1The rules in this chapter apply to the person(s) who notify the FCA under SECN 2.5. Some of the provisions in this chapter are also directly applicable to any sponsors, originators, SSPEs or original lenders where relevant.
1A securitisation which is not an ABCP programme or an ABCP transaction must fulfil the following requirements to be considered an STS securitisation:
those in SECN 2.2.2R to SECN 2.2.29R; and
the FCA must have received an STS notification in respect of that securitisation and the securitisation must appear on the list it publishes under regulation 10(2) of the Securitisation Regulations 2024; and
the originator and sponsor involved in the securitisation must be established in the United Kingdom.
1Any SSPE must acquire title to the underlying exposures in a manner enforceable against the seller or any other third party, whether transfer of title is by means of:
true sale;
assignment; or
another transfer with the same legal effect as (a) or (b).
If the seller becomes insolvent, the transfer of the title to the SSPE must not be subject to severe clawback provisions.
1For the purposes of SECN 2.2.2R(2), the following are severe clawback provisions:
those allowing the seller’s liquidator to invalidate the sale of the underlying exposures solely because it was concluded within a certain period before the declaration of the seller’s insolvency;
provisions where the SSPE can prevent the invalidation referred to in (1) only if it can prove it was unaware of the seller’s insolvency at the time of sale.
1For the purposes of SECN 2.2.2R(1), if provisions of national insolvency laws allow a liquidator or court to invalidate the sale of underlying exposures in the following circumstances, such provisions are not severe clawback provisions:
fraudulent transfers; or
unfair prejudice to creditors or transfers intended to improperly favour particular creditors over others.
1If the seller is not the original lender, the transfer of the underlying exposures to that seller by any of the means in SECN 2.2.2R(1) (whether direct or through one or more intermediate steps) must meet the requirements in SECN 2.2.1 to SECN 2.2.3.
1If the transfer of the underlying exposures is performed by assignment and perfected after the transaction’s closing, the triggers to effect such perfection must be set broadly enough to require perfection in all of the following events:
severe deterioration in the seller’s credit quality standing;
the seller’s insolvency; and
unremedied breaches of the seller’s contractual obligations, including the seller’s default.
1The seller must provide representations and warranties that, to the best of its knowledge, the underlying exposures included in the securitisation are not encumbered or otherwise in a condition that can be foreseen to adversely affect the enforceability of the transfer by the means in SECN 2.2.2R(1).
1The underlying exposures the seller transfers to the SSPE (if an SSPE is used) or that are otherwise securitised must meet predetermined, clear and documented eligibility criteria prohibiting active portfolio management of those exposures on a discretionary basis.
For the purposes of SECN 2.2.8R(1), substitution of exposures that are in breach of representations and warranties is not considered active portfolio management.
Exposures transferred to the SSPE (if an SSPE is used) or otherwise added to the securitisation after the closing of the transaction must meet the eligibility criteria applied to the initial underlying exposures.
1The securitisation must be backed by a pool of underlying exposures that are homogeneous in terms of asset type, considering the specific characteristics relating to the asset type’s cash flows, including their contractual, credit-risk and prepayment characteristics.
Further details specifying which underlying exposures are homogeneous for the purposes of (1) are set out at SECN 2.4.
The underlying exposures must contain contractually binding and enforceable obligations, with full recourse to debtors and, where applicable, guarantors.
The underlying exposures must have defined periodic payment streams (the instalments of which may differ in their amounts) relating to rental, principal, or interest payments, or to any other right to receive income from assets supporting such payments. The underlying exposures may also generate proceeds from the sale of any financed or leased assets.
The underlying exposures must not include any transferable security, other than corporate bonds not listed on a trading venue.
1The underlying exposures must not include any securitisation position.
1The underlying exposures must be originated:
in the ordinary course of the originator’s or original lender’s business; and
following underwriting standards at least as rigorous as those the originator or original lender applied at the time of origination to similar unsecuritised exposures, to the extent there are any.
The originator or the original lender (as the case may be) must fully disclose to potential investors, without undue delay:
the underwriting standards pursuant to which the underlying exposures are originated; and
any material changes from former underwriting standards.
For securitisations with residential loans as underlying exposures, the pool of loans must not include any loan that was marketed and underwritten on the premise that the loan applicant or, where applicable, intermediaries were made aware that the lender might not verify the information provided.
The assessment of the borrower’s creditworthiness must meet the requirements in:
MCOB 11.6.2R(1)(a), MCOB 11.6.2R(1)(b), MCOB 11.6.2R(2), MCOB 11.6.5R(1), MCOB 11.6.60R and MCOB 11A.2.1R; or
where applicable, equivalent requirements in a third country.
