Dáil Éireann Debate, Tuesday - 6 February 2018
151. Deputy Róisín Shortall asked the Minister for Finance the regulations regarding the securitisation of home loans; the statutory underpinning of these regulations; the obligation that is required on the part of the lender to inform the borrower of the existence of this securitisation; the extent of this practice in respect of existing mortgages; and if he will make a statement on the matter. [5919/18]
Amharc ar fhreagraI am advised by the Central Bank that securitisation activity, including that of ‘home loans’, is currently subject to a variety of regulatory requirements in various pieces of EU sectoral legislation. The main securitisation-specific requirements generally relate to the prudential treatment of investments in securitisation by certain financial firms and investor transparency requirements that apply to issuers of securitisation. They are contained in the below pieces of legislation, albeit securitisation activity may also be subject to general overarching/crosscutting financial regulatory requirements:
- EU Capital Requirements Regulations (575/2015) (‘CRR’) governs the prudential capital treatment of a credit institution or investment firms’ (‘institutions’) investment in a securitisation, the conditions that allow an institution to achieve capital relief on underlying loans it securitises, due diligence requirements for institutions that invest in securitisation and risk retention requirements that have to be fulfilled by the originator of the transaction in order for an institution to be allowed to invest in it;
- Similar to the CRR, the EU Solvency II Directive (2009/138/EC recast) regulates the prudential capital treatment of investments in securitisations by insurance firms, while delegated regulation (2015/35) also contains provisions in relation to risk retention.
- Risk retention requirements may also apply to certain collective investment undertakings and alternative funds managers as per the UCITs Directive (2009/65/EC) and AIFMD (2011/61/EU) respectively.
- Various investor transparency requirements are set out in the Credit Rating Agency Regulation (1060/2009), notably in relation to the provision of loan-level data to investors, and the Prospectus Directive (2010/73) which governs the information provided by way of a prospectus for publically listed securitisations.
Under Capital Markets Union, securitisation is seen as an important channel for diversifying funding sources for the real economy. Two new European regulations (2017/2402 and 2017/2401) will come into effect in January of next year which will help define simple, transparent and standardised securitisation products with the aim of re-establishing a safe securitisation market in Europe. These European regulations will compile most of the above sectoral requirements for securitisation into one EU legal act, as well as modifying the prudential treatment of securitisation for credit institutions and investment firms.
In terms of consumer protection, the Central Bank’s Codes apply to all mortgages provided to a consumer borrower.
If a loan is sold to an unregulated entity, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 will apply. This ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections they had prior to the sale
