On the 12December 2017, the European Parliament and Council of the European Union adopted Regulation (EU) 2017/2402 which lays down a new regulatory framework for securitisation transactions and the related Regulation (EU) 2017/2401 amending the Credit Requirements Regulation. The Regulations aim to:

  • define the term securitisations, broaden the definition of sponsor to include non-EU credit institutions or investment firms and exhaustively list the entities which may be considered institutional investors under EU Securitisations law;
  • establish due-diligence, risk-retention and transparency requirements for the parties involved;
  • establish criteria for credit granting;
  • establish requirements for the selling of securitisations to retail clients;
  • prohibit re-securitisations unless these are contracted for a legitimate purpose under paragraph 3 of Article 8 of the Regulation;
  • establish requirements for Securitisation Special Purpose Entities;
  • establish conditions and procedures for securitisation repositories;
  • create a specific framework for simple, transparent and standardised (STS) securitisation; and
  • introduce preferential regulatory requirements for exposures to STS securitisations when compared to non-STS securitisations for credit institutions and investment firms.

The New Securitisation Regulation also sets out general rules establishing administrative pecuniary sanctions in the case of negligence or intentional infringement of the provisions of the Regulation. In the case of natural persons, the maximum administrative pecuniary sanction is of at least EUR 5,000,000 whilst for legal persons; there is the possibility of incurring a maximum penalty of at least EUR 5,000,000 or up to 10% of the total annual net turnover of the legal person according to the last available accounts. Furthermore, the sanctions prescribed by the Regulation may also come in the form of a maximum administrative pecuniary sanction of at least twice the amount of the benefit derived from the infringement notwithstanding the amount exceeding the maximum amounts stated above.

The New Securitisation Regulation came into effect on the the 17 January 2018 and shall apply to securitisation transactions whose securities are issued as of the 1 January 2019. The adoption of the New Securitisation Regulation and the CRR Amendments are part of the broader Investment Plan for Europe which aims to create a Capital Markets Union.