Securitisation in Scotland: Spotlight on the MTSA

Despite a challenging macroeconomic environment, the UK securitisation market demonstrated measured growth in 2025, supported by steady issuance, strong investor demand and gradual diversification.

Scotland does not itself host a securitisation market on the same scale as London; rather, the Scottish market is predominantly integrated within the wider UK ecosystem with Scottish receivables commonly pooled alongside English receivables as part of sizable UK-wide transactions. As a result, transactional activity in Scotland tends to mirror UK market trends.

From the firm’s perspective, the following represented some of the headline market trends from 2025, representing transactional activity where Scottish customers or assets were involved.

• Residential mortgage-backed securities (RMBS): while there was a reported contraction in RMBS issuances in 2025, the asset class remains a relatively stable pillar of the UK market, and investor participation continues to be strong.
• Commercial mortgage-backed securities (CMBS): issuance activity is reported to have improved on previous years, with performance largely varying by product type. Competitive pricing in resilient asset classes, such as leisure and logistics, has contributed to increased transactional activity in those sub-sectors.
• Asset-based securities (ABS): this market remained active and resilient, with some sub-sector headwinds. It is expected that this has been aided by the continued growth of non-traditional lenders in the market and the expectation of regulatory updates increasing appetite for such transactions.

Scotland’s regulatory landscape for securitisation transactions shifted in 2025, in line with the UK’s new regulatory regime. The Securitisation Regulations 2024 (as amended), together with the Securitisation Sourcebook (SECN) of the Financial Conduct Authority (FCA) and the securitisation rules of the Prudential Regulation Authority (PRA), came into force on 1 November 2024, replicating much of the existing framework, albeit under a new regulatory structure, with some specific policy changes. The firm-facing rules were transferred from legislation into the regulatory rulebooks as part of HM Treasury’s Smarter Regulatory Framework. Although the regulatory architecture may have changed, it has not had a notable impact on market behaviour, and it has largely been business as usual for Scotland. Scottish insolvency and property law continues to interact with the UK-wide regulatory framework in transactions involving Scottish assets.

While market trends and regulatory changes in Scotland have generally largely fallen into line with England, Scotland saw an important domestic legal reform in 2025 in the form of the implementation of The Moveable Transactions (Scotland) Act 2023 (MTSA).

Scots law had long been considered inflexible and commercially out of step with other UK and international markets in the context of structure finance transactions, requiring complex and costly structuring in order to achieve agreed commercial outcomes and often placing administratively burdensome operational requirements on transaction counterparties, particularly in the case of securitisation transactions. The need for reform had become increasingly evident, with Scottish structures frequently characterised by complexity and compromise.

The MTSA radically modernised the law in relation to the transfer and collateralisation of claims, finally aligning Scots law with the commercial landscape within which it operates and representing a significant step in the right direction for the Scottish securitisation market.

Securitisation of Scots Law Receivables: Historical Complexities and the Drivers for Reform

Commercial practice in Scotland has long felt the absence of the concept of “equity”, which recognises a duality of interests in moveable assets – both legal and equitable. Equity does a lot of heavy lifting in UK-governed securitisation transactions, where originators/sellers seek to trade their interest in a portfolio of receivables without having to satisfy certain commercially undesirable conditions associated with transferring legal title (such as notifying the underlying counterparties of the sale).

Scots law takes a different position than its English counterpart: ownership of assets is unititular, meaning that title to a right or a claim is absolute, not divisible, and any transfer of title is only capable of being effected by the transferor divesting itself of its interest in that claim through the passing of control to the beneficiary. Traditionally, this was usually achieved by the service of notice (known as intimation) on the claim counterparty, mirroring the perfection steps of an English legal assignment. Furthermore, it was not necessarily clear to what extent it was possible to assign an interest in a future claim under Scots law – there was no mechanism to give advance intimation, which was required to constitute the transfer.

This posed a significant structural problem for Scottish lawyers who were tasked with the application of commercially agreed sale terms (frequently involving non-static pools of receivables and non-disclosure requirements to underlying counterparties) to the transfer of Scottish assets.

The challenges presented by a typical securitisation structure

The proforma English securitisation structure involves the sale of receivables by an originator to a special purpose vehicle (SPV), which in turn funds that purchase by way of issuance of debt securities to investors. Typically, the SPV will contemporaneously secure its interest in those receivables to the relevant secured creditor pursuant to an English law security agreement.

It is important for reasons pertaining to regulatory and accounting treatment that the sale represents a “true sale”, meaning it cannot be recharacterised as a secured loan or financing arrangement. It is also critical that the sold receivables would not be considered to form part of the originator’s estate following insolvency. In England, this is achieved by way of equitable assignment, with the right to notify the receivable counterparties and perfect legal title upon specified events.

