'UK parent institution' have the meaning given in Article 4 of CRR; and

(b) 'mixed financial holding company’ has the meaning given in regulation 1(2) of the Financial Conglomerates Regulations.

5. Paragraph 1 shall not apply where the securitised exposures are exposures on or exposures fully, unconditionally and irrevocably guaranteed by:

5.2.10

SECN 5.2.1R to SECN 5.2.5R shall not apply where the securitised exposures are exposures to or exposures fully, unconditionally and irrevocably guaranteed by:

5. Paragraph 1 of this Article shall not apply where the securitised exposures are exposures to or exposures fully, unconditionally and irrevocably guaranteed by:

(a) central governments or central banks;

(1) central governments or central banks;

(a) central governments or central banks;

(b) regional governments, local authorities and public sector entities within the meaning of point (8) of Article 4(1) of Regulation (EU) No 575/2013 of Member States;

(2) regional governments, local authorities and ‘public sector entities’ within the meaning of Article 4(1)(8) of UK CRR;

(b) regional governments, local authorities and public sector entities within the meaning of point (8) of Article 4(1) of CRR;

(c) institutions to which a 50 % risk weight or less is assigned under Part Three, Title II, Chapter 2 of Regulation (EU) No 575/2013;

(3) institutions to which a 50% risk weight or less is assigned under Part Three, Title II, Chapter 2 of UK CRR and articles 132a to 132c of Chapter 3 of the Standardised Approach and Internal Ratings Based Approach to Credit Risk (CRR) Part of the PRA Rulebook;

(c) institutions to which a 50% risk weight or less is assigned under Part Three, Title II, Chapter 2 of CRR and Articles 132a to 132c of Chapter 3 of the Standardised Approach and Internal Ratings Based Approach to Credit Risk (CRR) Part;

(d) national promotional banks or institutions within the meaning of point (3) of Article 2 of Regulation (EU) 2015/1017 of the European Parliament and of the Council ( 6w); or

(4) national promotional banks or institutions within the meaning of Article 2(3) of Regulation (EU) 2015/1017 of the European Parliament and of the Council; or

(d) national promotional banks or institutions within the meaning of point (3) of Article 2 of Regulation (EU) 2015/1017; or

(e) the multilateral development banks listed in Article 117 of Regulation (EU) No 575/2013.

(5) the multilateral development banks listed in Article 117 of UK CRR.

(e) the multilateral development banks listed in Article 117 of CRR.

6. Paragraph 1 shall not apply to transactions based on a clear, transparent and accessible index, where the underlying reference entities are identical to those that make up an index of entities that is widely traded, or are other tradable securities other than securitisation positions.

5.2.11 R

SECN 5.2.1R to SECN 5.2.5R shall not apply to transactions based on a clear, transparent and accessible index, where the underlying reference entities are identical to those that make up an index of entities that is widely traded, or are other tradable securities other than securitisation positions.

6. Paragraph 1 of this Article shall not apply to transactions based on a clear, transparent and accessible index, where the underlying reference entities are identical to those that make up an index of entities that is widely traded, or are other tradable securities other than securitisation positions.

7. EBA, in close cooperation with the ESMA and the European Insurance and Occupational Pensions Authority (EIOPA) which was established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council ( 7 ), shall develop draft regulatory technical standards to specify in greater detail the risk-retention requirement, in particular with regard to:

(a) the modalities for retaining risk pursuant to paragraph 3, including the fulfilment through a synthetic or contingent form of retention;

(b) the measurement of the level of retention referred to in paragraph 1;

(c) the prohibition of hedging or selling the retained interest;

(d) the conditions for retention on a consolidated basis in accordance with paragraph 4;

(e) the conditions for exempting transactions based on a clear, transparent and accessible index referred to in paragraph 6;

(f) the modalities of retaining risk pursuant to paragraphs 3 and 3a in the case of NPE securitisations;

(g) the impact of fees paid to the retainer on the effective material net economic interest within the meaning of paragraph 1.

EBA shall submit those draft regulatory technical standards to the Commission by 10 October 2021.

