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FSA consults on the implementation of CRD2 and CRD3: Securitisation focus


These amendments are commonly referred to as "CRD2" and they include, amongst other things, the much debated "skin in the game" and investor due diligence requirements, as well as changes to the requirements for significant risk transfer (SRT) and certain other technical amendments to the securitisation framework.

Less predictably, the consultation paper also includes the FSA's preliminary proposals on the implementation of certain proposed (but not yet approved) further amendments to the CRD.

These further amendments are commonly referred to as "CRD3" and they include, amongst other things, increased risk weights for re-securitisation positions and provisions intended to align the treatment of securitisation positions as between the trading book and the banking book. The FSA's decision to address the CRD3 proposals sends a clear signal as to the political momentum behind them and is in keeping with the recent express endorsement of the securitisation related CRD3 proposals by the Government in its Pre-Budget Report.

While there were high hopes that the FSA's consultation paper would help to fill some of the (rather large) "gaps" in the CRD2 provisions (in particular, with respect to the retention and due diligence requirements), the additional guidance provided by the paper in this regard is limited.

The FSA has predictably adopted what it refers to as an "intelligent copy out" approach with respect to its implementation of CRD2 and CRD3 and, in general, little has been added to the Directive text. However, further guidance may still come. The Committee of European Banking Supervisors (CEBS) has been tasked with providing guidelines for the convergence of supervisory practices in respect of article 122a and the FSA refers to this in the consultation paper and notes that it that does not intend to provide additional guidance until such time as the CEBS guidance is available.

The consultation paper refers to a number of matters which will shape the securitisation market going forward and so we encourage market participants to read and respond to it (in particular as it now also deals with CRD amendments which have not yet been finalised and approved). The response period under the paper closes on 10 March 2010 and feedback is expected to follow fairly shortly thereafter as the approved CRD2 amendments must be implemented by national authorities by 31 October 2010.

Further information

For further information, please contact any of the key contacts listed above and/or your usual contact at Allen & Overy.




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