ESMA publishes draft RTS on CRA3 transparency requirements

ESMA publishes draft RTS on CRA3 transparency requirements


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CRA3: Commission Adopts Detailed Disclosure Rules for Structured Finance Instruments

1 October 2014

On 30 September 2014, the EU Commission (the "Commission") adopted a set of regulatory technical standards ("RTS") setting out how market participants will need to comply with Article 8b of the EU’s Credit Rating Agencies Regulation. The version adopted by the Commission is broadly in line with expectations and similar to the final draft of the RTS adopted by the European Securities and Markets Authority ("ESMA") on 24 June 2014. In this alert, we explain some of the outstanding issues and the most important differences between ESMA’s final draft RTS and the version adopted by the Commission.

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Cadwalader, Wickersham & Taft LLP

United States: CRA3 � New Requirements Affect Issuers, Originators And Sponsors

Last Updated: July 31 2013

Article by Merryn Craske , Stephen Day , Angus Duncan , Assia Damianova , Robert Cannon , Suzanne Bell and Nick Shiren

Cadwalader, Wickersham & Taft LLP

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On 20 June 2013, the European Regulation known as
CRA31 (“CRA3”) came into force. CRA3 not only
amends the European regulatory framework for credit rating agencies
(“CRAs”), but also contains certain important obligations
for issuers, originators and sponsors.

CRA3 introduces the following new provisions:

  • a requirement to appoint at least two CRAs in respect of rated
    structured finance instruments;
  • a requirement to consider appointing at least one small
    CRA;
  • a joint obligation for issuers, originators and sponsors of
    structured finance instruments to publish certain information in
    relation to the underlying assets and the transaction;
  • measures intended to reduce over-reliance on credit ratings;
    and
  • rotation requirements for CRAs in relation to
    re-securitisations, as well as other requirements which expand the
    previous regulatory framework for CRAs.

Background

Regulation (EC) No. 1060/2009 of 16 September 2009 on credit
rating agencies (as amended, the “CRA
Regulation”)2 established a framework for credit
ratings issued by CRAs within the European Community.3
The CRA Regulation includes the following provisions:

  • requirements for CRAs established in the European
    Community4 to be registered;
  • requirements in relation to the conduct of business of CRAs,
    including measures intended to avoid conflicts of interest, to
    ensure the quality of credit ratings and rating methodologies and
    to ensure transparency; and
  • requirements for the supervision of CRAs in the EU by the
    European Securities and Markets Authority (“ESMA”).

CRA3 amends the regulatory framework established under the CRA
Regulation in order to address issues such as:

  • over-reliance on external credit ratings;
  • potential conflicts of interest, including those arising from
    the “issuer-pays” model;
  • lack of transparency in relation to sovereign debt ratings;
    and
  • limited liability of CRAs in relation to the credit ratings
    they have issued.

Below is a summary of some of the new requirements under
CRA3.

Two credit ratings required for rated structured finance
instruments

Where an issuer or a related third party5 intends to
solicit a credit rating for a structured finance
instrument,6 it is required to appoint at least two
independent CRAs.

This requirement will apply only to new transactions and
transactions where a new credit rating is sought, as it applies
where an issuer or related third party “intends to
solicit” a credit rating. There are some questions over the
jurisdictional scope of this provision.

Since the majority of rated securitisation transactions have two
ratings, this requirement should not in itself be a significant
issue for those transactions (although note the requirement to
consider appointing a small CRA which is described below). However,
this requirement is likely to lead to additional transaction costs
in some cases, for example, in relation to subordinated tranches in
certain securitisation transactions where previously only one
rating would have been sought, and the question might be posed as
to how this requirement fits within the aim of decreasing reliance
on ratings.

Requirement to consider appointing small CRAs

Where an issuer or a related third party intends to appoint at
least two CRAs to provide a credit rating for the same issuance or
entity, it is required to consider appointing at least one CRA with
no more than 10% of the total market share7 (a
“Small CRA”) that is capable of rating the relevant
issuance or entity. ESMA will publish a list of registered CRAs on
an annual basis. If a Small CRA is not appointed, this is required
to be documented.

The recitals to CRA3 indicate that these measures are intended
to increase competition in the credit ratings market, which has
been dominated by Moody’s, Standard & Poor’s and Fitch,
and to encourage the use of smaller CRAs. The extent to which
market participants find that there are sufficient Small CRAs able,
and with the relevant experience, to provide the relevant ratings
remains to be seen.