The Commission is empowered to supplement this Regulation by adopting the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

[No equivalent]

[No equivalent]

EUSR Article 7

FCA SECN 6.2

PRA Chapter 2 Article 7

Transparency requirements for originators, sponsors and SSPEs

1. The originator, sponsor and SSPE of a securitisation shall, in accordance with paragraph 2 of this Article, make at least the following information available to holders of a securitisation position, to the competent authorities referred to in Article 29 and, upon request, to potential investors:

6.2 Provision of information to holders of a securitisation position

6.2.1 R The originator, sponsor and SSPE of a securitisation shall, in accordance with SECN 11 and SECN 12 make at least the following information available to holders of a securitisation position, to the FCA and, upon request, to potential investors:

ARTICLE 7 TRANSPARENCY REQUIREMENTS FOR ORIGINATORS, SPONSORS AND SSPE

1. The originator, sponsor and SSPE of a securitisation shall, in accordance with paragraph 2 of this Article and Chapters 4 and 5, make at least the following information available to holders of a securitisation position, to the PRA and, upon request, to potential investors:

(a) information on the underlying exposures on a quarterly basis, or, in the case of ABCP, information on the underlying receivables or credit claims on a monthly basis;

(1) information on the underlying exposures on a quarterly basis, or, in the case of asset backed commercial paper, information on the underlying receivables or credit claims on a monthly basis;

(a) information on the underlying exposures on a quarterly basis, or, in the case of asset-backed commercial paper, information on the underlying receivables or credit claims on a monthly basis;

(b) all underlying documentation that is essential for the understanding of the transaction, including but not limited to, where applicable, the following documents:

(2) all underlying documentation essential for the understanding of the transaction, including but not limited to, where applicable, the following documents:

(b) all underlying documentation that is essential to understand the transaction, including but not limited to, where applicable, the following documents:

(i) the final offering document or the prospectus together with the closing transaction documents, excluding legal opinions;

(a) the final offering document or the prospectus together with the closing transaction documents, excluding legal opinions;

(i) the final offering document or the prospectus together with the closing transaction documents, excluding legal opinions;

(ii) for traditional securitisation the asset sale agreement, assignment, novation or transfer agreement and any relevant declaration of trust;

(b) for traditional securitisation, the asset sale agreement, assignment, novation or transfer agreement and any relevant declaration of trust;

(ii) for traditional securitisation the asset sale agreement, assignment, novation or transfer agreement and any relevant declaration of trust;

(iii) the derivatives and guarantee agreements, as well as any relevant documents on collateralisation arrangements where the exposures being securitised remain exposures of the originator;

(c) the derivatives and guarantee agreements, as well as any relevant documents on collateralisation arrangements where the exposures being securitised remain exposures of the originator;

(iii) the derivatives and guarantee agreements, as well as any relevant documents on collateralisation arrangements where the exposures being securitised remain exposures of the originator;

(iv) the servicing, back-up servicing, administration and cash management agreements;

(d) the servicing, back-up servicing, administration and cash management agreements;

(iv) the servicing, back-up servicing, administration and cash management agreements;

(v) the trust deed, security deed, agency agreement, account bank agreement, guaranteed investment contract, incorporated terms or master trust framework or master definitions agreement or such legal documentation with equivalent legal value;

(e) the trust deed, security deed, agency agreement, account bank agreement, guaranteed investment contract, incorporated terms or master trust framework or master definitions agreement or such legal documentation with equivalent legal value;

(v) the trust deed, security deed, agency agreement, account bank agreement, guaranteed investment contract, incorporated terms or master trust framework or master definitions agreement or such legal documentation with equivalent legal value; and

(vi) any relevant inter-creditor agreements, derivatives documentation, subordinated loan agreements, start-up loan agreements and liquidity facility agreements;

(f) any relevant inter-creditor agreements, derivatives documentation, subordinated loan agreements, start-up loan agreements and liquidity facility agreements; and

(vi) any relevant inter-creditor agreements, derivatives documentation, subordinated loan agreements, start-up loan agreements and liquidity facility agreements.

