Regulation (EU) 2017/2402 of the European Parliament and of the CouncilDangos y teitl llawn

CHAPTER 6 U.K. AMENDMENTS

F1 Article 38 U.K. Amendment to Directive 2009/65/EC

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Textual Amendments

F1 Art. 38 omitted (31.12.2020) by virtue of The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 29 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F2 Article 39 U.K. Amendment to Directive 2009/138/EC

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Textual Amendments

F2 Art. 39 omitted (31.12.2020) by virtue of The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 29 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Article 40 U.K. Amendment to Regulation (EC) No 1060/2009

Regulation (EC) No 1060/2009 is amended as follows:

(1)

in recitals 22 and 41, in Article 8c and in point 1 of Part II of Section D of Annex I, ‘structured finance instrument’ is replaced by ‘securitisation instrument’;

(2)

in recitals 34 and 40, in Articles 8(4), 8c, 10(3) and 39(4) as well as in the fifth paragraph of point 2 of Section A of Annex I, point 5 of Section B of Annex I, the title and point 2 of Part II of Section D of Annex I, points 8, 24 and 45 of Part I of Annex III and point 8 of Part III of Annex III, ‘structured finance instruments’ is replaced by ‘securitisation instruments’;

(3)

in Article 1, the second subparagraph is replaced by the following:

‘This Regulation also lays down obligations for issuers and related third parties established in the Union regarding securitisation instruments.’

(4)

in Article 3(1), point (l) is replaced by the following:

‘(l)

“securitisation instrument” means a financial instrument or other assets resulting from a securitisation transaction or scheme referred to in Article 2(1) of Regulation (EU) 2017/2402 (Securitisation Regulation);’

(5)

Article 8b is deleted;

(6)

in point (b) of Article 4(3), point (b) of the second subparagraph of Article 5(6) and Article 25a, the reference to Article 8b is deleted.

F3 Article 41 U.K. Amendment to Directive 2011/61/EU

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Textual Amendments

F3 Art. 41 omitted (31.12.2020) by virtue of The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 29 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Article 42 U.K. Amendment to Regulation (EU) No 648/2012

Regulation (EU) No 648/2012 is amended as follows:

(1)

in Article 2, the following points are added:

‘(30)

“covered bond” means a bond meeting the requirements of Article 129 of Regulation (EU) No 575/2013.

(31)

“covered bond entity” means the covered bond issuer or cover pool of a covered bond.’

(2)

in Article 4, the following paragraphs are added:

‘5. Paragraph 1 of this Article shall not apply with respect to OTC derivative contracts that are concluded by covered bond entities in connection with a covered bond, or by a securitisation special purpose entity in connection with a securitisation, within the meaning of Regulation (EU) 2017/2402 of the European Parliament and of the Council(1) provided that:

(a) in the case of securitisation special purpose entities, the securitisation special purpose entity shall solely issue securitisations that meet the requirements of Article 18, and of Articles 19 to 22 or 23 to 26 of Regulation (EU) 2017/2402 (the Securitisation Regulation);

(b) the OTC derivative contract is used only to hedge interest rate or currency mismatches under the covered bond or securitisation; and

(c) the arrangements under the covered bond or securitisation adequately mitigate counterparty credit risk with respect to the OTC derivative contracts concluded by the covered bond entity or securitisation special purpose entity in connection with the covered bond or securitisation.

6. In order to ensure consistent application of this Article, and taking into account the need to prevent regulatory arbitrage, the ESAs shall develop draft regulatory technical standards specifying criteria for establishing which arrangements under covered bonds or securitisations adequately mitigate counterparty credit risk, within the meaning of paragraph 5.

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

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 or (EU) No 1095/2010.’

(3)

in Article 11, paragraph 15 is replaced by the following:

‘15. In order to ensure consistent application of this Article, the ESAs shall develop common draft regulatory technical standards specifying:

(a) the risk-management procedures, including the levels and type of collateral and segregation arrangements, required for compliance with paragraph 3;

(b) the procedures for the counterparties and the relevant competent authorities to be followed when applying exemptions under paragraphs 6 to 10;

(c) the applicable criteria referred to in paragraphs 5 to 10 including in particular what is to be considered as a practical or legal impediment to the prompt transfer of own funds and repayment of liabilities between the counterparties.