Joint disclosure requirements in relation to structured finance
instruments

The issuer, originator and sponsor8 of a structured
finance instrument established in the European Union will be
required, jointly, to publish information in relation to:

  • the credit quality and performance of the underlying
    assets;
  • the structure of the securitisation transaction;
  • the cash flows; and
  • any collateral supporting a securitisation exposure,

together with any information that is necessary to conduct
comprehensive and well-informed stress tests on the cash flows and
collateral values supporting the underlying exposures (the
“Joint Disclosure Requirements”). Such information is to
be published on a website which is to be established by ESMA. The
Joint Disclosure Requirements do not require information to be
disclosed where this would breach national or EU law in relation to
confidentiality or the processing of personal data.

The aim of this measure is to improve the ability of investors
to make an informed assessment of the creditworthiness of
structured finance instruments, thereby reducing their reliance on
credit ratings. It is also expected that the publication of such
information will reinforce competition between CRAs by encouraging
unsolicited credit ratings.

The Joint Disclosure Requirements are in addition to the
disclosure requirements under the Prospectus Directive9
(which apply in relation to prospectuses), Article
122a10 (which apply only to sponsor and originator
credit institutions) or Article 409 of CRD IV11 (which
apply only to sponsors and originators who are credit institutions
or investment firms), and the reporting requirements for eligible
collateral under the liquidity schemes put in place by the Bank of
England and the European Central Bank, as well as the disclosure
obligations imposed under Rule 17g-5.12 Consequently,
market participants will need to establish what additional
reporting obligations will be imposed by the Joint Disclosure
Requirements.

The details of what is required will not be known until the
publication of draft regulatory technical standards
(“RTS”) which will set out the information which is
required to be published and the frequency with which such
information must be updated, together with a form of disclosure
template.

On 10 July 2013, ESMA published a Discussion Paper (the
“Discussion Paper”) requesting comments from market
participants in preparation for drafting various RTS required under
CRA3, including the RTS for the Joint Disclosure
Requirements.13

We note that the Discussion Paper indicates that the Joint
Disclosure Requirements apply not only to issuers, originators and
sponsors established in the EU, but also to issuers, originators
and sponsors whose structured finance instruments are traded in the
EU. This is a new development and potentially widens the scope of
the Joint Disclosure Requirements to issuers, originators and
sponsors outside the EU. The Discussion Paper asks whether the
Joint Disclosure Requirements should be limited to structured
finance instruments which are covered by the Prospectus Directive
and the Transparency Directive, or whether they should cover all
structured finance instruments traded in the EU.

The Discussion Paper also asks how structured finance
instruments should be categorised in terms of asset class for the
purposes of the Joint Disclosure Requirements and makes reference
to various other disclosure requirements as possibilities for
consideration, including the European Central Bank and Bank of
England templates.

In addition, the Discussion Paper considers how frequently
disclosure should be made of the relevant information. Possible
options are an event-based approach, a periodic disclosure approach
or a combination of the two. It also asks whether the Joint
Disclosure Requirements should apply to “live” structured
finance instruments or only to structured finance instruments
issued after the RTS come into force.

Market participants have the opportunity to submit comments on
these important questions in the Discussion Paper before 10 October
2013. ESMA intends to issue a consultation paper in early 2014,
containing a summary of the responses and the draft RTS. The RTS
must be submitted to the European Commission (the
“Commission”) by 21 June 2014.

Reduction of reliance on credit ratings

Financial institutions

CRA3 includes a new provision requiring credit institutions,
investment firms, insurance undertakings, reinsurance undertakings,
institutions for occupational retirement provision, management
companies, investment companies, alternative investment fund
managers and central counterparties (together, “Financial
Institutions”) to make their own credit risk assessment and
not to rely solely or mechanistically on credit ratings for
assessing the creditworthiness of an entity or financial
instrument.

The intention is that credit institutions and investment firms
should put in place internal procedures in order to make their own
credit risk assessment and encourage investors to carry out due
diligence. The recitals to CRA3 also state that financial
institutions should avoid using credit ratings in contracts as the
only parameter to assess the creditworthiness of investments or to
decide whether to invest or divest.

National supervisory authorities are required to monitor the
adequacy of the credit risk assessment processes of Financial
Institutions, assess the use of contractual references to credit
ratings and encourage Financial Institutions to mitigate the impact
of such references, with a view to reducing sole and mechanistic
reliance on credit ratings.