The originator or original lender must have expertise in originating exposures of a similar nature to those securitised.
1After the underlying exposures have been selected, they must be transferred to the SSPE (if an SSPE is used) or otherwise securitised without undue delay.
At the time of selection, the underlying exposures must not include exposures in default within the meaning of Article 178(1) of the UK CRR or exposures to a credit-impaired debtor or guarantor who, to the best of the originator’s or original lender’s knowledge:
was, at the time of origination, where applicable:
on a public credit registry of persons with adverse credit history; or
if there is no such public credit registry, another credit registry that is available to the originator or original lender;
has a credit assessment or a credit score indicating that the risk of contractually agreed payments not being made is significantly higher than for comparable unsecuritised exposures the originator holds, if any;
has been declared insolvent;
had a court grant its creditors a final non-appealable right of enforcement or material damages as a result of a missed payment within 3 years before the date of origination; or
has undergone a debt restructuring process with regard to its non-performing exposures within 3 years before the date of transfer of the underlying exposures to the SSPE (if an SSPE is used) or other means of securitising the underlying exposure.
If a credit-impaired debtor or guarantor has undergone a debt restructuring process as described in (2)(e), the underlying exposures may include exposures to that credit-impaired debtor or guarantor if:
the restructured underlying exposure has not presented new arrears since the date of the restructuring, which must have taken place at least 1 year before the date the underlying exposures were transferred to the SSPE (if an SSPE is used) or otherwise securitised; and
the information the originator, sponsor and SSPE have provided in accordance with SECN 6.2.1R(1) and SECN 6.2.1R(5)(a) explicitly sets out:
the proportion of total underlying exposures, which have been restructured;
the time and details of the restructuring; and
their performance since the date they were restructured.
1The debtors must, at the time the exposures are transferred, have made at least one payment, except in the case of revolving securitisations backed by exposures payable in a single instalment or with a maturity of less than 1 year (including, without limitation, monthly payments on revolving credits).
1A securitisation must not be structured so that repayment of investors depends predominantly on the sale of the assets securing the underlying exposures.
Paragraph (1) must not prevent such assets from subsequently being rolled over or refinanced.
If a securitisation’s underlying exposures are secured by assets, and the value of those assets is guaranteed or fully mitigated by an obligation on the seller or another third party to repurchase them, that securitisation does not contravene the prohibition in (1).
1The originator, sponsor or original lender must satisfy the risk-retention requirement in accordance with SECN 5.
1The interest rate and currency risks arising from the securitisation must be appropriately mitigated. Any measures taken to that effect must be disclosed.
The securitisation must be structured such that:
the SSPE does not enter into derivative contracts, unless to hedge interest rate or currency risk; and
the pool of underlying exposures does not include derivatives.
Any derivatives into which the SSPE does enter in accordance with (2)(a) must be underwritten and documented according to common standards in international finance.
1Any referenced interest payments under the securitisation assets and liabilities must:
be based on generally used market interest rates or generally used sectoral rates reflective of the cost of funds; and
not reference complex formulae or derivatives.
1If an enforcement or an acceleration notice has been delivered:
no cash may be trapped in the SSPE above what is needed to ensure the SSPE’s operational functioning or the orderly repayment of investors under the securitisation’s contractual terms. However, an amount of cash may be so trapped if exceptional circumstances require it to be used (in the investors’ best interests) to pay expenses to prevent deterioration in the underlying exposures’ credit quality;
principal receipts from the underlying exposures must be passed to investors via sequential amortisation of the securitisation positions, as determined by the securitisation positions’ seniority;
repayment of the securitisation positions must not be reversed with regard to their seniority; and
no provisions may require automatic liquidation of the underlying exposures at market value.
1Transactions featuring non-sequential priority of payments must include triggers relating to the performance of the underlying exposures resulting in the priority of payments reverting to sequential payments in order of seniority. Such performance-related triggers must include the deterioration in the credit quality of the underlying exposures below a predetermined threshold.
1The transaction documentation must include appropriate early amortisation provisions or, in the case of a revolving securitisation, triggers for termination of the revolving period, including in the following circumstances:
the underlying exposures’ credit quality deteriorating to or below a predetermined threshold;
an insolvency-related event with regard to the originator or the servicer occurring;
the value of the underlying exposures falling below a predetermined threshold (early amortisation event); and
failing to generate sufficient new underlying exposures meeting the predetermined credit quality (trigger for termination of the revolving period).
