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    US Treasury Announces US and UK Financial Innovation Partnership

    May 29, 2019

    The U.S. Department of the Treasury and the UK's HM Treasury announced that United States and United Kingdom have established the Financial Innovation Partnership. The Partnership between the U.S. Department of the Treasury and the HM Treasury will build on, and deepen, bilateral engagement on emerging trends in financial services innovation. This will include encouraging collaboration in the private sector, sharing information and expertise about regulatory practices, and promoting growth and innovation.

  • The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

    • To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
    • To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
    • To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
    • To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

    The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

     

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    Effective Date: June 18, 2019

    Press Release
  • Proposed Rule 1
  • Proposed Rule 2
  • Proposed Rule 3
  • Presentation on Regulatory Framework (PDF)
  • Presentation on Resolution Plan Rules (PDF)
  • The Partnership was announced at the meeting of the U.S.-UK Financial Regulatory Working Group, which was established to facilitate even closer collaboration on financial services issues between U.S. and UK Treasuries and U.S. and UK financial regulators. The Financial Innovation Partnership will focus on two main areas:

    • Regulatory Engagement. Dialog between authorities and with the private sector is critical to identify and address potential regulatory synergies, share lessons, and develop closer working relationships. The United States and United Kingdom will build on existing regulatory cooperation by discussing regulatory developments and sharing experiences on technical issues related to innovation in financial services. 
    • Commercial Engagement. The  Financial Innovation Partnership also seeks to promote a dynamic private sector that supports entrepreneurs and new business models—a necessary driver of financial innovation. It will provide enhanced and regular opportunities for the private sector in one country to engage with industry associations and market participants in the other country.  Through the  Financial Innovation Partnership, the UK Department for International Trade will bring UK firms to the United States and the U.S. Commerce Department will coordinate trade promotion missions to the United Kingdom.

     

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    Keywords: Americas, Europe, US, UK, Banking, Insurance, Securities, Fintech, Regtech, Financial Innovation Partnership, US Treasury

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