That underlying documentation shall include a detailed description of the priority of payments of the securitisation;

(g) a detailed description of the priority of payments of the securitisation;

That underlying documentation shall include a detailed description of the priority of payments of the securitisation;

(c) where a prospectus has not been drawn up in compliance with Directive 2003/71/EC of the European Parliament and of the Council ( 8 ), a transaction summary or overview of the main features of the securitisation, including, where applicable:

(3) where section 85 of the Act (Contravention of prohibition relating to public offer of securities) and rules made by the FCA for the purposes of Part 6 of the Act (Official Listing) do not require a prospectus to be drawn up, a transaction summary or overview of the main features of the securitisation, including, where applicable:

(c) where section 85 of FSMA and rules made by the FCA for the purposes of Part 6 of FSMA do not require a prospectus to be drawn up, a transaction summary or overview of the main features of the securitisation, including, where applicable:

(i) details regarding the structure of the deal, including the structure diagrams containing an overview of the transaction, the cash flows and the ownership structure;

(a) details regarding the structure of the deal, including the structure diagrams containing an overview of the transaction, the cash flows and the ownership structure;

(i) details regarding the structure of the deal, including the structure diagrams containing an overview of the transaction, the cash flows and the ownership structure;

(ii) details regarding the exposure characteristics, cash flows, loss waterfall, credit enhancement and liquidity support features;

(b) details regarding the exposure characteristics, cash flows, loss waterfall, credit enhancement and liquidity support features;

(ii) details regarding the exposure characteristics, cash flows, loss waterfall, credit enhancement and liquidity support features;

(iii) details regarding the voting rights of the holders of a securitisation position and their relationship to other secured creditors;

(c) details regarding the voting rights of the holders of a securitisation position and their relationship to other secured creditors; and

(iii) details regarding the voting rights of the holders of a securitisation position and their relationship to other secured creditors; and

(iv) a list of all triggers and events referred to in the documents provided in accordance with point (b) that could have a material impact on the performance of the securitisation position;

(d) a list of all triggers and events referred to in the documents provided in accordance with SECN 6.2.1R(2) that could have a material impact on the performance of the securitisation position;

(iv) a list of all triggers and events referred to in the documents provided in accordance with point (b) of this subparagraph that could have a material impact on the performance of the securitisation position;

(d) in the case of STS securitisations, the STS notification referred to in Article 27;

(4) in the case of STS securitisations, the STS notification referred to in SECN 2.5;

(d) in the case of STS securitisations, the STS notification referred to in [SECN 2.5 of the FCA

Handbook];

(e) quarterly investor reports, or, in the case of ABCP, monthly investor reports, containing the following:

(5) quarterly investor reports, or, in the case of asset backed commercial paper, monthly investor reports, containing at least the following:

(e) quarterly investor reports, or, in the case of asset-backed commercial paper, monthly investor reports, containing the following:

(i) all materially relevant data on the credit quality and performance of underlying exposures;

(a) all materially relevant data on the credit quality and performance of underlying exposures;

(i) all materially relevant data on the credit quality and performance of underlying exposures;

(ii) information on events which trigger changes in the priority of payments or the replacement of any counterparties, and, in the case of a securitisation which is not an ABCP transaction, data on the cash flows generated by the underlying exposures and by the liabilities of the securitisation;

(b) information on events which trigger changes in the priority of payments or the replacements of any counterparties, and, in the case of a securitisation which is not an ABCP transaction or an ABCP programme, data on the cash flows generated by the underlying exposures and by the liabilities of the securitisation; and

(ii) information on events which trigger changes in the priority of payments or the replacement of any counterparties, and, in the case of a securitisation which is not an ABCP transaction, data on the cash flows generated by the underlying exposures and by the liabilities of the securitisation; and

(iii) information about the risk retained, including information on which of the modalities provided for in Article 6(3) has been applied, in accordance with Article 6.

(c) information about the risk retained, including information on which of the modalities provided for in SECN 5.6.15R has been applied, in accordance with SECN 11 and SECN 12.