1The transaction documentation must clearly specify:
the servicer’s, any trustee’s and other ancillary service providers’ contractual obligations, duties and responsibilities;
the processes and responsibilities necessary to ensure that the servicer’s default or insolvency does not result in servicing terminating, such as a contractual provision enabling the servicer to be replaced in such cases; and
provisions ensuring derivative counterparties, liquidity providers and the account bank are replaced in the case of their default, insolvency and other specified events, where applicable.
The transaction documentation must clearly and consistently set out definitions, remedies and actions relating to:
delinquency and default of debtors;
debt restructuring;
debt forgiveness;
forbearance;
payment holidays;
losses;
charge offs;
recoveries; and
other asset performance remedies.
The transaction documentation must clearly specify:
the priorities of payment and events triggering any change to these; and
the obligation to report such events.
Any change in the priorities of payments which will materially adversely affect a securitisation position’s repayment must be reported to investors without undue delay.
1The transaction documentation must include clear:
provisions facilitating timely resolution of conflicts between different classes of investors;
definitions of voting rights;
allocation of voting rights to classes of investor; and
identification of responsibilities of the trustee and other entities with fiduciary duties to investors.
1Before pricing or original commitment to invest, the originator and the sponsor must make available to potential investors:
data covering a period of at least 5 years about static and dynamic historical default and loss performance, such as delinquency and default data, for substantially similar exposures to those being securitised; and
the sources of the data in (1) and the reasons those exposures are substantially similar exposures to those being securitised.
1An appropriate and independent external party must verify a sample of the underlying exposures before the securities resulting from the securitisation are issued.
That verification must confirm that the data disclosed in respect of the underlying exposures is accurate.
1Before pricing or original commitment to invest, the originator or the sponsor must make available to potential investors a liability cashflow model precisely representing the contractual relationship between the underlying exposures and the payments flowing between:
the originator;
the sponsor;
the investors;
other third parties; and
the SSPE.
After pricing or original commitment to invest, the originator or the sponsor must continually make that model available to investors and potential investors on request.
1For a securitisation whose underlying exposures are residential loans or auto loans or leases, the originator and sponsor must publish the available information about the environmental performance of the assets financed by such residential loans or auto loans or leases as part of the information disclosed pursuant to SECN 6.2.1R(1).
1Before pricing or original commitment to invest, the following information must be made available to potential investors:
that required by SECN 6.2.1R(1); and
at least in draft or initial form, that required by SECN 6.2.1R(2) to SECN 6.2.1R(4).
The final documentation must be made available to investors at the latest 15 days after closing of the transaction.
1An ABCP transaction must fulfil the following requirements to be considered an STS securitisation:
those in SECN 2.3.2R to SECN 2.3.22R;
the FCA must have received an STS notification in respect of that securitisation and must have included the securitisation in the list it publishes under regulation 10(2) of the Securitisation Regulations 2024; and
the sponsor involved in the ABCP programme of which that ABCP transaction forms part must be established in the United Kingdom.
An ABCP programme must fulfil the following requirements to be considered an STS securitisation:
those in SECN 2.3.30R to SECN 2.3.37R;
The FCA must have received an STS notification in respect of that securitisation and must have included the securitisation in the list it publishes under regulation 10(2) of the Securitisation Regulations 2024; and
the sponsor involved in the ABCP programme must be established in the United Kingdom.
For the purposes of SECN 2.3, a ‘seller’ means ‘originator’ or ‘original lender’.
1Any SSPE must acquire title to the underlying exposures in a manner enforceable against the seller or any other third party, whether transfer of title is by means of:
true sale;
assignment; or
another transfer with the same legal effect as (a) or (b).
The transfer of the title to the SSPE must not be subject to severe clawback provisions if the seller becomes insolvent.
1For the purposes of SECN 2.3.2R(2), the following are severe clawback provisions:
those allowing the seller’s liquidator to invalidate the sale of the underlying exposures solely because it was concluded within a certain period before the declaration of the seller’s insolvency;
provisions where the SSPE can prevent the invalidation referred to in (a) only if it can prove it was not aware of the seller’s insolvency at the time of sale.
1For the purposes of SECN 2.3.2R if provisions of national insolvency laws allow a liquidator or court to invalidate the sale in the following circumstances, such provisions are not severe clawback provisions:
fraudulent transfers; or
unfair prejudice to creditors or transfers intended to improperly favour particular creditors over others.
