On 7 August 2023, the Financial Conduct Authority (FCA) published a consultation paper, CP23/17, setting out its proposed rules for the UK securitisation markets. The proposed rules would replace the firm-facing provisions from the UK Securitisation Regulation (UK SR) which are being transferred into the FCA Handbook.

Supervisory responsibility for the UK SR is currently shared primarily between the FCA and the Prudential Regulation Authority (PRA). As part of the repeal and replacement of retained EU law (REUL), HM Treasury plans to bring some provisions of the UK SR into new UK legislation while most firm-facing provisions of the UK SR will be covered by new FCA and PRA rules.

HM Treasury is expected to lay before Parliament a statutory instrument (SI) to repeal the UK SR, keeping part of it in new legislation, and a near-final draft of that SI was published in conjunction with the Chancellor’s Mansion House speech in July 2023. The PRA published its own consultation paper (CP15/23) on 27 July 2023, setting out its proposed rules to replace the firm-facing requirements of the UK SR for which it has supervisory responsibility.

Proposed changes

In CP23/17, the FCA is consulting on rules to:

  • Replace the firm-facing provisions from the UK SR which are being transferred into the FCA Handbook.
  • Clarify what kind of information UK institutional investors require to fulfil their due diligence obligations.
  • Amend and clarify risk retention provisions, with reference to changes to facilitate non-performing exposures securitisation.
  • Make several clarificatory changes to other areas of the regulation based on market feedback, such as the geographical scope of the UK SR and the criteria for homogeneity in simple transparent and standardised securitisations.

The consultation paper also includes a discussion on the definitions of public and private securitisations. The FCA notes that it plans to publish a second consultation “at a later stage”, which will include a full assessment of any proposed changes to the definition of public and private securitisations along with proposals for related changes to the reporting regime.  Any changes would aim to make reporting more proportionate as well as enhancing environmental, social and governance (ESG) reporting.

Next steps

The consultation closes on 30 October 2023.

The FCA does not expect the need for a long implementation period for the changes, as the proposals do not involve any changes to reporting templates (which would in turn involve systems changes) and transparency requirements more generally. Therefore, the implementation date for the changes resulting from the consultation paper would be set close to when the final rules are made and is expected to be in Q2 2024, depending on the progress of the securitisation near-final SI and feedback from the consultation.