CP2/26 – Reforms to securitisation requirements

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Responses are requested by Monday 18 May 2026.

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Responses can be sent by email to: CP2_26@bankofengland.co.uk

Alternatively, please address any comments or enquiries to:
Securitisation Policy
Prudential Regulation Authority
20 Moorgate
London
EC2R 6DA

1: Overview

1.1 Prudential Regulation Authority (PRA) authorised persons that participate in the securitisation market are subject to prudential requirements which relate to capital and liquidity, and general requirements which relate to conduct risks from securitisations. The PRA has recently published reforms to make the prudential requirements more proportionate in policy statement (PS) 3/26 – Restatement of CRR requirements – 2027 implementation – final. It has also received feedback from firms, in response to recent securitisation related consultations, that some of the existing general requirements are highly prescriptive and burdensome.

1.2 This consultation paper (CP) sets out the PRA’s proposed rules and expectations for PRA-authorised firms participating in securitisations. The proposals mainly relate to the securitisation general (or conduct) requirements, although certain proposals relate to securitisation capital requirements for Capital Requirements Regulation (CRR) firms.

1.3 The proposals aim to make the existing requirements more proportionate and less prescriptive, while still supporting the PRA’s primary objective of maintaining appropriate prudential and general safeguards. The PRA considers that the proposals would facilitate its secondary objectives by lowering compliance costs and aligning securitisation capital requirements with the economic substance which may, over time, enable greater competition and facilitate international competitiveness and growth.

Background

1.4 Securitisation is widely regarded as a contributing factor to the Global Financial Crisis (‘GFC’) of 2007-08. This included concerns around: misaligned incentives between manufacturers^{footnote [1]} and investors; poor due diligence by investors; the prevalence of complex securitisation structures; and insufficient capital requirements. In order to address the key risks^{footnote [2]} observed prior to the GFC, such as the opacity of certain securitisation structures, the European Union (EU) developed prescriptive conduct regulation known as the Securitisation Regulation. This regulation was specific to securitisation participants and generally went beyond that required by international standards.

1.5 The aim of the EU’s regulation was to ensure that: originators followed sound credit underwriting standards; manufacturers retained a material economic interest to ensure alignment of incentives and made appropriate disclosures; and investors performed appropriate due diligence. Furthermore, this regulation generally banned resecuritisations, while defining simple securitisations which are then eligible to benefit from preferential prudential treatment. These requirements were subsequently onshored into UK law and, with some changes, into the PRA Rulebook and the FCA Handbook. These requirements are what the PRA now refers to as the securitisation general requirements.

1.6 The general requirements have been in force since 2019. The industry has fed back that requirements in some cases have created a substantial administrative burden for firms and investors, in return for minimal benefit for safety and soundness. The PRA has considered this feedback and reflected on its own supervisory experience in relation to these requirements. In the PRA’s view, the desired policy outcome of the general requirements can be achieved through a more targeted, less prescriptive set of requirements as proposed in this CP.

1.7 Overall the PRA has sought to achieve an appropriate balance between maintaining safety and soundness and facilitating competition, competitiveness and growth within the market. However, the PRA notes that securitisation is a relatively complex activity, where financial innovation can lead to the emergence of new risks, particularly following such regulatory change. The PRA will continue to monitor market developments, and it would seek to take appropriate action if significant risks to its objectives were to emerge.

Scope

1.8 The proposals in this CP would result in:

• changes to the Securitisation Part of the PRA Rulebook (Annex B of Appendix 1);
• changes to the Securitisation (CRR) Part of the PRA Rulebook (Annex C of Appendix 1);
• changes to the Reporting (CRR) Part of the PRA Rulebook (Annex E of Appendix 1);
• changes to the Glossary Part of the PRA Rulebook (Annex A of Appendix 1);
• changes to the Non-Performing Exposures Securitisation (CRR) Part of the PRA Rulebook (Annex D of Appendix 1); and
• changes to supervisory statement (SS) 10/18 – Securitisation: General requirements and capital framework (Appendix 2).

1.9 The PRA proposes to amend existing rules and relevant supervisory guidance to:

• make securitisation due diligence requirements less prescriptive;
• introduce a new risk retention modality which combines two existing modalities;
• streamline market disclosure (transparency) requirements for all securitisations;
• disapply certain market disclosure (transparency) and regulatory reporting requirements for single loan securitisations;
• exempt two types of resecuritisation structures from the existing ban and introduce alternative capital treatment for CRR firms’ exposures to such resecuritisations;
• clarify credit-granting requirements;
• make amendments to the PRA Rulebook to improve the readability of the securitisation general requirements; and
• introduce a new approach for capital treatment of Mortgage Guarantee Scheme (“MGS”) or similar private scheme loans (known as “Loans”).