1If the seller is not the original lender, the transfer of the underlying exposures to the seller by any of the means in SECN 2.3.2R(1) (whether direct or through one or more intermediate steps) must meet the requirements in SECN 2.3.2R, SECN 2.3.3 and SECN 2.3.4R.
1If the transfer of the underlying exposures is performed by assignment and perfected after the transaction’s closing, the triggers to effect such perfection must be set broadly enough to require perfection in all of the following events:
severe deterioration in the seller’s credit quality standing;
the seller’s insolvency; and
unremedied breaches of the seller’s contractual obligations, including the seller’s default.
1The seller must provide representations and warranties that, to the best of its knowledge, the underlying exposures included in the securitisation are not encumbered or otherwise in a condition that can be foreseen to adversely affect the enforceability of the transfer by the means in SECN 2.3.2R(1).
1The underlying exposures the seller transfers to the SSPE (if an SSPE is used) or that are otherwise securitised must meet predetermined, clear and documented eligibility criteria prohibiting active portfolio management of those exposures on a discretionary basis.
For the purposes of (1), substitution of exposures that are in breach of representations and warranties is not considered active portfolio management.
Exposures transferred to the SSPE (if an SSPE is used) or otherwise added to the securitisation after the closing of the transaction must meet the eligibility criteria applied to the initial underlying exposures.
1The underlying exposures must not include any securitisation positions.
1After the underlying exposures have been selected, they must be transferred to the SSPE (if an SSPE is used) or otherwise securitised without undue delay.
At the time of selection, the underlying exposures must not include exposures in default within the meaning of Article 178(1) of the UK CRR or exposures to a credit-impaired debtor or guarantor who, to the best of the originator’s or original lender’s knowledge:
was, at the time of origination, where applicable:
on a public credit registry of persons with adverse credit history; or
if there is no such public credit registry, another credit registry that is available to the originator or original lender;
has a credit assessment or a credit score indicating that the risk of contractually agreed payments not being made is significantly higher than for comparable unsecuritised exposures the originator holds, if any;
has been declared insolvent;
had a court grant its creditors a final non-appealable right of enforcement or material damages as a result of a missed payment within 3 years before the date of origination; or
has undergone a debt restructuring process with regard to its non-performing exposures within 3 years before the date of transfer of the underlying exposures to the SSPE (if an SSPE is used) or other means of securitising the underlying exposure.
If a credit-impaired debtor or guarantor has undergone a debt restructuring process as described in (2)(e), the underlying exposures may include exposures to that credit-impaired debtor or guarantor if:
the restructured underlying exposure has not presented new arrears since the date of the restructuring, which must have taken place at least 1 year before the date the underlying exposures were transferred to the SSPE (if an SSPE is used) or otherwise securitised; and
the information the originator, sponsor and SSPE have provided in accordance with SECN 6.2.1R(1) and SECN 6.2.1R(5)(a) explicitly sets out:
the proportion of total underlying exposures, which have been restructured;
the time and details of the restructuring; and
their performance since the date they were restructured.
1The debtors must, at the time the exposures are transferred, have made at least one payment, except in the case of revolving securitisations backed by exposures payable in a single instalment or with a maturity of less than 1 year (including, without limitation, monthly payments on revolving credits).
1The securitisation must not be structured so that repayment of securitisation investors depends predominantly on the sale of the assets securing the underlying exposures.
Paragraph (1) must not prevent such assets from subsequently being rolled over or refinanced.
If a securitisation’s underlying exposures are secured by assets, and the value of those assets is guaranteed or the risks related to that value are fully mitigated by an obligation on the seller of those assets, or on another third party, to repurchase them, that securitisation does not contravene the prohibition in (1).
1The interest rate and currency risks arising from the securitisation must be appropriately mitigated. Any measures taken to that effect must be disclosed.
The securitisation must be structured such that:
the SSPE does not enter into derivative contracts, unless to hedge interest rate or currency risk; and
the pool of underlying exposures does not include derivatives.
Any derivatives into which the SSPE does enter in accordance with (2)(a) must be underwritten and documented according to common standards in international finance.
1The transaction documentation must clearly and consistently set out definitions, remedies and actions relating to:
delinquency and default of debtors;
debt restructuring;
debt forgiveness;
forbearance;
payment holidays;
losses;
charge offs;
recoveries; and
other asset performance remedies.
The transaction documentation must clearly specify:
the priorities of payment and events triggering any change to these; and
the obligation to report such events.
Any change in the priorities of payments which will materially adversely affect a securitisation position’s repayment must be reported to investors without undue delay.