Prior to the MTSA coming into effect, this approach was not available under Scots law, under which notification was a prerequisite to transfer of the claim. This created significant challenges, including:

• portfolios often include thousands of debtors;
• receivables arise on a continuing basis; and
• market practice generally avoids notifying borrowers of securitisation arrangements.

Without intimation, the SPV’s title was vulnerable, particularly if the originator became insolvent.

Bridging the equity gap: Scottish trusts

In the absence of an equitable solution under Scots law, Scottish counsel turned to trust law to bridge the “equity gap”. The proposed solution was for an originator to declare a trust in favour of the SPV in respect of the receivable purported to be sold. Pursuant to that trust deed, the originator (as truster) appoints itself (as trustee) to hold the trust property (ie, the Scottish receivables) on trust for the benefit of the SPV. Through this mechanism, the trust property is deemed to transfer into a separate “patrimony” (that of the trust, rather than of the originator) and is segregated from the originator’s personal estate.

Such trusts are typically drafted to contain automatic termination provisions, whereby the trust declared over any trust property will cease to have effect in certain circumstances (such as a perfection event, or the underlying receivable being discharged).

Despite being a neat solution to the equity problem, the process is technically prescriptive and can be administratively burdensome, especially where newly originated receivables are brought into the structure, often necessitating the entry into numerous supplemental “top-up” declarations of trust on a periodic basis.

While effective, this approach:

• added legal complexity;
• increased documentation, delayed deal timetables and increased legal spend; and
• was unfamiliar to many international investors.

Tailoring the Scots law security package

While the English law debenture effectively charges the SPV’s present and future interests in purchased English receivables, the Scottish position is again somewhat distinct:

• Firstly, the SPV does not hold a direct interest in the purchased Scottish receivables; rather, it has a personal right against the trustee under each Scottish declaration of trust. It is this interest in these trust deed(s) that is assigned to the secured creditor by way of an assignation in security. Prior to the implementation of the MTSA, the entry into supplemental trust deeds (as is frequently required) therefore also necessitated the entry into corresponding supplemental assignations in security, and registration of such documents at Companies House, which is administratively cumbersome and frequently overlooked once the transaction has closed, leaving collateral exposure.
• Secondly, in the event that the trust terminates in respect of certain trust property, the assignation in security ceases to have effect in respect of that trust property. Where this occurs as a result of a perfection event (that is, legal title to the receivables passing to the SPV pursuant to the terms of the sale agreement), fresh security must be delivered by the SPV to the secured creditor in respect of the newly acquired interests. Most commonly, this is seen in RMBS transactions in the form of a supplemental mortgage-style charge (also known as a piggyback standard security). However, the enforcement value of such security is generally perceived to be fairly limited.

MTSA Reform: Marginal Gains in the Scottish Securitisation Market

The MTSA constitutes a substantial reform of Scots law, but in the context of securitisation structures, it stops short of substantively overhauling existing approaches. However, what it has achieved is a series of marginal, but meaningful, practical benefits.

• It dispenses with the need to intimate transfers to counterparties: the MTSA introduced an alternative to intimation, being the registration of a transfer electronically at the Register of Assignations (RoA). This is important in securitisation structures for two reasons.
1. It introduces an opportunity to replace the prevailing trust mechanic with a simple assignation of claims (for non-mortgage-backed deals), more akin to the approach in England. With intimation to underlying counterparties no longer required, a valid transfer can be achieved by way of registration of that transfer at the RoA. Increased use of this approach has been seen in certain asset classes, such as auto-loan securitisations, but the market has been cautious to adopt this uniformly. Arguably, an MTSA transfer goes further than the equivalent English position – it transfers legal, rather than equitable, title – and so consideration must be given to the suitability of that (from a legal and regulatory perspective) on a deal-by-deal basis.
2. Registration provides a means of creating valid security without direct notification to relevant counterparties, enabling legal certainty to be achieved quickly and at scale. As any assignation in security would be made publicly available at Companies House (provided the assignor is an English, Welsh, Scottish or Northern Irish company), registration at the RoA does not constitute any further disclosure – allowing parties to maintain a level of confidentiality that is consistent with market practice in securitisation financings.
• It provides certainty regarding electronic methods of notification: the MTSA finally recognises that the majority of commercial communications now occur electronically and provides certainty as to the forms of electronic notification that will be considered as an effective method of intimation. In addition, it introduces welcome flexibility, citing that intimation may be done by reference to a website or portal, which will deliver meaningful operational efficiencies for high-volume securitisation deals.
• It permits the assignation of future claims: subject to certain exceptions, it is clear that future rights or claims may be validly transferred, provided that they are appropriately identified. This allows the interest in future Scottish receivables to be competently assigned under the “Day 1” assignation in security provided as deliverable to closing without the need for supplemental assignations of security to be delivered (and registered) following the delivery of each supplemental declaration of trust.
• Dispensing with control requirement: the MTSA makes clear that an assignation in security may be validly created without giving up day-to-day control of the receivables. This better aligns Scots law with general market practice, where an originator will often continue to service the assets on behalf of the SPV, managing routine administration and collecting payments from debtors or lessees.

