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Financial Services

Question for Treasury

UIN HL2702, tabled on 17 March 2020

To ask Her Majesty's Government whether they, or the Financial Conduct Authority, monitor whether trade receivables included in securitised bonds (1) reflect transactions completed, or (2) can also include transactions yet to be completed or documented by the two sides to the expected transaction; and whether they have discussed this with the Federal Financial Supervisory Authority in Germany.

Answered on

26 March 2020

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are responsible for monitoring risks in the UK securitisation market, in line with their statutory objectives.

In January 2019, the EU Securitisation Regulation (Regulation 2017/2407) became applicable in the United Kingdom. Consistent with this Regulation, the Government and the FCA expects that underlying exposures transferred to a securitisation vehicle, including trade receivables, contain obligations which are contractually binding and enforceable.

In trade receivable transactions, goods or services to which the credit claims refer may be delivered later and be deficient. Such a risk is often quantified as a matter of routine in securitisation transactions. The Government expects relevant market participants to conduct due diligence where required.

The FCA and the PRA apply a risk-based supervision of the securitisation market and can choose to undertake a thematic analysis of the market, including on trade receivables financing.

The FCA maintains bilateral relationships and collaborates effectively with the regulatory and supervisory authorities of other countries, including Germany.

Answered by

Treasury