Securitisation: The new EU framework and Significant Risk Transfer

Policy Statement 29/18 | Consultation Paper 12/18

Update 20 December 2018: The PRA published a joint statement with the Financial Conduct Authority (FCA), ‘Securitisation Regulation: PRA and FCA joint statement on reporting of private securitisations’. This direction is intended to apply to all UK established originators, sponsors and securitisation special purpose entities (SSPEs) from Tuesday 15 January 2019.

Published on 15 November 2018

Securitisation: The new EU framework and Significant Risk Transfer - PS29/18

Overview

This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 12/18 ‘Securitisation: The new EU framework and Significant Risk Transfer’ (see page 2 of 2). It also contains the PRA’s final policy, as follows:

  • final Supervisory Statement (SS) 10/18 ‘Securitisation: General requirements and capital framework’ (Appendix 1);
  • updated SS9/13 ‘Securitisation: Significant Risk Transfer’ (Appendix 2); and
  • updated SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ (Appendix 3).

Different parts of the PS are relevant to different firms, depending on whether the policy relates to the implementation of the EU Securitisation Regulation, revisions to the banking securitisation capital framework, or Significant Risk Transfer (SRT) securitisation. Policy relating to the implementation of the Securitisation Regulation will be relevant to all PRA-authorised CRD IV firms and all PRA-authorised Solvency II firms (and potentially other firms pending HM Treasury discretions). Policy relating to the revision to the banking securitisation capital framework and SRT securitisation will be relevant to PRA-authorised CRD IV firms only.

Implementation

The date of application for the new securitisation legislative framework is Tuesday 1 January 2019. SS10/18 ‘Securitisation: General requirements and capital framework’ and amendments to SS31/15 are effective from Tuesday 1 January 2019.

The updated policies amending SS9/13 apply immediately after the publication of this PS to all PRA authorised CRD IV firms.



Published on 22 May 2018

Securitisation: The new EU framework and Significant Risk Transfer - CP12/18

Overview

This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA’s) proposals on its approach to the European Union’s Securitisation Regulation and certain aspects of the revised Capital Requirements Regulation (CRR) banking securitisation capital framework. This CP also proposes to update firms on the PRA’s expectations with regard to Significant Risk Transfer (SRT) securitisation.

The proposals in this CP are relevant to all PRA-authorised Capital Requirements Directive IV (CRD IV) firms and all Solvency II firms.

Summary of proposals

The PRA proposes to introduce the new SS ‘Securitisation: general requirements and capital framework’ in order to set out the PRA’s approach and expectations in relation to:

(i) Chapter 2 (provisions applicable to all securitisations) of the incoming European Union Securitisation Regulation;
(ii) firms that intend to sponsor Simple, Transparent and Standardised (STS) Asset Backed Commercial Paper (ABCP) programmes; and
(iii) the incoming securitisation capital framework introduced via Amendments to the CRR.

SS9/13 ‘Securitisation’, which currently covers only SRT securitisation, is proposed to be renamed ‘Securitisation: Significant Risk Transfer’. The PRA proposes to amend this SS in order to clarify the role of firms’ senior management, prudential treatment of excess spread and certain aspects of the PRA’s assessment of commensurate risk transfer with respect to SRT securitisation.

Responses and next steps

The date of application for the new securitisation legislative framework is Tuesday 1 January 2019.The proposals laid out in the proposed new PRA SS ‘Securitisation: general requirements and capital framework’ and SS31/15 would be effective from Tuesday 1 January 2019.

The proposals laid out which amend SS9/13 would apply immediately after the publication of a policy statement (PS) to all PRA-authorised CRD IV firms, as they are equally applicable to the current and Amended CRR.

This consultation closed on Wednesday 22 August 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP12-18@bankofengland.co.uk.

The proposals in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with the European Union take effect.

PDF Consultation Paper 12/18

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