1The transaction documentation must include clear:
provisions facilitating timely resolution of conflicts between different classes of investors;
definitions of voting rights;
allocation of voting rights to classes of investor; and
identification of responsibilities of the trustee and other entities with fiduciary duties to investors.
1Before pricing or original commitment to invest, the originator and the sponsor must make the following data available to potential investors:
except as provided in (2), data covering a period of at least 5 years about static and dynamic historical default and loss performance, such as delinquency and default data, for substantially similar exposures to those being securitised; and
the sources of the data in (1)(a) and the reasons those exposures are substantially similar to those being securitised.
If the data in (1)(a) relates to trade receivables and other short-term receivables, it must cover a period of at least 3 years.
If the sponsor cannot access such data, it must obtain from the seller access to static or dynamic data about the historical performance of exposures substantially similar to those being securitised (such as delinquency and default data).
1ABCP transactions must be backed by a pool of underlying exposures that are homogeneous in terms of asset type, considering the specific characteristics relating to the asset type’s cash flows, including their contractual, credit-risk and prepayment characteristics.
The pool of underlying exposures must have a remaining weighted average life of not more than 1 year. The underlying exposures must not have a residual maturity of more than 3 years.
By way of derogation from (2), pools of auto loans, auto leases and equipment lease transactions must have a remaining weighted average life of not more than 3.5 years. The underlying exposures must not have a residual maturity of more than 6 years.
Further details specifying which underlying exposures are homogeneous for the purposes of (1) are set out at SECN 2.4.
The underlying exposures must not include loans secured by residential or commercial mortgages.
The underlying exposures:
must contain contractually binding and enforceable obligations, with full recourse to debtors;
must have defined payment streams relating to rental, principal, interest, or any other right to receive income from assets warranting such payments;
may generate proceeds from the sale of any financed or leased assets; and
must not include any transferable security, other than corporate bonds not listed on a trading venue.
1Any referenced interest payments under the ABCP transaction’s assets and liabilities must:
be based on generally used market interest rates or generally used sectoral rates reflective of the cost of funds; and
not reference complex formulae or derivatives.
Referenced interest payments under the ABCP transaction’s liabilities may be based on interest rates reflective of an ABCP programme’s cost of funds.
1Following the seller’s default or an acceleration event:
no amount of cash may be trapped in the SSPE above what is needed to ensure the SSPE’s operational functioning or the orderly repayment of investors under the securitisation’s contractual terms. However, an amount of cash may be so trapped if exceptional circumstances require it to be used (in the investors’ best interests) to pay expenses to prevent deterioration in the underlying exposures’ credit quality;
principal receipts from the underlying exposures must be passed to investors via sequential payment of the securitisation positions, as determined by the securitisation positions’ seniority; and
no provisions may require automatic liquidation of the underlying exposures at market value.
1The underlying exposures must be originated:
in the ordinary course of the seller’s business; and
following underwriting standards at least as rigorous as those the seller applied at the time of origination to similar unsecuritised exposures, to the extent there are any.
The originator or the original lender must fully disclose to the sponsor and other parties directly exposed to the ABCP transaction without undue delay:
the underwriting standards pursuant to which the underlying exposures are originated; and
any material changes from prior underwriting standards.
The seller must have expertise in originating exposures of a similar nature to those securitised.
1If an ABCP transaction is a revolving securitisation, the transaction documentation must include triggers for termination of the revolving period, including in the following circumstances:
the underlying exposures’ credit quality deteriorating to or below a predetermined threshold; and
an insolvency-related event with regard to the seller or the servicer occurring.
1The transaction documentation must clearly specify:
the sponsor’s, servicer’s, any trustee’s and ancillary service providers’ contractual obligations, duties and responsibilities;
the processes and responsibilities necessary to ensure that the servicer’s default or insolvency does not result in servicing terminating;
provisions ensuring derivative counterparties and the account bank are replaced in the case of their default, insolvency, and other specified events, where applicable; and
how the sponsor meets the requirements of SECN 2.3.25R.
1The sponsor of an ABCP programme must:
be a CRR firm; and
not be an investment firm.
1The sponsor of an ABCP programme must:
be a liquidity facility provider;
support all securitisation positions on an ABCP programme level by covering all liquidity and credit risks and any material dilution risks of the securitised exposures as well as any other transaction and programme-level costs if necessary to guarantee to the investor the full payment of any amount under the ABCP with such support; and
disclose to investors a description of the support provided at transaction level and of the liquidity facilities provided.
1Before a credit institution may sponsor an STS ABCP programme, it must demonstrate to the PRA that its role under SECN 2.3.24R does not pose risks to its solvency and liquidity, even in extremely stressed market conditions.