In addition, similar requirements are imposed under Directive
2013/14/EU of 21 May 201314 in order to reduce sole and
mechanistic reliance on credit ratings by IORPs, UCITS and
AIFMs.15

European Supervisory Authorities and the European Systemic
Risk Board

The European Banking Authority (“EBA”), the European
Insurance and Occupational Pensions Authority (“EIOPA”)
and ESMA are now prohibited from referring to credit ratings in
their guidelines, recommendations and draft technical standards
where such references have the potential to trigger sole or
mechanistic reliance on credit ratings. Similar requirements apply
to the European Systemic Risk Board in relation to its warnings and
recommendations. EBA, EIOPA and ESMA are required to review and
remove, where appropriate, all such references to credit ratings in
existing guidelines and recommendations by 31 December 2013.

EU law

The European Commission will continue to review whether
references to credit ratings in EU law trigger or have the
potential to trigger sole or mechanistic reliance on credit
ratings, with a view to removing all references to credit ratings
in EU law for regulatory purposes by 1 January 2020, provided that
appropriate alternatives to credit risk assessment have been
identified and put in place.

These new requirements are in line with the principles drawn up
at the international level by the Financial Stability Board, which
aim to reduce reliance on CRA ratings in standards, laws and
regulations.16 The principles state that wherever
possible, references to such ratings should be removed or replaced
with suitable alternative standards of creditworthiness assessment,
and that banks, investment managers and institutional investors
should not mechanistically rely on external credit ratings for
assessing the creditworthiness of assets but should make their own
credit assessments. This is also consistent with the aim of
reducing over-reliance on external credit ratings described in CRD
IV and the proposals by the Basel Committee on Banking Supervision
to reduce over-reliance on CRA ratings in the regulatory capital
framework.17

Parallels may also be drawn with Section 939A of
Dodd-Frank18 which requires the removal of any reference
to credit ratings in regulations. However, in the case of CRA3, the
removal of references to credit ratings is conditional upon
identifying and implementing appropriate alternatives. It remains
to be seen whether suitable alternatives will be found to such
references to credit ratings and, if found, what such alternatives
will be.

Rotation in relation to re-securitisations

Where a CRA has entered into a contract for the issuance of
credit ratings in relation to re-securitisations,19 that
CRA will not be permitted to issue credit ratings on new
re-securitisations with underlying assets from the same originator
for a period exceeding four years from the date of entry into the
contract (the “Maximum Ratings Period”). There is an
exemption where at least four CRAs each rate more than 10% of the
total number of outstanding re-securitisations with underlying
assets from the same originator (the “Multiple Rating Agencies
Exemption”). In addition, the rotation requirements do not
apply to CRAs with fewer than 50 employees at group level involved
in credit rating activities or with an annual turnover generated
from credit rating activities of less than �10 million at
group level.

Following the expiry of a contract for the rating of
re-securitisations, the relevant CRA is not permitted to enter into
a new contract for the issuance of credit ratings on
re-securitisations with underlying assets from the same originator
for a period equal to the duration of the expired contract (but not
exceeding four years) (the “Non-Ratings Period”).
Notwithstanding these requirements, a CRA is still permitted to
monitor and update credit ratings which it has issued in relation
to re-securitisations before the end of the Maximum Ratings
Period.

While the CRA Regulation already included a rotation mechanism
in relation to individuals in analytical teams and credit rating
committees, this was not considered to be a sufficient guarantee
against possible conflicts of interest from long-standing
relationships with CRAs, and consequently it was thought necessary
to bring in a rotation mechanism for the CRAs themselves. It is
acknowledged in the recitals to CRA3 that frequent rotation could
result in increased costs for both issuers and CRAs (since the cost
of a new rating is typically higher than for ongoing monitoring of
a rating). It is also recognised that it can take time and
resources for new CRAs to be established and that rotation could
have “a significant impact on the quality and continuity of
credit ratings”. However, the intention is that rotation
should lead to greater diversity in, and consequently improve, the
credit assessment process.