MTSA: (Almost) A Year In Review

Some things change, some things stay the same

While the MTSA has replaced the prior statutory regime in relation to claims, any interest that is deemed to fall outwith the scope of the legislation does not benefit from the recent change in law. This is a complex and unclear area of law, and particular care should be taken when looking to rely on common law doctrine for the purpose of creating a valid transfer (or security transfer).

Similarly, while the MTSA makes it clear that assignations can be validly signed by electronic means (with certain exceptions, such as where documents relate to heritable property), many practitioners still prefer a wet-ink signature, given the perceived evidentiary benefit attached thereto. In such circumstances, it is important to proceed with caution – if counterparties elect to sign in wet ink, it is essential that the document be subscribed in accordance with the Requirements of Writing (Scotland) Act 1995 (RoWSA). Failure to do so will be fatal to the validity of the document, notwithstanding that the wet-ink signature was not originally a requirement.

Settling market practice

While the dust settles on the new legislation and practitioners look to achieve uniformity of approach in the market, there is one point that the market has not yet reconciled.

As the MTSA specifically excludes transactions involving interests in heritable property, it is commonly acknowledged that transactions involving property-backed receivables will not benefit fully from the new regime – that is, the prevailing trust structure is not capable of being replaced by a more efficient MTSA assignation. However, although practice in the market is yet to settle, there are ongoing discussions as to whether an SPV’s interest in each declaration of trust comprising property-backed securities can be competently assigned in security pursuant to an “MTSA” assignation (thus avoiding the need for administratively burdensome and costly supplemental assignations in security).

The legislation specifically excludes the transfer of claims relating to “non-monetary rights relating to land” from its remit. As “land” is interpreted to include heritable interests (such as Scottish standard securities), this has led some in the market to query as to whether an SPV’s interest in trust property (comprising property-backed securities) constitutes an assignable claim or whether it falls within the exception.

It is known that, under common law, any real right in trust property legally vests in the trustee. It is also known that the right of the beneficiary in a trust is a personal right against the trustee. Therefore, in the context of a mortgage-backed securitisation transaction, the assignable interest is the SPV’s right to enforce the performance of the trust against the trustee, not a direct right in the trust property (ie, each mortgage or the “land”) itself. Notwithstanding this, some practitioners are wary that a court might take an overtly literal interpretation of the drafting in the legislation and determine the claim to sit outside the remit of the MTSA. As a result, there is a divergence of practice as to whether an “MTSA” assignation may be taken on RMBS and CMBS deals (capturing future trust interests) or whether assignations must comply with historic common law rules (necessitating, amongst other things, the need for supplemental assignations in security to be delivered alongside each supplemental declaration of trust).

Further, future reform?

The Scottish Law Commission has recently instructed a draft Bill to be prepared in respect of the modernisation of security over heritable property, which is expected to include legal reform in relation to sub-security arrangements. It is not yet clear what this will look like, but it will be of particular interest to stakeholders in the Scottish securitisation market, as the existing laws pertaining to heritable property have long been a primary contributor to the structural complexity of securitisation transactions.

The FCA and PRA also intend to consult on further changes to make the UK regulatory framework more proportionate, with a consultation paper expected in Q1 2026.

Conclusions

The MTSA represents a decisive step forward for the Scottish securitisation market. By modernising the law of assignations and introducing registration-based perfection, it enables simpler, more efficient and more internationally recognisable transaction structures.

Since the commencement of the MTSA:

• non-RMBS and CMBS transactions are increasingly using registration-based assignations, and it is hoped that the market will move in the same direction for property-backed transactions in due course;
• the burden for originators to prepare and deliver wet-ink executed supplemental security alongside each trust deed, and for funders to register such documents, has been minimised, resulting in a smoother administrative process and minimising of risk for secured participants; and
• investors are becoming more comfortable with Scottish receivables representing a larger share of traded portfolios.

While it remains to be seen how significant the MTSA’s impact will be on the Scottish market, the overall trajectory is clear: Scotland is now much better positioned as a jurisdiction for securitisation transactions.