1.10 The CP is relevant to all categories of PRA-authorised persons who are established in the UK, including CRR firms, UK Solvency II firms, non-CRR firms (such as credit unions) and non-Directive firms. It is also relevant to qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms, and financial institutions that are subsidiaries of these firms. It is not relevant to non-UK firms with branches in the UK.

1.11 Respondents may also want to refer to the parallel Financial Conduct Authority (FCA) CP26/6 – Rules for reforming the UK Securitisation Framework which sets out their proposals to reform the securitisation general requirements in their rules. As the general requirements are present in both the PRA Rulebook and FCA Handbooks, the PRA and FCA have worked closely in developing the proposals in their respective CPs. The proposals are generally aligned, and in many instances identical, particularly in relation to proposals on due diligence, risk retention, transparency and credit-granting.

Structure of the CP

1.12 The CP is structured as follows:

• Chapter 2 sets out proposals relating to the general requirements for securitisation market participants. These include due diligence, risk retention, market disclosure (transparency) and regulatory reporting, resecuritisation, and credit-granting rules for securitised exposures.
• Chapter 3 sets out proposals for a new risk-sensitive internal ratings based (IRB) treatment for Loans.
• Chapter 4 covers further legal requirements of the consultation paper process.

1.13 The PRA proposes that the implementation date for the changes resulting from this CP will be 2027 Q2. This will be confirmed in a PRA policy statement following the consultation period.

Responses and next steps

1.14 This consultation closes on Monday 18 May 2026. The PRA invites feedback on the proposals set out in this consultation and the proposed implementation date. Please address any comments or enquiries to CP2_26@bankofengland.co.uk.

1.15 When providing your response, please tell us whether or not you consent to the PRA publishing your name, and/or the name of your organisation, as a respondent to this CP.

1.16 Please also indicate in your response if you believe any of the proposals in this consultation paper are likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.

1.17 References related to the UK’s membership of the EU in the SS covered by this CP have been updated as part of these proposals to reflect the UK’s withdrawal from the EU. Unless otherwise stated, any remaining references to EU or assimilated legislation refer to the version of that legislation which forms part of assimilated EU law.^{footnote [3]}

2: Securitisation general requirements

Background

2.1 The securitisation general requirements seek to address conduct risks in securitisation markets. The general requirements are set out in the Securitisation Part of the PRA Rulebook for PRA-authorised firms and in the FCA Handbook for the solo-regulated firms. The requirements were transposed from the retained EU legislation in July 2024, following PS7/24 – Securitisation: General requirements, with some small policy changes to improve proportionality.

2.2 Over the last three years, the PRA and FCA have received responses from industry participants to various consultations on securitisations, notably CP15/23 – Securitisation: General requirements, CP13/24 – Remainder of CRR: Restatement of assimilated law and FCA CP23/17 – Rules relating to Securitisation. Respondents have commented that they consider several of the general requirements to be highly prescriptive and burdensome. The PRA noted in PS7/24 that it would consider making further reforms to the general requirements in due course.

2.3 The PRA has considered these responses, as well as industry feedback to HMT’s review of the Securitisation Regulation^{footnote [4]} and the recent EU Commission consultation on securitisation that covers similar general securitisation requirements that apply to EU firms. The PRA has analysed the existing requirements and considers that there are areas where the requirements could be made more proportionate and less prescriptive, while maintaining appropriate safeguards to ensure that the requirements still address the conduct risks that can arise in securitisation markets, such as ensuring that the misalignment of incentives between manufacturers and investors that was present prior to the GFC does not reemerge. The proposals set out in this chapter aim to achieve this balance.

2.4 The securitisation general requirements cover five areas: 1) due-diligence requirements for institutional investors, 2) risk retention, 3) transparency requirements, 4) the ban on resecuritisation, and 5) criteria for credit-granting. The proposals below are grouped into each of these areas.

Proposal 1: Due diligence

2.5 The due diligence requirements in the Securitisation Part aim to ensure PRA-authorised investors and potential investors understand the risks associated with investing in securitisation positions. The PRA observes that current due diligence requirements are highly prescriptive. For example, they require investors to verify compliance by the manufacturer with certain requirements in the Securitisation Part and to establish written procedures to monitor numerous specified aspects of the securitisation’s performance. The PRA considers that such prescription can add complexity and compliance burden, while not necessarily improving investors’ understanding of the risks involved in a securitisation.

