Irish Securitisation Regulations - Securitization & Structured Finance

The Irish Securitisation Regulations were published on 18 January 2019 and take effect from 1 January 2019. Amongst other things, the Irish Regulations designate the Central Bank of Ireland as the competent authority for the purposes of the EU Securitisation Regulation (save with respect to institutions for occupational retirement provision where the Pensions Authority is appointed as the competent authority).

Jurisdictional Application

The Irish Regulations apply to institutional investors and to originators, sponsors, original lenders and SSPEs (as each such term is defined).

On its face the Irish Regulations purport to apply to all institutional investors, originators, sponsors, original lenders and SSPEs, whether or not located in Ireland. It appears logical that the jurisdictional scope of the Irish Regulations will be interpreted to apply only to institutional investors, originators, sponsors, original lenders and SSPEs located in Ireland.

This interpretation follows the EBA position in its commentary to the draft Risk Retention RTS where the EBA suggested that the apparent extra-territorial effect of the risk retention requirement in the EU Securitisation Regulation should apply only to originators, sponsors and original lenders established in the EU as suggested by the Commission in the explanatory memorandum. It should be noted however that this suggestion was prefaced by an acknowledgment that the scope of application and jurisdictional scope of the 'direct' retention obligation relates to a general interpretation issue of the EU Securitisation Regulation and is outside the scope of the RTS.

Evidence of Arrangements

On its new Securitisation Regulation webpage the Central Bank notes that any entity acting as an institutional investor, originator, sponsor, original lender or securitisation special purpose entity (SSPE) should be prepared to evidence the arrangements, processes and mechanisms it has in place to ensure compliance with all relevant requirements of the EU Securitisation Regulation.

Notification of Securitisation

'Day 1' Notification

The Irish Regulations introduce a requirement on a person¹ who acts as an originator, sponsor or SSPE to notify the Central Bank of a securitisation within 15 working days of the first issue of securities (the "Central Bank Notification"). This notification requirement applies in respect of all securitisations, including private securitisations.

Where a person located in Ireland acts as originator, sponsor or SSPE in respect of any securitisation (whether public or private and wherever located) such person will have to make a Central Bank Notification. Where more than one of these roles are performed by an Irish person, it appears that each person will have to make a Central Bank Notification in respect of the same securitisation.

What is included?

The Central Bank Notification is to include the following information:

the International Securities Identification Number (ISIN) of the securitisation;
whether the person making the notification is an originator, sponsor or SSPE with respect to the securitisation;
the name and registered address of the person (whether the person making the notification or another person) required to comply with a requirement under the EU Securitisation Regulation, where the EU Securitisation Regulation provides discretion in respect to whom among the originator, sponsor and SSPE is to comply with such requirement; and
details of whether the person making the notification is a corporate or non-corporate entity and the name, registered address, corporate status and Legal Entity Identifier (LEI)(if any) of (i) the person making the notification, and (ii) the originator, sponsor and SSPE (save where any of those persons are the person making the notification).

Method of Submission

The Central Bank have published guidance on submission of the Central bank Notification on its new Securitisation Regulation webpage:

Supervised/Regulated Firms

The Central Bank expects that supervised firms use pre-existing channels of communication with supervisors in order to discharge this notification requirement.
SSPEs

SSPEs that are already subject to the Central Bank's FVC registration regime should use this process to fulfil the notification requirement. Further details on the specific arrangements in this regard can be found in the Guidance Notes on the Central Bank's FVC webpage.
Other entities

For all other entities falling under the scope of Art. 29(4) of the EU Securitisation Regulation, the notification should be sent to securitisation@centralbank.ie.

Format of Central Bank Notification

The Central Bank have updated their Guidance Notes on FVC and SPE registration to provide that SSPE's who are subject to the Central Bank Notification should self-declare the relevant securitisation when completing the SPE Registration Form upon initial registration of a new SSPE. Existing SSPEs that are already registered as an SPE with the Central Bank that issue additional securities which are subject to the Central Bank Notification must also complete and submit the registration form.

The SPE Registration Form has been updated to include a new heading 'ECB Securitisation Regulation [2017/2402]' and the questions to be completed are as follows:

is the securitisation transaction subject to the requirements of the EU Securitisation Regulation (2017/2402), having regard for the transitional provisions set out in Article 43 of this regulation? [Y/N]
is the securitisation transaction making use of the 'simple, transparent, and standardised' (STS) securitisation, are defined by Article 18 of the EU Securitisation Regulation (2017/2402)? [Y/N]
please indicate if you have been designated to fulfil transparency requirements in line with Article 7(2) of the EU Securitisation Regulation (2017/2402)? [Y/N]
please provide relevant information, in accordance with regulation 6 of S.I. No. 656 of 2018, of the following entities as defined in the EU Securitisation Regulation (2017/2402) [Originator & Sponsor].

There appears to be a mismatch in the content of the Central Bank Notification envisaged by Article 6(4) of the Irish Regulations (see 'What is included?' above) and the fields in the updated SPE Registration Form e.g. the form does not have any section for insertion of an ISIN nor is there a field for the provision of information on the person required to comply with a requirement under the EU Securitisation Regulation in circumstances where there is a discretion in respect to whom among the originator, sponsor and SSPE is to comply with such requirement. Pending further guidance we expect this information to be provided in the cover email attaching the completed SPE Registration Form.