The level and type of collateral required with respect to OTC derivative contracts that are concluded by covered bond entities in connection with a covered bond, or by a securitisation special purpose entity in connection with a securitisation within the meaning of this Regulation and meeting the conditions of Article 4(5) of this Regulation and the requirements set out in Article 18, and in Articles 19 to 22 or 23 to 26 of Regulation (EU) 2017/2402 (the Securitisation Regulation) shall be determined taking into account any impediments faced in exchanging collateral with respect to existing collateral arrangements under the covered bond or securitisation.

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

Depending on the legal nature of the counterparty, power is delegated to the Commission to adopt the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 or (EU) No 1095/2010.’

Article 43 U.K. Transitional provisions

1. This Regulation shall apply to securitisations the securities of which are issued on or after 1 January 2019, subject to paragraphs 7 and 8.

2. In respect of securitisations the securities of which were issued before 1 January 2019, 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, only where the requirements set out in Article 18 and the conditions set out in paragraph 3 of this Article are complied with.

3. Securitisations the securities of which were issued before 1 January 2019, other than securitisation positions relating to an ABCP transaction or an ABCP programme, shall be considered ‘STS’ provided that:

(a) they met, at the time of issuance of those securities, the requirements set out in Article 20(1) to (5), (7) to (9) and (11) to (13) and Article 21(1) and (3); and

(b) they meet, as of the time of notification pursuant to Article 27(1), the requirements set out in Article 20(6) and (10), Article 21(2) and (4) to (10) and Article 22(1) to (5).

4. For the purposes of point (b) of paragraph 3, the following shall apply:

(a) in Article 22(2), ‘prior to issuance’ shall be deemed to read ‘prior to notification under Article 27(1)’;

(b) in Article 22(3), ‘before the pricing of the securitisation’ shall be deemed to read ‘prior to notification under Article 27(1)’;

(c) in Article 22(5):

(i)

in the second sentence, ‘before pricing’ shall be deemed to read ‘prior to notification under Article 27(1)’;

(ii)

‘before pricing at least in draft or initial form’ shall be deemed to read ‘prior to notification under Article 27(1)’;

(iii)

the requirement set out in the fourth sentence shall not apply;

(iv)

references to compliance with Article 7 shall be construed as if Article 7 applied to those securitisations notwithstanding Article 43(1).

[F4 4A. Subject to the second subparagraph, in paragraphs 3 and 4 a reference to a numbered Article is a reference to the Article so numbered of this Regulation as it had effect immediately before IP completion day, or as it has effect on or after IP completion day in relation to an EEA State.

In paragraphs 3(b) and 4, in relation to a STS notification made on or after IP completion day by a person who is established in the United Kingdom, a reference to Article 27(1) is a reference to that Article as it has effect on or after IP completion day in the United Kingdom.“STS notification” means notification that a securitisation meets the requirements of Section 1 or Section 2 of Chapter 4.]

5. In respect of securitisations the securities of which were issued on or after 1 January 2011 but before 1 January 2019 and in respect of securitisations the securities of which were issued before 1 January 2011 where new underlying exposures have been added or substituted after 31 December 2014, the due-diligence requirements as provided for in Regulation (EU) No 575/2013, Delegated Regulation (EU) 2015/35 and Delegated Regulation (EU) No 231/2013 respectively shall continue to apply in the version applicable on 31 December 2018.

[F5 For the purposes of this paragraph, Articles 407 and 410 of Regulation (EU) No 575/2013 (which set out, in part, requirements for due diligence) have effect with the following modifications—

(a) in Article 407 (additional risk weight) and Article 410 (uniform condition of application) a reference to Article 405 (retained interest of the issuer) is a reference to that Article as modified by [F6 paragraph 6];

(b) in Article 407, in the first subparagraph ignore the reference to Article 409; and

(c) in Article 410—

(i) ignore paragraph 1;

(ii) in paragraph 2—

(aa) in the first subparagraph read the opening words as if for “EBA shall develop draft regulatory” there were substituted “The FCA and the PRA may each make”, and ignore point (d);

(bb) ignore the second and third subparagraphs; and

(iii) in paragraph 3, —

(aa) in the first subparagraph read the opening words as if for “EBA shall develop draft regulatory” there were substituted “The FCA and the PRA may each make”;

(bb) ignore the second and third subparagraphs.]