(iii) information about the risk retained, including information on which of the modalities provided for in Article 6(3) of this Chapter has been applied, in accordance with Article 6 of this Chapter and Chapters 4 and 5;

(f) any inside information relating to the securitisation that the originator, sponsor or SSPE is obliged to make public in accordance with Article 17 of Regulation (EU) No 596/2014 of the European Parliament and of the Council ( 9 ) on insider dealing and market manipulation;

(6) any inside information relating to the securitisation that the originator, sponsor or SSPE is obliged to make public in accordance with Article 17 of the Market Abuse Regulation;

(f) any inside information relating to the securitisation that the originator, sponsor or SSPE is obliged to make public in accordance with Article 17 of Regulation (EU) No 596/2014; and

(g) where point (f) does not apply, any significant event such as:

(7) where SECN 6.2.1R(6) does not apply, any significant event, such as:

(g) where point (f) of this subparagraph does not apply, any significant event such as:

(i) a material breach of the obligations provided for in the documents made available in accordance with point (b), including any remedy, waiver or consent subsequently provided in relation to such a breach;

(a) a material breach of the obligations provided for in the documents made available in accordance with SECN 6.2.1R(2), including any remedy, waiver or consent subsequently provided in relation to such a breach;

(i) a material breach of the obligations provided for in the documents made available in accordance with point (b) of this subparagraph, including any remedy, waiver or consent subsequently provided in relation to such a breach;

(ii) a change in the structural features that can materially impact the performance of the securitisation;

(b) a change in the structural features that can materially impact the performance of the securitisation;

(ii) a change in the structural features that can materially impact the performance of the securitisation;

(iii) a change in the risk characteristics of the securitisation or of the underlying exposures that can materially impact the performance of the securitisation;

(c) a change in the risk characteristics of the securitisation or of the underlying exposures that can materially impact the performance of the securitisation;

(iii) a change in the risk characteristics of the securitisation or of the underlying exposures that can materially impact the performance of the securitisation;

(iv) in the case of STS securitisations, where the securitisation ceases to meet the STS requirements or where competent authorities have taken remedial or administrative actions;

(d) in the case of STS securitisations, where the securitisation ceases to meet the STS requirements or where the FCA or PRA have taken remedial or administrative actions; and

(iv) in the case of STS securitisations, where the securitisation ceases to meet the STS requirements or where the PRA or FCA has taken remedial or administrative actions; and

(v) any material amendment to transaction documents.

(e) any material amendment to transaction documents.

(v) any material amendment to transaction documents.

The information described in points (b), (c) and (d) of the first subparagraph shall be made available before pricing.

[this appears – but the UK version is not the same as the EU - as sub-rule (2) below]

The information described in points (b), (c) and (d) of the first subparagraph shall be made available before pricing in draft or initial form and in final form no later than 15 days after closing of the transaction.

The information described in points (a) and (e) of the first subparagraph shall be made available simultaneously each quarter at the latest one month after the due date for the payment of interest or, in the case of ABCP transactions, at the latest one month after the end of the period the report covers.

6.2.2 R (1) The information described in SECN 6.2.1R(1) and SECN 6.2.1R(5) shall be made available simultaneously each quarter at the latest one month after the due date for the payment of interest or, in the case of ABCP transactions, at the latest one month after the end of the period the report covers.

The information described in points (a) and (e) of the first subparagraph shall be made available simultaneously each quarter at the latest one month after the due date for the payment of interest or, in the case of ABCP transactions, at the latest one month after the end of the period the report covers.

[covered above, but the EU version differs from the UK rules]

(2) The information described in SECN 6.2.1R(2), SECN 6.2.1R(3) and SECN 6.2.1R(4) must be made available before pricing or original commitment to invest in draft or initial form. Final versions of this information must be made available at the latest 15 days after closing of the transaction.

[covered above]

In the case of ABCP, the information described in points (a), (c)(ii) and (e)(i) of the first subparagraph shall be made available in aggregate form to holders of securitisation positions and, upon request, to potential investors. Loan-level data shall be made available to the sponsor and, upon request, to competent authorities.