Although many market participants may dislike the concept of
rotation, we note that the rotation requirements for CRAs have been
watered down from the original proposals, which included different
time periods and were not limited to re-securitisations. Market
participants may regard the final rule as a better outcome,
particularly as it appears likely that its application may be less
widespread owing to potentially reduced interest in entering into
re-securitisation transactions following the financial crisis, due
to their perceived complexity and punitive risk weights for
regulatory capital purposes20 (although care will need
to be taken to check whether a transaction could unintentionally
fall into the re-securitisation definition). The rotation
requirements have been applied to re-securitisations in the first
instance on the basis that this class of securitisation
transactions has underperformed since the financial crisis and
therefore this is where the need to address conflicts of interest
is greatest. However, the requirements may change, since the
European Commission will be reviewing whether rotation should be
applied to other asset classes, as well as whether it is
appropriate to maintain a rotation mechanism.

For re-securitisations, the parties will need to find suitable
replacement CRAs at the end of the relevant Maximum Ratings Period
and will need to allow time for the replacement CRAs to analyse the
transaction. Additionally, there may be a risk of fluctuations in
ratings since the replacement CRAs may well assess the transaction
using different methodologies and it is likely that the rotation
requirements will lead to increased transaction costs.

European rating platform

CRAs are required to submit credit ratings, rating outlooks and
other relevant information to ESMA, which is required to publish
this information on a website referred to as the European rating
platform. This is intended to allow investors to compare all credit
ratings (except for credit ratings provided under the
“investor-pays” model) and to allow smaller and new CRAs
to gain more visibility.

The Discussion Paper asks for comments on the content, timing
and format of the information to be published on the European
rating platform. It also asks what information should be provided
to enable investors to compare credit ratings, given that credit
ratings are defined differently by various CRAs and are based on
different methodologies.

Advance notice of publication of ratings

CRAs are now required to notify a rated entity of any change to
a credit rating or rating outlook within working hours and at least
one full working day before publication, to allow the rated entity
to draw the relevant CRA’s attention to any
errors.21

Sovereign ratings

While CRAs have an obligation to review their credit ratings on
an ongoing basis and at least annually, they will now be required
to review sovereign ratings at least every six months. CRAs are
required to publish a calendar in December for the following 12
months setting out a maximum of three dates for the publication of
unsolicited sovereign ratings and rating outlooks and setting the
dates for the publication of solicited sovereign ratings and rating
outlooks. Those dates must be set on a Friday and deviation from
those dates is permitted only in certain specified
circumstances.

Advance notice of changes to rating methodologies

If a CRA intends to make a material change to, or use, new
rating methodologies, models or key rating assumptions which could
have an impact on a credit rating, it is required to publish the
proposed material changes or methodologies on its website for one
month with a detailed explanation of the reasons for, and
implications of, such changes or methodologies and to invite
stakeholders to submit comments.

Liability

If a CRA commits an infringement under Annex III of the CRA
Regulation, either intentionally or with gross negligence, which
has an impact on a credit rating, an investor or an issuer may
claim damages if:

  1. in the case of an investor, it can establish that it reasonably
    relied on such credit rating; or
  2. in the case of an issuer, it or its financial instruments are
    covered by such credit rating and the infringement was not caused
    by misleading or inaccurate information provided by such
    issuer.

The civil liability provisions of the CRA Regulation provide
that terms which are not defined therein should be interpreted and
applied in accordance with the applicable national law. As far as
the UK is concerned, the Credit Rating Agencies (Civil Liability)
Regulations 2013, which came into force on 25 July 2013, define
certain terms used in the civil liability provisions and also set
out certain factors which a court may consider in relation to
whether limitations on liability are reasonable and proportionate,
the general approach to determining damages, which will be subject
to a duty to mitigate, and a limitation period.22

It is apparent that, even though CRA3 and other new legislation
in the EU and in the US have the aim of reducing investors’
reliance on ratings, CRAs could be subject to civil liability
claims resulting from breaches of their obligations under Annex III
of the CRA Regulation (which are extensive). While there may be
some who will welcome these changes, the new provisions will be of
concern to CRAs and may restrict the availability of ratings.

Independence and avoidance of conflicts of interest due to
shareholdings

CRA3 contains further provisions aimed at ensuring the
independence of CRAs and the avoidance of conflicts of interest, by
requiring effective internal control structures governing the
implementation of policies and procedures to address these matters
and by prohibiting shareholders or members with 5% or more of the
capital or voting rights in a CRA from holding 5% or more of the
capital or voting rights or exercising control over any other
CRA.