2.6 Industry has provided feedback that due diligence requirements generate a disproportionate compliance burden for firms, reporting for example that 30% of start-up costs for an investor entering the securitisation market are directly attributable to due diligence requirements.^{footnote [5]}

2.7 The PRA proposes a substantial simplification of due diligence requirements for securitisations. The PRA considers that the proposed changes would not hinder the safety and soundness of PRA-authorised firms investing in securitisations as they would continue to be required to undertake due diligence that is proportionate to risks posed.

2.8 The PRA proposes the following changes to current due diligence requirements:

• verification requirements for investors – the PRA proposes to remove the requirements to verify:
  • compliance with Chapter 2 Article 9 of the Securitisation Part credit-granting criteria, and Chapter 2 Article 6 of the Securitisation Part risk retention requirement;
  • availability of specific information; and
  • compliance with Simple, Transparent and Standardised (STS) criteria.
• prior to investing in a securitisation position – the PRA proposes to remove:
  • the prescriptive list of elements to be included in the due diligence assessment of a securitisation position.
• while holding a securitisation position – the PRA proposes to remove:
  • the requirement for investors to establish written procedures for the ongoing monitoring of a securitisation position and its underlying exposures;
  • the prescriptive list of elements to be monitored on an ongoing basis while holding a securitisation position;
  • the requirements for investors to conduct stress tests of cash flows and underlying exposures, and solvency and liquidity;
  • the requirement for investors to ensure internal reporting to their management body; and
  • the requirement for an investor to be able to demonstrate, upon request, to the PRA that they have a comprehensive and thorough understanding of the securitisation structure and relevant underlying exposures.

2.9 The PRA proposes to introduce some examples taken from the current rules in SS10/18 (see Appendix 2), to assist firms in complying with the revised rules. These examples relate to:

• Chapter 2 Article 5 paragraph 1(d) of the Securitisation Part – providing examples of how a non-UK manufacturer may demonstrate a material alignment of commercial interest with the institutional investor;
• Chapter 2 Article 5 paragraph 1(e) of the Securitisation Part – providing examples of sufficient information that investors may consider enables them to assess the risk and monitor the performance of the securitisation position and the underlying exposures;
• Chapter 2 Article 5 paragraph 3(b) of the Securitisation Part – providing examples of structural features that may materially impact the performance of a securitisation position; and
• Chapter 2 Article 5 paragraph 4(a) of the Securitisation Part – providing examples of elements that investors may consider monitoring on an ongoing basis while holding a securitisation position.

Verification requirements for investors

2.10 Current rules require investors to verify that:

• a UK-based originator or original lender that is not a CRR firm or an FCA investment firm, has complied with credit-granting standards (pursuant to Securitisation Part Chapter 2 Article 9);
• a non-UK originator or original lender’s credit-granting standards are of a similar quality;
• an originator, sponsor, or original lender has complied with risk retention requirements (pursuant to Securitisation Part Chapter 2 Article 6 and Chapter 4); and
• where relevant, a manufacturer is compliant with STS criteria.

2.11 The PRA proposes to remove the specific credit-granting verification requirements and instead require investors to consider credit-granting standards in a proportionate manner as part of their due diligence assessment.

2.12 The PRA considers that the current requirements for investors to verify compliance with credit-granting standards are not proportionate. This proposal would allow firms to invest in securitisations where the credit-granting standards employed are appropriate for the risk profile of the securitisation position and the risk appetite of the investor.

2.13 Similarly in the case of Asset-Backed Commercial Paper (ABCP) transactions, the PRA proposes to remove the specific requirement for the sponsor to verify the originator or original lender’s compliance with credit-granting standards (pursuant to Securitisation Part Chapter 2 Article 9), and instead require the sponsor to consider the credit-granting standards and processes applied to the underlying exposures as part of their proportionate due diligence assessment.

2.14 The PRA also proposes to remove the requirement to verify compliance with risk retention standards in the case where the originator is UK-based. In the case of non-UK-based originators, the PRA proposes to instead require investors to verify that the originator maintains, on an ongoing basis, sufficient and appropriate alignment of commercial interest in the performance of the securitisation. This proposal is further supported by additional guidance in SS10/18, which clarifies how an investor should appraise the originators’ proposed alignment. SS10/18 clarifies that this alignment does not necessarily need to be the 5% risk retention standard but instead the originator can maintain material alignment of commercial interest through alternative means.

