CP15/23 – Securitisation: General requirements

The Prudential Regulation Authority (PRA) has launched a consultation (CP15/23) concerning intended regulations in relation to securitizations. Specifically, the PRA seeks to replace all firm-facing requirements currently stipulated in retained EU legislation (REUL) under the UK (retained) Securitisation Regulation. The consultation follows the enactment of the Financial Services and Markets Act 2023, the subsequent empowerment of the PRA to draw up such rules, and the release of a draft Securitisation Regulations 2023 policy note and near-final draft statutory instrument by the HM Treasury which would set out the general framework for securitizations in UK (please see EventID 22190 in this context).
In its new consultation, the PRA seeks to
– establish new rules for which the PRA is now responsible thereby adopting new parts in its rulebook titled „Securitization“ to cover all such firm-facing obligations. This would include risk retention obligations, due diligence obligations for institutional investors, transparency requirements of sponsors, originators, and securitization special purpose entities (SSPEs), information requirements on securitizations, and many others. Notably, the new parts would also ban resecuritizations unless authorized by the PRA.
– replace the current risk retention technical standards as retained from the EU; and
– replace the current disclosure technical standards as retained from the EU;
The PRA notes in this context that it would in large „take over“ those rules from REUL with some targeted changes to – among others –
– clarify that all PRA-authorized manufacturers involved in UK-based securitizations must adhere to relevant requirements;
– adopt a more principle-based approach for due diligence obligations of PRA-approved institutional investors, potentially enhancing proportionality and international competitiveness;
– modify risk retention rules for non-performing exposures (NPE) securitizations, encouraging PRA-approved entities to use NPE securitizations for credit risk reduction; or
– clarify provisions as regards the delegation of due diligence obligations.
The consultation also requests feedback on the differentiation between public and private securitizations and the related transparency requirements, specifically the reduction of disclosure obligations for private securitizations to apply a more proportionate approach to such obligations.
The anticipated implementation date for the changes stemming from CP15/23 is the second quarter of 2024, contingent upon the progress of the draft Securitisation Regulations 2023 as noted above.
To conclude, it shall be noted that the proposed targeted changes noted above would also result in revisions to the PRA’s Supervisory Statement (SS 10/18) – Securitisation: General requirements and capital framework and a new Statement of Policy – Permissions for resecuritizations under section 138BA of the Financial Services and Markets Act 2000.