In addition, a CRA is not permitted to issue a credit rating or
rating outlook if a shareholder or member of a CRA holding 10% or
more of the capital or voting rights of the CRA, or with
significant influence on its business activities, holds 10% of more
of the capital or voting rights of the rated entity, a related
third party or an ownership interest in any such entity.

Future review of the CRA Regulation

The European Commission is required to report to the European
Parliament and the European Council on various issues arising from
the CRA Regulation, including:

  1. by 31 December 2013, on the feasibility of a network of smaller
    CRAs in order to increase competition in the market, including
    evaluation of financial and non-financial support for such a
    network, taking into account potential conflicts of interest
    arising from public funding. This may lead to re-evaluation and
    amendment of the requirement to consider appointing at least one
    Small CRA, as described above;
  2. by 31 December 2014, on the appropriateness of the development
    of a European creditworthiness assessment for sovereign debt;
  3. by 31 December 2015, on the steps taken regarding the removal
    of references to credit ratings which trigger or have the potential
    to trigger sole or mechanistic reliance on credit ratings, and
    alternative tools to enable investors to make their own credit risk
    assessments, with a view to deleting all references to credit
    ratings in EU law for regulatory purposes by 1 January 2020;
  4. by 1 July 2016, on:
    • the availability of sufficient choice to comply with the
      requirement to appoint at least two CRAs when soliciting a credit
      rating;
    • whether the Joint Disclosure Requirements should be extended to
      any other financial credit products;
    • the availability of sufficient choice to comply with the
      rotation requirements in relation to re-securitisations;
    • whether the Maximum Ratings Period and the Non-Ratings Period
      in relation to the rotation requirements for re-securitisations
      should be shortened or extended;
    • whether the Multiple Rating Agencies Exemption should be
      amended;
    • whether the scope of the rotation mechanism should be extended
      to other asset classes and whether different periods should be
      applicable for various asset classes;
    • whether various provisions such as those intended to avoid
      conflicts of interest have sufficiently mitigated such conflicts of
      interest; and
    • whether there is a need to propose measures to address
      contractual over-reliance on credit ratings; and
  5. by 31 December 2016, on the appropriateness and feasibility of
    supporting a European CRA for assessing the creditworthiness of the
    sovereign debt of Member States and/or a European credit rating
    foundation for all other credit ratings.

Clearly, the European regulatory framework in relation to credit
ratings remains under continued review and it is highly likely that
there will be further developments.

Conclusion

Issuers, sponsors and originators will need to be aware of the
requirements introduced under CRA3, particularly when soliciting
ratings and if they are involved in transactions that could fall
within the definition of re-securitisations. They will also need to
review the RTS in relation to the Joint Disclosure Requirements,
when they are made available, to consider what information will be
required to be disclosed by issuers, originators and sponsors. In
addition, given the number of matters which are the subject of
further review over the next few years, market participants will
need to monitor the situation closely to consider how they will be
affected by any additional regulation in this evolving area.

Footnotes

1 Regulation (EU) No. 462/2013 of 21 May 2013, which can
be found at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:146:0001:0033:EN:PDF .

2 The CRA Regulation can be found at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:302:0001:0031:EN:PDF .

It was amended by Regulation (EC) No. 513/2011 of 11 May
2011 which can be found at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:145:0030:0056:EN:PDF .

3 References to the “Community” (i.e. the
European Community) in the CRA Regulation have now been replaced
under CRA3 with references to the Union (i.e. the European
Union).

4 See previous footnote.

5 “related third party” means “the
originator, arranger, sponsor, servicer or any other party that
interacts with a credit rating agency on behalf of a rated entity,
including any person directly or indirectly linked to that rated
entity by control”.

6 “structured finance instrument” is defined in
the CRA Regulation as “a financial instrument or other assets
resulting from a securitisation transaction or scheme referred to
in Article 4(36) of Directive 2006/48/EC”. Under Article 4(36)
of Directive 2006/48/EC, “securitisation” means “a
transaction or scheme, whereby the credit risk associated with an
exposure or pool of exposures is tranched, having the following
characteristics:

(a) payments in the transaction or scheme are dependent
upon the performance of the exposure or pool of exposures;
and

(b) the subordination of tranches determines the
distribution of losses during the ongoing life of the transaction
or scheme.”

7 Total market share of the relevant CRA is to be
measured with reference to annual turnover generated from credit
rating activities and ancillary services, at group
level.