2.15 The PRA notes that this proposal does not modify existing requirements applicable to UK manufacturers as regards risk retention requirements. This proposal aims to allow investors greater flexibility in investing in non-UK securitisation structures, while still minimising the risk from ‘originate-to-distribute’ models^{footnote [6]} by prohibiting investors from entering into transactions where no such alignment exists. Additionally, by removing the requirement for institutional investors to verify that non-UK-based originators comply with Article 6 risk retention standards, this proposal aims to offer further flexibility to UK investors in securitisation structures. For example, this would allow PRA firms to invest in US Collateralised Loan Obligation (CLO) structures which currently are prohibited due to not complying with Article 6 risk retention standards.

2.16 The PRA proposes to remove the prescriptive list of information that an investor must verify has been provided to them by the originator, sponsor or securitisation special purpose entity (SSPE) prior to investment in a securitisation position. The PRA proposes to instead introduce a more general rule that requires the investor ensure that the originator, sponsor or SSPE makes available sufficient information to enable the investor to independently assess the risks of a securitisation position, and commits to making further information available on an ongoing basis.

2.17 The PRA considers that the current prescription of required information, and the frequency with which it must be received, may be overly burdensome. While the PRA deems it vital that an investor possesses the information necessary to conduct its due diligence, the investor should be able to tailor the information received, and the frequency, to the transaction.

Prior to holding a securitisation position

2.18 Current PRA rules require investors to carry out a due diligence assessment according to a specific list of elements prior to holding a securitisation position. The PRA proposes to reduce the elements that must be included in the due diligence assessment. Investors will still need to assess:

• the risk characteristics of the securitisation position, as well as the underlying exposures;
• all structural features of the securitisation that can materially impact its performance; and
• in the case where the originator or original lender is not a CRR firm or FCA investment firm, the credit-granting standards and processes employed.

2.19 The PRA proposes to restate examples from the current list of elements in SS10/18, to help provide clarity of what the due diligence assessment may contain. This proposal may allow investors to include elements most relevant to the proposed transaction.

2.20 The PRA also proposes that while the due diligence assessment must be proportionate to the likely risk profile of the securitisation, it should always result in the investor having a comprehensive and thorough understanding of the securitisation position and its underlying exposures.

2.21 Furthermore, the PRA proposes to remove the requirement for investors to verify compliance with STS status of a securitisation prior to investing in a securitisation position. The PRA deems that the STS designation should not impact the level of due diligence and hence the additional burden of verifying STS compliance may not be justified.

2.22 The PRA anticipates that this proposal would allow firms to conduct their due diligence assessment in a more proportionate manner while incurring no additional cost.

While holding a securitisation position

2.23 Current PRA rules require investors in securitisation positions to:

• establish written procedures to monitor the ongoing performance of the securitisation structure and the relevant underlying exposures, based on a list of prescribed performance indicators;
• stress test securitisation cash flows and collateral values supporting the underlying exposures, and in case of fully supported ABCP programmes the solvency and liquidity of the sponsor;
• ensure internal reporting to the investor’s management body; and
• be able to demonstrate, upon request, to the PRA that they have a comprehensive and thorough understanding of the securitisation position and its underlying exposures.

2.24 The PRA proposes to remove these specific requirements from its rules while introducing a more general requirement that investors monitor performance in a proportionate manner. The PRA proposes to restate in SS10/18 the prescribed list of performance indicators found in current rules as examples of indicators that firms could monitor.

2.25 The PRA considers that removing the prescriptive requirements facing firms would lower the compliance cost of investing in securitisations. The PRA judges that this would not hinder investors’ ability to monitor securitisation positions and their underlying exposures, which is essential for promoting safety and soundness.

PRA objectives analysis

2.26 The paragraphs below analyse the impact on the PRA’s objectives of its proposals for due diligence requirements relating to investing in securitisation positions.

The PRA’s primary objective

2.27 Given the relatively complex nature of securitisations, the PRA maintains that product-specific due diligence requirements are appropriate. However, the PRA considers that investors should have the flexibility to exercise their judgement as to whether an investment is appropriate, based on their assessment and in the context of their mandate and risk appetite. This proposal would support safety and soundness by aiming to ensure that PRA-regulated investors have a sound understanding of securitisation structures and underlying exposures, as well as a comprehensive and thorough understanding of the risks posed. The PRA considers that this is required for investors to manage those risks effectively. The proposal intends to achieve this outcome in a more proportionate manner by removing prescriptive requirements that do not confer additional prudential benefit.

