Changes will expand access to global capital markets and strengthen the UK’s competitiveness
London, UK — MFA recommended targeted refinements to the UK’s proposed securitisation reforms in a letter to the Financial Conduct Authority (FCA) today. MFA supports the FCA’s overall direction in the consultation, which moves the UK securitisation framework toward a more flexible, risk-based approach.
MFA recommends the FCA further reduce barriers which inhibit investor access to global securitisation markets, which help diversify portfolios. Overall the reforms will help the UK to strengthen its global competitiveness in financial services and boost its economic growth prospects.
“The FCA has shown strong leadership in modernising the UK’s securitisation framework,” said Jillien Flores, MFA Chief Advocacy Officer. “It will expand UK investors’ access to global capital markets, reduce unnecessary burdens for market participants, and reinforce the UK’s position as a leading global financial centre. MFA’s targeted recommendations aim to ensure these reforms fully realise their benefits for UK capital markets and investors.”
MFA’s consultation response focuses on four changes that would help the reforms achieve their full potential:
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Recognise equivalent non-UK risk retention frameworks. The FCA should recognise non-UK frameworks, including the U.S. regime, that achieve the same policy goals. This would provide UK investors with more investment opportunities and to invest in non-UK securitisations and create a more level playing field with global peers.
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Reconsider the proposed new collateralised loan obligation (CLO) reporting template. MFA does not support a new mandatory reporting template for UK CLOs. Sophisticated institutional investors already receive extensive information from managers, and a new template would create unnecessary costs and operational burdens. The UK should also recognise equivalent EU reporting and provide a longer transition period for implementation.
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Allow investors to use the new due diligence framework immediately. Investors should be allowed to comply with the new principles-based due diligence rules as soon as they are finalised. Alternatively, the FCA should confirm it will not enforce the outgoing rules during the implementation period.
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Further tailor the framework for CLOs. MFA supports further changes to remove CLOs from the scope of the UK Securitisation Framework. CLOs have unique structural features, involve sophisticated institutional investors, and already operate under well-established market practices that align investor interests
Read the full letter here.
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