8 “issuer” is defined in CRA3 by reference to
the definition in Article 2(1)(h) of Directive 2003/71/EC, i.e.
“a legal entity which issues or proposes to issue
securities”.

“originator” is defined in CRA3 by reference to
the definition in point (41) of Article 4 of Directive 2006/48/EC,
i.e. “either of the following: (a) an entity which, either
itself or through related entities, directly or indirectly, was
involved in the original agreement which created the obligations or
potential obligations of the debtor or potential debtor giving rise
to the exposure being securitised; or (b) an entity which purchases
a third party’s exposures onto its balance sheet and then
securitises them”.

“sponsor” is defined in CRA3 by reference to
the definition in point (42) of Article 4 of Directive 2006/48/EC,
i.e. “a credit institution other than an originator credit
institution that establishes and manages an asset-backed commercial
paper programme or other securitisation scheme that purchases
exposures from third party entities”.

9 Directive 2003/71/EC of 4 November 2003 on the
prospectus to be published when securities are offered to the
public or admitted to trading and amending Directive
2001/34/EC.

10 Article 122a was added to the Capital Requirements
Directive (Directive 2006/48/EC and Directive 2006/49/EC) by
Directive 2009/111/EC of 16 September 2009 amending Directives
2006/48/EC, 2006/49/EC and 2007/64/EC as regards banks affiliated
to central institutions, certain own funds items, large exposures,
supervisory arrangements, and crisis management.

11 Directive 2013/36/EU on the access to the activity of
credit institutions and the prudential supervision of credit
institutions and investment firms and the regulation on prudential
requirements for credit institutions and investment firms, amending
Directive 2002/87/EC and repealing Directives 2006/48/EC and
2006/49/EC and Regulation (EU) No 575/2013 of 26 June 2013 on
prudential requirements for credit institutions and investment
firms and amending Regulation (EU) No. 648/2012 (the
“CRR”). Articles 404-410 of the CRR will replace the
previous risk retention provisions under Article 122a of Directive
2006/48/EC with effect from 1 January 2014.

12 Rule 17g-5 under the United States Exchange Act of
1934, as amended.

13 Discussion Paper on CRA Implementation, 10 July 2013,
ESMA/2013/891, which can be found at http://www.esma.europa.eu/system/files/2013-891_discussion_paper_on_cra3_implementation.pdf

14 The Directive can be found at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:145:0001:0003:EN:PDF .

15 Institutions for occupational retirement provision,
undertakings for collective investment in transferable securities
and alternative investment fund managers, respectively.

16 Principles for Reducing Reliance on CRA Ratings,
published by the Financial Stability Board on 27 October 2010,
which can be found here http://www.financialstabilityboard.org/publications/r_101027.pdf .

17 As illustrated, for example, by the proposed revisions
to the Basel securitisation framework which are intended to
mitigate mechanistic reliance on external credit ratings, as
described in the consultative paper entitled “Revisions to the
Basel Securitisation Framework” which was published in
December 2012 and can be found here http://www.bis.org/publ/bcbs236.pdf . See the
Cadwalader Clients & Friends Memo entitled “What’s
Next for the Basel Securitisation Framework?” for more
information:
http://www.cadwalader.com/assets/client_friend/050913WhatsNextfortheBaselSecuritisationFramework.pdf .

18 The Dodd-Frank Wall Street Reform and Consumer
Protection Act.

19 “re-securitisation” is defined in CRA3 by
reference to the definition in point (40a) of Article 4 of
Directive 2006/48/EC. Such definition was included in that
Directive under Directive 2010/76/EU of 24 November 2010, which
added the following definition of “re-securitisation”:
“a securitisation where the risk associated with an underlying
pool of exposures is tranched and at least one of the underlying
exposures is a securitisation position”.

20 See the Cadwalader Clients & Friends Memo entitled
“What’s Next for the Basel Securitisation Framework?”
which summarises the treatment of re-securitisation exposures under
the proposed revisions to the Basel securitisation framework
referred to in footnote 17 above. This Clients & Friends Memo
can be found at
http://www.cadwalader.com/assets/client_friend/050913WhatsNextfortheBaselSecuritisationFramework.pdf .

21 Previously, CRAs had to inform the relevant rated
entity at least 12 hours before publication of the credit
rating.

22 SI 2013/1637, which can be found at http://www.legislation.gov.uk/uksi/2013/1637/pdfs/uksi_20131637_en.pdf .

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.

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