The requirement referred to in (1) is fulfilled if the PRA has determined, based on the review and evaluation referred to in regulation 34A(2) of the Capital Requirements Regulations 2013, that:
the arrangements, strategies, processes and mechanisms that credit institution has implemented; and
the own funds and liquidity that credit institution holds,
ensure sound management and coverage of its risks.
perform its own due diligence;
verify compliance with the requirements set out in SECN 4.2.1R and SECN 4.2.2R or equivalent PRA rules; and
verify the seller has in place servicing capabilities and collection processes meeting the requirements specified in Article 265(2)(h)–(p) of the UK CRR or equivalent requirements in a third country.
1Before pricing or original commitment to invest, the sponsor must make available to potential investors pricing on request:
the aggregate information required by SECN 6.2.1R(1) or equivalent PRA rules; and
the information required by SECN 6.2.1R(2) to SECN 6.2.1R(7) or equivalent PRA rules, at least in draft or initial form.
1All ABCP transactions within an ABCP programme must fulfil the requirements of SECN 2.3.2R to SECN 2.3.22R.
Notwithstanding (1), a maximum of 5% of the aggregate amount of the exposures underlying the ABCP transactions and which are funded by the ABCP programme may temporarily not comply with the requirements of SECN 2.3.10R, SECN 2.3.11R and SECN 2.3.12R without affecting the ABCP programme’s STS status.
For the purposes of (2), an appropriate and independent external party must regularly verify compliance of a sample of the underlying exposures.
The sponsor of the ABCP programme must comply with the requirements under SECN 2.3.23R to SECN 2.3.29R;
1The remaining weighted average life of the underlying exposures of an ABCP programme must not be more than 2 years.
1The ABCP programme must be fully supported by a sponsor in accordance with SECN 2.3.24R.
1The ABCP programme must not contain any resecuritisation. The credit enhancement must not establish a second layer of tranching at the programme level.
1The securities an ABCP programme issues must not include the following clauses, if they are exercisable at the discretion of the seller, sponsor or SSPE:
call options;
extension clauses; and
other clauses that affect the final maturity of those securities.
1The interest rate and currency risks arising at ABCP programme level must be appropriately mitigated. Any measures taken to that effect must be disclosed.
The ABCP programme must be structured such that:
the SSPE must not enter into derivative contracts, unless to hedge interest rate or currency risk; and
the pool of underlying exposures does not include derivatives.
Any derivatives into which the SSPE does enter in accordance with (2)(a) must be underwritten and documented according to common standards in international finance.
1The ABCP programme’s documentation must clearly specify:
the responsibilities of the trustee and other entities with fiduciary duties, if any, to investors;
the contractual obligations, duties and responsibilities of the sponsor (who must have expertise in credit underwriting), any trustee and other ancillary service providers;
the processes and responsibilities necessary to ensure that the servicer’s default or insolvency does not result in servicing terminating;
the provisions ensuring derivative counterparties and the account bank at ABCP programme level are replaced in case of their default, insolvency and other specified events, where the liquidity facility does not cover such events;
the remedial steps that must be taken on specified events, or on the sponsor’s default or insolvency to achieve collateralisation of the funding commitment or replacement of the liquidity facility provider (as appropriate); and
that the liquidity facility must be drawn down and the maturing securities repaid if the sponsor does not renew the liquidity facility’s funding commitment before it expires.
1For the purposes of SECN 2.2.9R and SECN 2.3.17R, underlying exposures are homogeneous if:
they correspond to one of the following asset types:
residential loans either secured by one or more mortgages on residential immovable property or fully guaranteed by an eligible protection provider among those under Article 201(1) of the UK CRR and qualify for the credit quality step 2 or above under Part Three, Title II, Chapter 2 of the UK CRR;
commercial loans secured by one or more mortgages on commercial immovable property, including offices or other commercial premises;
credit facilities provided to individuals for personal, family or household consumption purposes and credit facilities provided to enterprises where the originator applies the same credit risk assessment approach as for individuals not covered under (i), (ii) and (iv) to (viii);
credit facilities, including loans and leases, provided to any type of enterprise or corporation;
auto loans and leases;
credit card receivables;
trade receivables; or
other underlying exposures which, in the opinion of the originator or sponsor, constitute a distinct asset type based on internal methodologies and parameters;
they are underwritten according to standards applying similar approaches for assessing associated credit risk;
they are serviced according to similar procedures for monitoring, collecting and administering cash receivables of the originator, or on the asset side of the SSPE; and
one or more of the homogeneity factors are applied in accordance with SECN 2.4.2R, where applicable.