6.2.3 R In the case of ABCP, the information described in SECN 6.2.1R(1), SECN 6.2.1R(3)(b) and SECN 6.2.1R(5)(a) shall be made available in aggregate form to holders of securitisation positions and, on request, to potential investors. Loan-level data must be made available to the sponsor and, on request, to the FCA.

In the case of asset-backed commercial paper, the information described in points (a), (c)(ii) and (e)(i) of the first subparagraph shall be made available in aggregate form to holders of securitisation positions and, upon request, to potential investors. Loan-level data shall be made available to the sponsor and, upon request, to the PRA.

Without prejudice to Regulation (EU) No 596/2014, the information described in points (f) and (g) of the first subparagraph shall be made available without delay.

6.2.4 R Without prejudice to the provisions of the Market Abuse Regulation, the information described in SECN 6.2.1R(6) and SECN 6.2.1R(7) shall be made available without delay.

Without prejudice to Regulation (EU) No 596/2014, the information described in points (f) and (g) of the first subparagraph shall be made available without delay.

FCA and PRA require documentation “in draft or initial form” before pricing or original commitment to invest, and in final form no later than 15 days after closing (and updated as soon as practicable following any material change). The EU currently requires disclosure “before pricing”, and does not differentiate investments by way of original subscription from those by way of secondary purchases in the market. See further the commentary on “Transparency”.

When complying with this paragraph, the originator, sponsor and SSPE of a securitisation shall comply with national and Union law governing the protection of confidentiality of information and the processing of personal data in order to avoid potential breaches of such law as well as any confidentiality obligation relating to customer, original lender or debtor information, unless such confidential information is anonymised or aggregated.

6.2.5 R When complying with SECN 6.2.1R, the originator, sponsor and SSPE of a securitisation may provide the information specified in anonymised or aggregated form or, in relation to SECN 6.2.1R(2), as a summary of the specified documentation, where and to the extent that is necessary in order to comply with the law applicable in the United Kingdom governing the protection of confidentiality of information and the processing of personal data and with any confidentiality obligation relating to customer, original lender or debtor information.

[see also Rule 6.2.7 below]

[no equivalent]

In particular, with regard to the information referred to in point (b) of the first subparagraph, the originator, sponsor and SSPE may provide a summary of the documentation concerned.

[included in 6.2.5 above]

Competent authorities referred to in Article 29 shall be able to request the provision of such confidential information to them in order to fulfil their duties under this Regulation.

6.2.6 G

Nothing in SECN 6.2.5R affects the FCA’s powers by and under the Act relating to the ability to request and process confidential information.

2. The originator, sponsor and SSPE of a securitisation shall designate amongst themselves one entity to fulfil the information requirements pursuant to points (a), (b), (d), (e), (f) and (g) of the first subparagraph of paragraph 1.

6.3 Designation relating to securitisation repository

6.3.1 R

(1) The originator, sponsor and SSPE of a securitisation must designate one of their number to be the entity responsible for fulfilling the information requirements under SECN 6.2.1R(1), SECN 6.2.1R(2), SECN 6.2.1R(4), SECN 6.2.1R(5), SECN 6.2.1R(6) and SECN 6.2.1R(7).

2. The originator, sponsor and SSPE of a securitisation shall designate one entity amongst themselves to fulfil the information requirements pursuant to points (a), (b), (d), (e), (f) and (g) of the first subparagraph of paragraph 1 of this Article, ‘the reporting entity’.

[no equivalent of the FCA Rule]

(2) Such designation does not relieve the other parties referred to in SECN 6.3.1R of their responsibilities under SECN 6.2.

[oddly there is no equivalent of the FCA Rule]

The entity designated in accordance with the first subparagraph shall make the information for a securitisation transaction available by means of a securitisation repository.

6.3.2 R

The reporting entity shall make the information for a securitisation transaction available by means of a securitisation repository registered by the FCA.

The reporting entity shall make the information for a securitisation transaction available by means of a securitisation repository.

