By Marcus Leach

The Financial Services Authority (FSA) has published changes to its regulatory framework for UK regulated covered bonds. Changes to the RCB Regulations were published on 29 November 2011 by HM Treasury.

The changes to the regime are designed to increase transparency for investors and make features of the UK regime readily comparable to those from other countries. They reflect feedback from the industry that we received on the joint consultation published earlier this year. These changes will come into force on 1 January 2013.

The policy statement sets out the following changes to the FSA’s RCB Sourcebook:

- Introduction of consistent standards of investor reporting: this will increase transparency for investors and highlight the quality of underlying assets, while the use of common standards will make it easier for investors to compare different programmes. This includes requiring issuers to provide loan level information on assets in the cover pool.

- Clarification of the role of ‘Asset Pool Monitor’: this codifies the existing UK practice of independent, external scrutiny of an issuer’s regulated covered bond programme. Issuers will be required to provide these reports to the FSA.

- Refining of regulatory reporting: this updates and consolidates the regulatory reporting that the FSA requires when issuers apply to register with the FSA and on an ongoing basis. This information is used to assess issuers’ applications and as part of the regular stress-testing the FSA conducts on regulated covered bond programmes.

The policy statement also provides an update on other areas of policy which relate to covered bonds.

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