For the purposes of (1)(a), if an underlying exposure corresponds to more than one asset type, that exposure must be assigned only to one asset type in that securitisation.
Any changes to underlying exposures in a pool that is deemed to be homogenous pursuant to SECN 2.4 will not affect such homogeneity where such changes are for reasons outside the originator’s or sponsor’s control.
1The homogeneity factors for the asset type referred to in SECN 2.4.1R(1)(a)(i) are the following:
ranking of security rights, whereby the pool of underlying exposures comprises only one of the following:
loans secured by first ranking security rights on a residential immovable property;
loans secured by lower and all prior ranking rights on a residential immovable property; or
loans secured by lower ranking security rights on a residential immovable property;
type of residential immovable property, whereby the pool comprises only one of the following types:
income-producing properties; or
non-income producing properties;
jurisdiction, whereby the pool comprises exposures secured by residential immovable properties located in the same jurisdiction.
The homogeneity factors for the asset type referred to in SECN 2.4.1R(1)(a)(ii) are the following:
ranking of security rights, whereby the pool comprises only one of the following types of underlying exposures:
loans secured by first ranking security rights on a commercial immovable property;
loans secured by lower and all prior ranking rights on a commercial immovable property; or
loans secured by lower ranking security rights on a commercial immovable property;
type of immovable commercial property, whereby the pool comprises only one of the following types:
office buildings;
retail space;
hospitals;
storage facilities;
hotels;
industrial properties; or
other specific type of commercial immovable properties;
jurisdiction, whereby the pool comprises underlying exposures secured by properties located in the same jurisdiction.
The homogeneity factors for the asset type referred to in SECN 2.4.1R(1)(a)(iv) are the following:
type of obligor, whereby the pool comprises only one of the following types of obligors:
micro, small and medium-sized enterprises; or
other types of enterprises and corporates;
jurisdiction, whereby the pool comprises only one of the following types of underlying exposures:
exposures secured by immovable property located in the same jurisdiction; or
exposures to obligors with residence in the same jurisdiction.
The homogeneity factors for the asset type referred to in SECN 2.4.1R(1)(a)(v) are the following:
type of obligor, whereby the pool comprises underlying exposures with only one of the following types of obligors:
individuals and enterprises where the originator applies the same approach for assessing the credit risk associated with exposures to enterprises as for exposures to individuals;
micro, small and medium-sized enterprises;
other types of enterprises and corporates;
public sector entities; or
financial institutions;
jurisdiction, whereby the pool comprises underlying exposures to obligors with residence in the same jurisdiction.
The homogeneity factors for the asset type referred to in SECN 2.4.1R(1)(a)(vi) are the following:
type of obligor, whereby the pool comprises underlying exposures with only one of the following types of obligors:
individuals and enterprises where the originator applies the same approach for assessing the credit risk associated with exposures to enterprises as for exposures to individuals;
micro, small and medium-sized enterprises;
other types of enterprises and corporates;
public sector entities; or
financial institutions;
jurisdiction, whereby the pool comprises underlying exposures to obligors with residence in the same jurisdiction.
The homogeneity factors for the asset type referred to in SECN 2.4.1R(1)(a)(viii) are any of the following:
type of obligor;
ranking of security rights;
type of immovable property; or
jurisdiction.
1Under the requirements of SECN 2.4.1R(1)(b) and (c) we would normally expect homogenous residential mortgage portfolios to contain owner-occupier or buy-to-let mortgages but not generally both. However, they may be homogenous where the owner-occupier and buy-to-let mortgages are both underwritten and serviced according to similar standards.
1If a securitisation which is not an ABCP programme or an ABCP transaction meets the relevant STS criteria, the originator and sponsor jointly may notify the FCA of that fact as described in SECN 2.6.
If:
an ABCP programme meets the relevant STS criteria; or
an ABCP transaction meets the relevant STS criteria,
the sponsor may notify the FCA of that fact as described in SECN 2.6.
A notice given in accordance with (1) or (2) must explain how the relevant STS criteria have been complied with.
If the originator and sponsor involved in a securitisation jointly give the STS notification, the STS notification must designate one of them to be the first contact point for investors and the FCA.
1The originator, sponsor or SSPE may use the service of a third party registered under regulation 25 of the Securitisation Regulations 2024 to check whether a securitisation complies with the relevant STS criteria.
