Market updates and sector developments

The UK FCA has issued its own consultation on proposed changes to the securitisation regime, following the publication of HM Treasury’s near-final statutory instrument (SI) (SCI 13 July) and the UK PRA’s consultation (SCI 28 July) last month. The document appears to focus on fixing some technical issues and clarifying others, rather than recommending any wholesale changes to the current regulatory framework.

The FCA notes that taken together, its consultation paper (CP), the PRA CP and the near-final SI provide an overview of the proposed replacement of the UK Securitisation Regulation. It further notes that the near-final SI requires the FCA and the PRA to “have regard” to the coherence of the overall framework for the regulation of securitisation. This means that, although the FCA and the PRA will write their own rules in relation to the firms and activities they supervise, both regulators need to ensure this creates a coherent set of rules overall.

Under the near-final SI, the FCA is tasked with making general rules requiring a relevant institutional investor to carry out due diligence, both before holding a securitisation position and while holding a securitisation position. Additionally, the authority proposes to make rules for all authorised and unauthorised originators, sponsors, original lenders and SSPEs that are not PRA-authorised firms, in relation to risk retention requirements, transparency obligations, resecuritisation restrictions and credit granting standards. The PRA will make rules for PRA-authorised firms in relation to those obligations.

The FCA also proposes to make rules relating to STS securitisations for all UK originators and sponsors, as well as for securitisation repositories (SR) and third-party verifiers (TPV).

As part of the CP, the authority is seeking to: clarify what kind of information UK institutional investors require to fulfil their due diligence obligations; amend and clarify risk retention provisions, with particular reference to facilitating non-performing exposures (NPE) securitisation; and make a number of 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 STS securitisations. Additionally, the CP includes a discussion on the definitions of public and private securitisations.

The FCA says it plans to consult on proposed changes to the reporting regime in a second consultation to be published at a later stage, with the aim of making reporting more proportionate. Indeed, the authority emphasises that the outcomes it is seeking from its proposals are: to make the UK SR more proportionate; to remove barriers to the issuance of, and investment in, securitisations; to implement such proposals while maintaining appropriate protections for investors and with as minimal additional regulatory and operational cost upon impacted firms as possible; and to provide a clearer framework within which the market can operate.

The implementation date for the changes resulting from this CP is anticipated to be in 2Q24. The consultation runs until 30 October.

In other news…

ICE, Black Knight timing agreement inked
Intercontinental Exchange and Black Knight have jointly stipulated, along with the Federal Trade Commission (FTC), to dismiss the preliminary injunction proceeding in the US District Court seeking to block the close of ICE’s previously announced acquisition of Black Knight (SCI 10 March). The joint stipulation dismisses the federal court complaint and dissolves the temporary restraining order that was previously in place, allowing ICE, Black Knight and the FTC to continue working towards a final settlement agreement resolving the FTC’s challenge to the acquisition.

In connection with the stipulation, ICE and Black Knight have entered into an agreement with the FTC staff to refrain from closing the acquisition before 11:59pm EDT on the tenth calendar day after the parties sign an Agreement Containing Consent Order (ACCO) for submission to the FTC. The timing agreement provides certain deadlines and milestones for a mutually acceptable ACCO by 25 August. If the parties do not sign an ACCO by that time, any party may unilaterally terminate the timing agreement with three calendar days written notice to all other parties.

The agreement follows divestiture agreements for Black Knight’s Optimal Blue business and Empower loan origination system (LOS) business. The divestiture transactions are subject to the closing of ICE’s acquisition of Black Knight and other customary closing conditions.