The obligations referred to in the second and fourth subparagraphs shall not apply to securitisations where no prospectus has to be drawn up in compliance with Directive 2003/71/EC.

6.3.3 R The obligations referred to in SECN 6.3.2R and SECN 6.3.4R shall not apply to securitisations for which section 85 of the Act (Contravention of prohibition relating to public offer of securities) and rules made by the FCA for the purposes of Part 6 of the Act do not require a prospectus to be drawn up.

The obligations referred to in the second and fourth subparagraphs shall not apply to securitisations for which section 85 of FSMA and rules made by the FCA for the purposes of Part 6 of FSMA do not require a prospectus to be drawn up.

Where no securitisation repository is registered in accordance with Article 10, the entity designated to fulfil the requirements set out in paragraph 1 of this Article shall make the information available by means of a website that:

6.3.4 R (1) Where no securitisation repository is registered in accordance with regulation 14 of the Securitisation Regulations 2024, the reporting entity must make the information available by means of a website that:

Where no securitisation repository is registered in accordance with [regulation 15 of the securitisation Regulations], the reporting entity shall make the information available by means of a website that:

(a) includes a well-functioning data quality control system;

(1) includes a well-functioning data quality control system;

(a) includes a well-functioning data quality control system;

(b) is subject to appropriate governance standards and to maintenance and operation of an adequate organisational structure that ensures the continuity and orderly functioning of the website;

(2) is subject to appropriate governance standards and to maintenance and operation of an adequate organisational structure that ensures the continuity and orderly functioning of the website;

(b) is subject to appropriate governance standards and to maintenance and operation of an adequate organisational structure that ensures the continuity and orderly functioning of the website;

(c) is subject to appropriate systems, controls and procedures that identify all relevant sources of operational risk;

(3) is subject to appropriate systems, controls and procedures that identify all relevant sources of operational risk;

(c) is subject to appropriate systems, controls and procedures that identify all relevant sources of operational risk;

(d) includes systems that ensure the protection and integrity of the information received and the prompt recording of the information; and

(4) includes systems that ensure the protection and integrity of the information received and the prompt recording of the information; and

(d) includes systems that ensure the protection and integrity of the information received and the prompt recording of the information; and

(e) makes it possible to keep record of the information for at least five years after the maturity date of the securitisation.

(5) makes it possible to keep records of the information for at least 5 years after the maturity date of the securitisation.

(e) makes it possible to keep record of the information for at least five years after the maturity date of the securitisation.

The entity responsible for reporting the information, and the securitisation repository where the information is made available shall be indicated in the documentation regarding the securitisation.

6.3.5 R

In relation to SECN 6.3.2R and SECN 6.3.4R, the reporting entity and the securitisation repository where the information is made available shall be indicated in the documentation regarding the securitisation.

The reporting entity and the securitisation repository where the information is made available shall be indicated in the documentation regarding the securitisation.

3. ESMA, in close cooperation with the EBA and EIOPA, shall develop draft regulatory technical standards to specify the information that the originator, sponsor and SSPE shall provide in order to comply with their obligations under points (a) and (e) of the first subparagraph of paragraph 1 taking into account the usefulness of information for the holder of the securitisation position, whether the securitisation position is of a short-term nature and, in the case of an ABCP transaction, whether it is fully supported by a sponsor;

ESMA shall submit those draft regulatory technical standards to the Commission by 18 January 2019.

The Commission is empowered to supplement this Regulation by adopting the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

[no equivalent]

[no equivalent]

4. In order to ensure uniform conditions of application for the information to be specified in accordance with paragraph 3, ESMA, in close cooperation with the EBA and EIOPA, shall develop draft implementing technical standards specifying the format thereof by means of standardised templates. ESMA shall submit those draft implementing technical standards to the Commission by 18 January 2019.

The Commission is empowered to adopt the implementing technical standards referred to in this paragraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

The FCA’s templates can be found in the FCA Rulebook SECN section (or see Policy Statement PS24/4)

[The PRA’s templates can be found as annexes to the Securitisation Rules instrument]

The Disclosure RTS and the Disclosure ITS are not covered in this table.