The PRA’s secondary objectives

2.28 The PRA has assessed that the proposed changes to the due diligence requirements would facilitate competitiveness and growth, as more proportionate and less prescriptive requirements would lead to lower costs and administrative burden. This could lead to greater investment and activity in the UK securitisation market.

2.29 The PRA has assessed that this proposal would likely facilitate more effective competition in the securitisation market by lowering compliance costs and reducing barriers to entry for new and smaller market participants.

Cost benefit analysis (CBA)

2.30 This section considers the benefits and costs of the proposed changes to due diligence requirements.

2.31 The PRA estimates that the proposed changes would lead to a significant one-off and ongoing cost savings for securitisation investors. The market-wide cost saving is estimated to be between £1.6 million and £3.3 million. The aggregate CBA (Appendix 3) covers the estimates including the methodology used.

2.32 The PRA anticipates there to be minimal implementation costs associated with this proposal, as it would merely remove prescriptive elements of the current regime.

Proposal 2: Risk retention – introduction of the ‘L-Shaped’ risk retention modality

2.33 The risk retention rules aim to align the incentives of securitisation manufacturers and investors by ensuring manufacturers remain exposed to the performance of the securitisation (this is informally known as ‘skin in the game’).

2.34 Currently, Chapter 2 Article 6 of the Securitisation Part allows five modalities for retaining such risk:

1. retention of no less than 5% of the nominal value of each of the tranches sold or transferred to investors;
2. retention of randomly selected exposures equivalent to not less than 5% of the nominal value of the securitised exposures;
3. retention of the first loss tranche and, if necessary, other tranches of similar risk profile than those transferred or sold to investors and not maturing any earlier, so the retention equals 5% of the nominal value of the securitised exposures;
4. retention of the 5% of the ‘first loss’ part of every securitised exposure, so that the credit risk retained is subordinated to the credit risk securitised in respect of these same exposures; and
5. retention of the originator’s interest of not less than 5% of the nominal value of each of the securitised exposures.

2.35 The PRA has considered the merits of introducing an ‘L-shaped’ risk retention modality, ie incorporating portions of both vertical and first-loss risk retention, as is possible in some other jurisdictions. HMT, in its HMT Securitisation Regulation Review, noted that it can see potential benefits to ‘L-shaped’ risk retention. A respondent to CP15/23 asked that the regulators permit this modality.^{footnote [7]}

2.36 The PRA proposes to introduce an ‘L-shaped’ risk retention modality by combining modalities 1 and 3 described above. The PRA considers that the new modality would provide additional flexibility, enabling potential investors in and manufacturers of UK securitisations to access new structures. The PRA also proposes some changes to relevant reporting instructions to reflect this amendment.

‘L-shaped’ risk retention modality

2.37 The proposed ‘L-shaped’ retention would have the following characteristics:

• the combination of risk retention, in total, must amount to a minimum 5% of nominal value of the securitised exposures; and
• firms should firstly calculate the first loss tranche portion of the L-shape, prior to calculating the vertical retention portion; and in the case of multiple retainers, each retainer must retain the net interest in the securitisation on a pro-rata basis and in the same proportion of the two limbs of the ‘L-shape’ as the rest of the retainers.

2.38 The graph below illustrates a simple form of the L-shaped risk retention modality:

Reporting ‘L-shaped’ risk retention in COREP C14.00

2.39 The Reporting (CRR) Part of the PRA Rulebook requires firms, both Small Domestic Deposit Takers (SDDT) and non-SDDTs, to report information on all securitisation exposures. Specifically, the templates C 14.00 (CR SEC Details) Detailed information on securitisations) of Annex IA and Annex I, respectively, require information on each securitisation transaction, including reporting the modality of risk retention (column 0080) for each transaction.

2.40 The PRA proposes to update the reporting instructions in Annex IIA and Annex II for SDDTs and non-SDDTs, respectively, with regards to column 0080 to allow firms to report ‘L-shaped’ risk retention under the listed value ‘U’ for ‘unknown’. The PRA also proposes to replace the references to the EU Securitisation Regulation ((EU) 2017/2402) with the relevant ones to the Securitisation Part of the PRA Rulebook. The PRA considers this approach proportionate and expedient to implement the proposal (see Appendix 5 and 6).

