Covid-19 related amendments to the EU Securitisation Regulation

The European Parliament and the Council of the European adopted Regulation (EU) 2021/557 on 31 March 2021 which aims to support the recovery from the severe economic shock caused by the Covid-19 pandemic by amending the EU securitisation regulation to:

• provide synthetic on-balance sheet securitisations with access to the simple, transparent and standardised (STS) framework, which was previously only available to “true sale” securitisations; and
• remove regulatory obstacles to the securitisation of non-performing loans.

The amendments to the EU securitisation regulation are in line with the recommendations set out in the EBA’s final report on an STS framework for synthetic securitisations which we considered in our blog on 12 May 2020.

Regulation (EU) 2021/557 and Regulation (EU) 2021/558, which makes concomitant changes to the CRR, were published in the Official Journal of the European Union on 6 April 2021 and will come into force on 9 April 2021.

As the Brexit transition period has ended, these amendments will not form part of UK law. Therefore, it is important that market participants are conscious of the divergences that are developing between the EU and UK securitisation laws.

ESAs opinion on the jurisdictional scope of the EU securitisation regulation

In that regard, the European Supervisory Authorities (the ESAs) have also published a joint opinion on the jurisdictional scope of the EU securitisation regulation which proposes that, among other things:

• Articles 5, 7 and 9 of the EU securitisation regulation should be amended insofar as is necessary to address issues concerning their jurisdictional scope;
• the European Commission should clarify that the EU securitisation regulation does not require all of a securitisation's sell-side parties to be located in the EU for the transaction to be compliant with the EU securitisation regulation and that a sell-side party located in the EU should be directly responsible for complying with the obligations under Articles 6 and 9 and the main disclosure obligation under Article 7;
• the European Commission should assess the feasibility of incorporating a third country equivalence regime for transparency requirements in relation to third country securitisations because the existing transparency requirements are overly inflexible in their application to third country securitisations; and
• the application of the EU securitisation regulation to non-EU AIFMs, sub-threshold AIFMs and investment fund managers should be clarified.

Feel free to contact us if you would like to discuss any of the above.