When using a third party under SECN 2.5.2R(1) the originator, sponsor or SSPE must check that such third party is registered under regulation 25 of the Securitisation Regulations 2024.
Using the service of a third party under SECN 2.5.2R (1) does not affect the liability of the originator, sponsor or SSPE in respect of their legal obligations under SECN.
If the originator, sponsor or SSPE use the service of a registered third party under (1), the STS notification must include a statement that the registered third party has confirmed compliance with the STS criteria.
The STS notification must include the registered third party’s:
name; and
place of establishment.
1If the originator or original lender is not a CRR firm or an FCA investment firm, the STS notification pursuant to SECN 2.5.1R(1) or SECN 2.5.1R(2) must be accompanied by:
confirmation by the originator or original lender that (other than in respect of trade receivables not originated in the form of a loan):
its credit granting is based on sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing credits; and
the originator or original lender has effective systems in place to apply such processes in accordance with SECN 8 (or equivalent PRA rules); and
a declaration by the originator or original lender as to whether credit granting referred to in (1) is subject to supervision.
1The originator and sponsor must immediately notify the FCA if a securitisation no longer meets the relevant STS criteria.
1Multiple STS notifications may be submitted in respect of the same securitisation where:
the relevant securitisation is an ABCP transaction, in which case one notification should be submitted in accordance with SECN 2.5.1(2) by each sponsor of a relevant ABCP programme wishing to treat the securitisation as an STS securitisation; or
both a securitisation which is not an ABCP transaction or an ABCP programme and an ABCP transaction, in which case one notification may be submitted in accordance with SECN 2.5.1R(1) and one notification should be submitted in accordance with SECN 2.5.1(2) by each sponsor of a relevant ABCP programme wishing to treat the securitisation as an STS securitisation.
1The following information must be included in the STS notification:
if the securitisation is a non-ABCP securitisation, the information specified in SECN 2 Annex 1R;
if the securitisation is an ABCP transaction, the information specified in SECN 2 Annex 2R;
for an ABCP programme, the information specified in SECN 2 Annex 3R.
For securitisations where section 85 of the Act (Contravention of prohibition relating to public offer of securities) and rules made by the FCA for the purposes of Part 6 of the Act (official listing) do not require a prospectus to be drawn up, the information to be included in the STS notification pursuant to (1) must be accompanied by the following:
where the securitisation is a non-ABCP securitisation, the information specified in fields STSS9 and STSS10 of SECN 2 Annex 1R;
where the securitisation is an ABCP transaction, the information specified in fields STSAT9 and STSAT10 of SECN 2 Annex 2R;
for an ABCP programme, the information specified in field STSAP9 of SECN 2 Annex 3R.
For the purposes of regulation 10 of the Securitisation Regulations 2024, the publication of the STS notification for those securitisations is limited to the information referred to in SECN 2.6.1R.
If the documents at SECN 2.6.2R(2) include information relevant to the STS notification, a reference to the relevant parts of those documents may be provided in the ‘Additional information’ column in SECN 2 Annex 1R, SECN 2 Annex 2R or SECN 2 Annex 3R.
The documents referred to in SECN 2.6.2R(1) are:
an approved prospectus as contemplated by section 85 of the Act (Contravention of prohibition relating to public offer of securities) and drawn up pursuant to rules made by the FCA for the purposes of Part 6 of the Act (official listing);
any other underlying documentation referred to in SECN 6.2.1R(2);
any other document with information relevant to the STS notification.
Where such information is provided, the documentation must be clearly identified.
1In the Annexes to this chapter, references to ‘pricing’ must be read to also include ‘original commitment to invest’.
1The information in SECN 2.6.1R(1) and SECN 2.6.1R(2) must be provided by means of the template set out in SECN 2 Annex 4R.
1The information in SECN 2.6.1R(1)(b) and SECN 2.6.1R(2)(b) must be provided by means of the template set out in SECN 2 Annex 5R.
1The information in SECN 2.6.1R(1)(c) and SECN 2.6.1R(2)(c) must be provided by means of the template set out in SECN 2 Annex 6R.
1Where the information to be provided pursuant to SECN 2.7 is not available or is not required due to the application of the transitional provisions in SECN 14 the notification must state ‘Not applicable due to the application of transitional provisions’ in the relevant field or fields of SECN 2 Annex 4R, SECN 2 Annex 5R or SECN 2 Annex 6R.
1The ‘Additional information’ referred to in SECN 2.6.2 must be included in the field ‘Box to complete’ of SECN 2 Annex 4R, SECN 2 Annex 5R or SECN 2 Annex 6R.
