Last week’s Supplementary Estimates contained another note of interest for student loans.
Under “Note K: Contingent Liabilities” (p. 90) we find that a fifth contingent liability has been added to those associated with the now abandoned sale of student loans.
The sale of student loans necessitated warranties and indemnities to secure interest and obtain value
for money from investors. These contingent liabilities are in respect of:…
e) New EU Securitisation Regulations (Possible CL [contingent liability] in due course). UKGI [UK Government and Investment] are seeking legal counsel to review the implications of new EU securitisation reporting requirements from 2019. Credit granting criteria are being assessed for student loans which may generate legal challenge and we will continue to work with UKGI to update as more information and analysis becomes available.
If any reader can explain what the issues may be here, I would be very grateful.
The original four contingent liabilities are discussed here. These, along with the fifth, are still classed as “unquantifiable”.
There were also issues around whether the Special Purpose Vehicles for the securitisations were sufficiently independent of government so as to constitute a genuine sale (and thereby transfer the loans off the government’s balance sheet).
The wording above though suggests that the lack of “credit” checks on student loans may be the issue.
