June 26, 2022

Volume XII, Number 177

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The End of the Temporary Transitional Power: Securitisation Reporting

Brexit and the Temporary Transitional Power

On 31 January 2020, the UK ceased to be a member of the EU. Following a transition period, EU law ceased to be applicable in the UK with effect from 11 p.m. on 31 December 2020. Directly applicable EU legislation, such as the EU Securitisation Regulation and associated technical standards, was ‘onshored’ into UK domestic law as of that date. Such onshored financial services legislation was subject to changes which reflected, among other things, the changed relationship between the UK and the EU, the replacement of EU authorities and regulators with their UK equivalents, and differing regulatory priorities in the EU and UK.

In order to give UK authorised firms enough time to adapt to this partial overhaul of the regulatory system, the UK Government empowered the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority (“PRA”) to make transitional provisions in respect of the onshored legislation for an interim period. This “temporary transitional power” (the “TTP”) enabled the UK regulators to delay the application of, or otherwise modify, regulated firms’ regulatory obligations where they have changed as a result of changes made to legislation through the onshoring process.

Using these powers, the PRA and the FCA elected to provide broad transitional relief, with key exceptions, from 31 December 2020 until 31 March 2022 (the “TTP period”). This means that, subject to some limited exceptions, during the TTP period UK firms did not need to comply with their obligations under the amended onshored legislation, but instead could satisfy their obligations through compliance with the previously applicable EU regulations.

The UK Securitisation Regulation and the TTP Period

Article 7 of the UK Securitisation Regulation requires the originator, sponsor and securitisation special purpose entity of a securitisation to make certain prescribed information relating to the securitisation available to investors, competent authorities and, upon request, to potential investors. The designated reporting entity must make certain prescribed information available to holders of a securitisation positions, to the relevant competent authorities and, upon request, to potential investors. These disclosures must be made using the templates provided for in regulatory technical standards. The EU Regulatory Technical Standards  (the “EU Transparency RTS”) had applied in the UK and EU since 23 September 2020. The onshored UK version of these Technical Standards (the “UK Transparency RTS”) have applied in the UK since 31 December 2020.

During the TTP period, UK banks and investment firms subject to the UK Securitisation Regulation were permitted to satisfy their obligations under Article 7 of the UK Securitisation Regulation by using the templates provided for in the EU Transparency RTS. From the end of the TTP period, where such firms are subject to the Article 7 obligation under the UK Securitisation Regulation, they will be required to use the relevant templates in the UK Transparency RTS. Although the templates are substantially the same in content, there are small technical differences (e.g., the industry code field for the obligor). 

The requirement for reporting under both regimes may arise in some scenarios, such as:

  • where a transaction such as a CLO has a UK manager and an EU securitisation special purpose entity (“SSPE”), the UK manager will have a regulatory obligation to complete the UK templates and the EU SSPE will have a regulatory obligation to complete the EU templates; or

  • where there is a UK entity that is an originator, sponsor or original lender (regardless of whether it is acting as the retention holder) and there is an EU SSPE, the UK entity will have a regulatory obligation to complete the UK templates and the EU SSPE will have a regulatory obligation to complete the EU templates.

In terms of the due diligence requirements imposed on UK investors under the UK Securitisation Regulation and EU investors under the EU Securitisation Regulation, it is unclear whether EU investors can satisfy their due diligence requirements under Article 5 through receipt of the UK templates. UK investors, however, should be able to satisfy their due diligence obligations under Article 5 of the UK Securitisation Regulation by receiving the EU templates, as the UK Securitisation Regulation permits them to rely on receiving transparency information which is “substantially the same” as that contained in the UK Transparency RTS. For example, the UK templates should not need to be completed in respect of securitisations with EU SSPEs where there is no UK originator, sponsor or original lender.

Claire PuddicombeDavid QuiroloNick Shiren, and Daniel Tobias contributed to this article.

© Copyright 2022 Cadwalader, Wickersham & Taft LLPNational Law Review, Volume XII, Number 41
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About this Author

Michael Sholem Finance Lawyer Cadwalader
Special Counsel

Michael Sholem is a special counsel in the Financial Services Group in Cadwalader’s London office. Michael has broad experience acting for banks, fund managers and financial technology firms in relation to financial regulatory issues.

Michael’s practice focuses on the supervision and regulation of banks, investment firms, payment institutions and asset managers, including in connection with new authorisations, changes of control, corporate governance and regulatory investigations. His practice has also included advising non-financial groups on the impact of new regulation, with a...

T.+44 (0) 20 7170 8545
Suzanne Bell, Cadwalader Law Firm, Finance Law Attorney
Special Counsel

Suzanne Bell is a special counsel in the Capital Markets Group in Cadwalader's London office.

Suzanne has advised leading financial institutions and corporations in connection with a wide range of domestic, European and International structured finance and capital markets transactions. Her experience includes structuring and documenting commercial paper conduits, structured investment vehicles, and public and private securitisations of a range of asset classes, with particular focus on credit card receivables, auto loans and...

44020-7170-8549
Robert Cannon, Capital Markets attorney, Cadwalader law firm
Special Counsel

Robert Cannon is a special counsel in the Capital Markets Group in Cadwalader's London office.

He focuses on structured finance and securitisation, and has acted for arrangers, originators and asset managers on transactions involving a variety of structures and asset classes, including CDOs, CLOs, mortgage securitisations and commercial paper conduits.

Prior to joining Cadwalader in 2007, Robert worked in the structured finance practice at Clifford Chance's London office for two and a half years and, prior to that, in the banking and financial services group at Matheson...

+44 (0) 20 7170 8735
Stephen Day, Capital Markets attorney, Cadwalader law firm
Partner

Stephen Day is a partner in the Capital Markets Group, resident in the London office. He advises leading financial institutions and corporations in Europe and the United States in connection with a wide range of structured finance and securitisation transactions, with a focus on complex cross border deals. His work in this area includes structuring commercial paper conduits, structured investment vehicles, multi-country receivables (trade, auto loan/lease, credit card) securitisations, securitisation bridge and private equity take-out deals, whole business transactions and...

T.+44 (0) 20 7170 8535 M.+44 (0) 7944 370 395
Matthew Duncan Finance Lawyer Cadwalalder
Partner

Matthew Duncan advises a wide range of institutions and other entities that operate, invest in or deal with businesses that provide financial services and products to the consumer, financial, commercial and public sectors in the United Kingdom and other jurisdictions (including banks, lenders, credit funds, insurers, reinsurers, pension funds, alternative investment funds, investment managers, finance arrangers and fintechs).

Matthew has played a significant role in many landmark, innovative “first of kind” transactions that have been widely followed by many issuers, including the...

+44 (0) 20 7170 8730
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