[F7 For the purposes of this paragraph—

(a) Article 256 of Delegated Regulation (EU) 2015/35 continues to have effect notwithstanding its deletion by Article 1(7) of Commission Delegated Regulation (EU) 2018/1221; and

(b) for the purposes of the application by point (a) of paragraph 3(f) of Article 256, Article 254 continues to have effect notwithstanding its deletion by Article 1(7) of Commission Delegated Regulation (EU) 2018/1221, and has effect for those purposes with the following modifications—

(i) paragraph 1 is to be read as if for “Article 135(2)(a) of Directive 2009/138/EC” there were substituted “rule 6.1 of the Investments Part of the rulebook published by the PRA containing rules made by the PRA under the 2000 Act (as the rulebook has effect on IP completion day);

(ii) paragraph 2(b) is to be read as if for “Article 242(12)” there were substituted “ Article 242(15) ”.]

6. In respect of securitisations the securities of which were issued before 1 January 2019 [F8 a CRR firm (as defined by Article 4(1)(2A) of Regulation (EU) No 575/2013 [F9 as that Regulation had effect on IP completion day]), an insurance undertaking (as defined in section 417(1) of the 2000 Act), a reinsurance undertaking (as defined in that section) and an AIFM (as defined by regulation 4(1) of the Alternative Investment Fund Managers Regulation 2013)] shall continue to apply Article 405 of Regulation (EU) No 575/2013 and Chapters I, II and III and Article 22 of Delegated Regulation (EU) No 625/2014, Articles 254 and 255 of Delegated Regulation (EU) 2015/35 and Article 51 of Delegated Regulation (EU) No 231/2013 respectively as in the version applicable on 31 December 2018.

[F10 For the purposes of this paragraph, Article 405 of Regulation (EU) No 575/2013 has effect with the following modifications—

(a) read paragraph 2 as if—

(i) for the first subparagraph there were substituted—

“Where—

(a)

a mixed financial holding company,

(b)

a UK parent institution which is a credit institution,

(c)

a financial holding company 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 credit institutions, investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirement set out in paragraph 1 may be satisfied on the basis of the consolidated situation of the mixed financial holding company, UK parent institution or financial holding company concerned.”;

(ii) in the second subparagraph for the words from “, in a timely manner” to the end there were substituted “the information needed to satisfy the requirements set out in Article 409, 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”; and

(iii) after the second subparagraph there were inserted—

“In this paragraph—

(a)

‘credit institution’, ‘financial holding company’, ‘financial institution’, ‘investment firm’, ‘subsidiary’ and ‘UK parent institution’ have the meaning given in Article 4(1) of Regulation (EU) No 575/2013; and

(b)

‘mixed financial holding company” has the meaning given in regulation 1(2) of the Financial Conglomerates and Other Financial Groups Regulations 2004.”; and

(b) in paragraph 3, in point (b) ignore “of Member States”.]

7. Until the [F11 FCA and the PRA, acting jointly, have made technical standards pursuant to Article 6(7) of this Regulation], originators, sponsors or the original lender shall, for the purposes of the obligations set out in Article 6 of this Regulation, apply Chapters I, II and III and Article 22 of Delegated Regulation (EU) No 625/2014 to securitisations the securities of which are issued on or after 1 January 2019.

8. Until the [F12 FCA and the PRA, acting jointly, have made technical standards pursuant to Article 7(3) of this Regulation], originators, sponsors and SSPEs shall, for the purposes of the obligations set out in points (a) and (e) of the first subparagraph of Article 7(1) of this Regulation, make the information referred to in Annexes I to VIII of Delegated Regulation (EU) 2015/3 available in accordance with Article 7(2) of this Regulation.

9. For the purpose of this Article, in the case of securitisations which do not involve the issuance of securities, any references to ‘securitisations the securities of which were issued’ shall be deemed to mean ‘securitisations the initial securitisation positions of which are created’, provided that this Regulation applies to any securitisations that create new securitisation positions on or after 1 January 2019.

Textual Amendments

F4 Art. 43(4A) inserted (31.12.2020) by The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 30(2) (with savings in S.I. 2019/680, reg. 11) (as amended by S.I. 2020/1301, reg. 3, Sch. para. 35(e)); 2020 c. 1, Sch. 5 para. 1(1)

F5 Words in Art. 43(5) inserted (31.12.2020) by The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 30(3) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F6 Words in Art. 43(5)(a) substituted (1.1.2022) by The Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021 (S.I. 2021/1376), regs. 1(3), 30(5)(a) (with regs. 36, 38)

F7 Words in Art. 43(5) inserted (31.12.2020) by The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/710), regs. 1(3), 32 (as amended by S.I. 2020/1301, reg. 3, Sch. para. 43(j)); 2020 c. 1, Sch. 5 para. 1(1)

