EU Securitisation Regulation: good news for Cayman SSPEs

In our podcast of 13 June 2022 on the EU/UK Securitisation Regulations and restrictions on the use of third country SPVs we have discussed, among other things, concerns and barriers that arise from the perspective of the EU sell-side parties and institutional investors in-scope of the EU Securitisation Regulation (Regulation (EU) 2017/2402) when it comes to the use of securitisation special purpose entities (SSPEs) established in the Cayman Islands, because this jurisdiction is on the EU list of countries that have strategic deficiencies in its regime on anti-money laundering and countering the financing of terrorism (EU AML/CFT blacklist).

By way of an update, please note that concerns surrounding the use of the Cayman Islands as a jurisdiction for SSPE establishment fall away from 7 February 2024 as a result of the EU AML/CFT blacklist being amended by Delegated Regulation (EU) 2024/163, which removes the Cayman Islands from the EU AML/CFT blacklist. By way of background, this EU move follows the October 2023 decision of the Financial Action Task Force (FATF) to remove the Cayman Islands from the FATF list of jurisdictions under increased monitoring.

Therefore, from 7 February 2024 (the date of entry into force of the amendments to the EU AML/CFT blacklist), for the purposes of the EU Securitisation Regulation and the Article 4 restriction on third country SSPEs, it will be safe again to set up SSPEs in the Cayman Islands and for institutional investors in-scope of the EU Securitisation Regulation to buy in primary or secondary markets securitisation positions involving Cayman SSPEs. Updates to the corresponding risk factors will be needed on securitisations involving Cayman SSPEs that are closing prior to 7 February 2024 to reflect the latest position and the need for such risk factor will away altogether for new securitisations closing on or after 7 February 2024.

If you have questions on the application of the EU Securitisation Regulation or the UK Securitisation Regulation regimes, please contact us. Click here for contact details of our global securitisation team.