The long-anticipated final version of the European Union’s (EU) Regulatory Technical Standards on risk retention has been published in the Official Journal of the European Union after years of development and multiple drafts. The Regulations were finalized and made public on October 18, 2023. You can find the regulations here.
The implementation of these new regulatory standards will have deep implications across the EU and UK securitisation markets. Among these implications are the publication of the UK Securitisation Regulation Statutory Instrument and the implications for draft Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) rules.
Key changes introduced by the EU’s new Regulatory Technical Standards on risk retention include:
- Revisions to the risk retention methodologies.
- Alterations in the approaches to managing capital and liquidity risk.
- Changes to the reporting requirements for securitisation transactions.
- Clarification on the roles and responsibilities of risk retention holders.
Legal and financial professionals working in key decision-making echelons within corporations and major firms must familiarize themselves with these new regulations and comprehend how they will influence the future direction of EU and UK securitisation markets.
The full implications of these changes remain to be seen, particularly in light of further expected regulatory developments. However, it is clear that the newly published EU Regulatory Technical Standards on risk retention represent a significant step in evolving the sector by refining the steps participants should take to manage and mitigate risk. This is true not only for incumbents in the securitisation markets but also for newcomers seeking to navigate the regulatory landscape.
In conclusion, as these changes continue to unfold, it is crucial for firms to stay current with the newest regulatory developments to remain compliant and shape strategy effectively.