F8 Words in Art. 43(6) substituted (31.12.2020) by The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 30(4)(a) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F9 Words in Art. 43(6) inserted (1.1.2022) by The Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021 (S.I. 2021/1376), regs. 1(3), 30(5)(b) (with regs. 37, 38)

F10 Words in Art. 43(6) inserted (31.12.2020) by The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 30(4)(b) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F11 Words in Art. 43(7) substituted (31.12.2020) by The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 30(5) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F12 Words in Art. 43(8) substituted (31.12.2020) by The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 30(6) (with savings in S.I. 2019/680, reg. 11) (as amended by S.I. 2019/1212, reg. 21); 2020 c. 1, Sch. 5 para. 1(1)

F13 Article 44 U.K. Reports

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Textual Amendments

F13 Art. 44 omitted (31.12.2020) by virtue of The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 31 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F14 Article 45 U.K. Synthetic securitisations

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Textual Amendments

F14 Art. 45 omitted (31.12.2020) by virtue of The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 31 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Article 46 U.K. Review

[F15 (1) The Treasury must, no later than 1st January 2022, review the functioning of this Regulation and lay a report before Parliament.

F16 ...

Where the Treasury review the functioning of this Regulation in response to such progress, the Treasury must lay a report before Parliament.]

[F17 (2) That report shall F18 ... shall assess:

(a)

the effects of this Regulation, including the introduction of the STS securitisation designation, on the functioning of the market for securitisations F19 ..., the contribution of securitisation to the real economy, in particular on access to credit for SMEs and investments, and interconnectedness between financial institutions and the stability of the financial sector;

(b)

the differences in use of the modalities referred to in Article 6(3), based on the data reported pursuant to point (e)(iii) of the first subparagraph of Article 7(1). If the findings show an increase in prudential risks caused by the use of the modalities referred to in points (a), (b), (c) and (e) of Article 6(3), then suitable redress shall be considered;

(c)

whether there has been a disproportionate rise of the number of transactions referred to in the third subparagraph of Article 7(2), since the application of this Regulation and whether market participants structured transactions in a way to circumvent the obligation under Article 7 to make available information through securitisation repositories;

(d)

whether there is a need to extend disclosure requirements under Article 7 to cover transactions referred to in the third subparagraph of Article 7(2) and investor positions;

(e)

F20 ...

(f)

the implementation of the requirements provided for in Article 22(4) and whether they need to be extended to securitisation where the underlying exposures are not residential loans or auto loans or leases, with the view to mainstreaming environmental, social and governance disclosure;

(g)

the appropriateness of the third-party verification regime as provided for in Articles 27 and 28, and whether the authorisation regime for third parties provided for in Article 28 fosters sufficient competition among third parties and whether changes in the supervisory framework need to be introduced in order to ensure financial stability; and

(h)

whether there is a need to complement the framework on securitisation set out in this Regulation by establishing a system of limited licensed banks, performing the functions of SSPEs and having the exclusive right to purchase exposures from originators and sell claims backed by the purchased exposures to investors].

Textual Amendments

F15 Art. 46(1) substituted for words (31.12.2020) by The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 32(a) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F16 Words in Art. 46(1) omitted (29.8.2023) by virtue of Financial Services and Markets Act 2023 (c. 29), s. 86(3), Sch. 2 para. 37(2) (with s. 2(3)); S.I. 2023/779, reg. 4(zz)(iii)

F17 Words in Art. 46 renumbered as Art. 46(2) (31.12.2020) by The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 32(b) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F18 Words in Art. 46(2) omitted (31.12.2020) by virtue of The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 32(c) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F19 Words in Art. 46(2)(a) omitted (29.8.2023) by virtue of Financial Services and Markets Act 2023 (c. 29), s. 86(3), Sch. 2 para. 37(3)(a) (with s. 2(3)); S.I. 2023/779, reg. 4(zz)(iii)

F20 Art. 46(2)(e) omitted (29.8.2023) by virtue of Financial Services and Markets Act 2023 (c. 29), s. 86(3), Sch. 2 para. 37(3)(b) (with s. 2(3)); S.I. 2023/779, reg. 4(zz)(iii)

F21 Article 47 U.K. Exercise of the delegation

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Textual Amendments

F21 Art. 47 omitted (31.12.2020) by virtue of The Securitisation (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/660), regs. 1(2), 33 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Article 48 U.K. Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

It shall apply from 1 January 2019.

(1)

Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012 (OJ L 347, 28.12.2017, p. 35).’