The revised Guidance Notes on FVC and SPE registration recognise that the deadline for registration as an SPE is 5 days after the SSPE first engages in financial transactions, in accordance with its obligations under the FVC Regulation. However the Central Bank Notification is only required to be made within 15 working days of the first issue of securities. The Guidance Notes helpfully provide that, while it would be preferable for the ECB Securitisation Regulation section of the SPE Registration Form to be completed when making the initial SPE Registration for the purposes of the FVC Regulation, if the entity is not in a position to complete such information it may complete the form without these questions and then provide an updated registration when it is in a position to answer these questions at later date, provided it does so within the legal deadline of 15 working days after the issuance of securities.

No guidance has been provided on the preferred format of the Central Bank Notification for in-scope originators and sponsors however it seems logical to break the Central Bank Notification into the four headings listed in the Irish Regulations (see 'What is included?' above), supplemented by the four questions in the SPE Registration Form. Again, we expect further clarity on this as the new reporting regime evolves.

Private securitisation reporting to Competent Authorities

The EU Securitisation Regulation imposes a requirement on one of the originator, sponsor or SSPE to make specified information² (the "Reportable Information") available to holders of a securitisation position, relevant competent authorities and, upon request, to potential investors

In respect of 'public' securitisations (i.e. where a prospectus is required in connection with the securitisation) Reportable Information is to be made available to the various recipients via a securitisation repository or, pending registration of a securitisation repository, via a website which meets certain criteria.

The EU Securitisation Regulation does not specify how Reportable Information is to be made available in respect of 'private' securitisations (i.e. where a prospectus is not required to been prepared in connection with the securitisation).

The UK domestic securitisation regulations grant the UK competent authorities a power to direct the manner in which Reportable Information is to be made available to them in respect of UK 'private' securitisations. The PRA and FCA have released a joint statement on reporting of 'private' securitisations which directs that only a summary of the relevant information needs to be provided to the relevant UK competent authority but that the full set of information shall remain available to each competent authority "on request".

The Irish Regulations do not grant Irish competent authorities an equivalent power to determine the manner in which Reportable Information is to be made available to them in respect of 'private' securitisations. Nor do the Irish Regulations give any guidance on the content of such Reportable Information (including as regards the transaction summary and overview of main features) or how such information is to be submitted.

ESMA have published a Q&A (the "ESMA Q&A") with the intention of promoting common, uniform and consistent supervisory approaches and practices in the day-to-day application of the EU Securitisation Regulation. The ESMA Q&A confirms that, absent any instructions or guidance provided by national competent authorities, reporting entities are free to make use of any arrangements that meet the conditions of the EU Securitisation Regulation. Barring any further guidance from Irish competent authorities, it is logical to assume that parties reporting to the Central Bank in its capacity as a competent authority should use the same channels of communication as were used for the Central Bank Notification.

The ESMA Q&A also confirms that 'private' securitisations should report using the templates set out at Annexes 2-10 (as applicable) and Annex 12 of the draft Regulatory Technical Standards on disclosure published on by ESMA 31 January 2019³ .

Given that the Central Bank Notification is to be delivered to the Central Bank (and there is no provision allowing for delivery to the other competent authority, the Pensions Authority), it appears that it will not satisfy the Irish competent authority reporting requirement for 'private' securitisations i.e. the Central Bank Notification is an additional and separate notification.

Enforcement & Sanctions

The Irish Regulations also provide that the Central Bank shall have all the powers necessary for the performance of its functions and duties under the EU Securitisation Regulation and the Irish Regulations. Included in these powers are:

the power to appoint an authorised officer for the purposes of monitoring compliance with the EU Securitisation Regulation and the Irish Regulations. Such authorised officer shall have a number of powers including the power to enter search and inspect any place for the purposes of locating relevant records (subject to obtaining a search warrant in respect of private dwellings);
the power to impose directions, conditions or other requirements on any person, where it considers it necessary to do so in order to (a) ensure the integrity of financial markets in the State or another Member State (b) enhance investor confidence in those markets, or (c) prevent any person from contravening or continuing to contravene the EU Securitisation Regulation or the Irish Regulations. Such direction shall expire after a maximum of 12 months. A person who fails to comply with such an order shall be guilty of an offence and shall be liable on summary conviction to a Class A Fine or imprisonment for a term not exceeding 12 months or both;
the power to issue a contravention notice to a person who is an originator, sponsor, original lender or SSPE for the purpose of (a) ensuring compliance by the person concerned with the EU Securitisation Regulation or the Irish Regulations, or (b) preventing any person from contravening or continuing to contravene a provision of the EU Securitisation Regulation or the Irish Regulations;
the power to appoint an assessor to determine whether a negligent or intentional contravention of the EU Securitisation Regulation or the Irish Regulations is being committed or has been committed by a person who is a non-regulated financial service provider. An adverse assessment may result in monetary fines (of up to €5,000,000 or 10% per cent of total annual net turnover, in the case of a legal person); and
the power to impose certain sanctions on regulated financial services providers following a negligent or intentional contravention of the EU Securitisation Regulation or the Irish Regulations in conjunction with the Central Bank's general Administrative Sanctions Procedure.

Summary

The Irish Regulations, combined with guidance from the Central Bank and ESMA are beginning to paint a picture of how the Irish securitisation regime will operate in practice. We expect further developments in the short term in this rapidly developing area.

Footnote

1 Which term includes a body corporate (whether a corporation aggregate or a corporation sole) and an unincorporated body of persons as well as an individual

2 Such information includes underlying documentation, investor reports, the STS notification (if applicable), inside information and, in the case of 'private' securitisations, a transaction summary or overview of main features.

3 At the time of writing these RTS are in draft form and have not been officially adopted

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.