2.41 The PRA may propose to introduce the ‘L-shaped’ risk retention modality as an additional option in the risk retention applicable field, value in column 0080, in the future.

PRA objectives analysis

2.42 The paragraphs below analyse the impact of the PRA’s proposal to introduce an ‘L-shaped’ risk retention modality on its objectives.

The PRA’s primary objective

2.43 This proposal would combine two existing modalities and hence is risk neutral. It is thus consistent with advancing the safety and soundness of PRA-authorised firms.

The PRA’s secondary objectives

2.44 The proposed new modality is familiar to certain overseas investors. Its introduction to the UK regime could potentially encourage such investors’ participation in UK securitisation transactions, which could, in turn, support UK manufacturers in better managing their capital and their funding positions, improving their competitiveness. Over time, the proposal could promote greater lending and contribute to UK growth.

2.45 The PRA does not expect this proposal to have any material effect on competition.

Cost benefit analysis (CBA)

2.46 The PRA considers that the proposal for ‘L-shaped’ risk retention is cost neutral for manufacturers and investors, while offering greater business model flexibility and utilising minimal PRA resource. Retainers could choose which modality they wish to use and, if opting for the ‘L-shaped’ modality, they could choose the split between the horizontal and vertical portions. For investors, there should be no additional burden involved, compared to the existing retention modalities.

Proposal 3: Transparency and Reporting requirements

2.47 Chapter 2 Article 7 of the Securitisation Part, sets out the transparency requirements for manufacturers. The purpose of the transparency requirements is to ensure that investors, potential investors and relevant regulatory authorities have sufficient information about securitisations, such that they understand the risks associated with a given transaction, on an initial and ongoing basis. For investors, transparency requirements also facilitate the fulfilment of due diligence requirements, as set out in Chapter 2 Article 5 of the Securitisation Part.

2.48 Industry feedback, including responses to CP13/24, CP15/23, direct engagement with market participants, and responses to the European Commission’s 2024 consultation, indicates that existing transparency requirements associated with securitisation are overly prescriptive and impose significant compliance and operational costs, supporting the PRA’s view that these requirements are disproportionately burdensome. Industry feedback to CP13/24 noted the disproportionate operational and cost burden of transparency requirements for single-loan securitisations, such as loans under the Mortgage Guarantee Scheme (MGS).

2.49 The PRA, therefore, proposes the following changes:

• an amended approach to the provision of underlying documentation;
• deletion of templates from the Securitisation Part of the PRA Rulebook; instead requiring manufacturers to use the revised templates in the FCA handbook;
• disapplication of templates for investor reports and inside information or significant event reporting;
• disapplication of disclosure templates for certain securitisations and asset classes;
• disapplication of the requirement to report single-loan retail securitisations in COREP C14.00 and C14.01;
• removal of the distinction between public and private securitisations for most requirements;
• removal of the requirement to make information available by means of a securitisation repository; and
• introducing a consistent definition of non-performing (‘NPE’) securitisation within the Securitisation Part.

2.50 The PRA has worked closely with the FCA in proposing the following changes to the transparency templates:

• reducing the number of transparency templates;
• amending the format of templates;
• alignment with Bank of England templates;
• developing a specific template for CLOs;
• simplification of ‘no data’ rules; and
• minor changes to the contents of the private securitisation notification template.

2.51 These proposals are discussed in the FCA’s CP 26/6.

2.52 The PRA considers that these changes would reduce unnecessary burden while continuing to support investor understanding, due diligence, and regulatory oversight.

An amended approach to the provision of underlying documentation

2.53 Article 7(1) of the Securitisation Part of the Rulebook requires manufacturers to provide all underlying documentation essential for the understanding of a securitisation position and specifies the list of documents to be included, where applicable.

2.54 As part of this requirement, Article 7(1)(b) specifies a non-exhaustive list of documents that must be made available to investors, and upon request to potential investors and the PRA. Industry feedback has suggested that this list is not highly valuable. Investors have indicated that their due diligence needs depend on factors such as the nature of the transaction and on the manufacturer, and that they typically identify the relevant documents directly from the offering document or prospectus.

2.55 In light of this feedback, the PRA proposes to simplify this requirement by removing the list of documents in sub-paragraphs ii to vii of Article 7(1)(b), and instead require the provision of an offering document, prospectus or term sheet together with all of the transaction documents (excluding legal opinions). This approach is intended to ensure that all relevant documents are made available, irrespective of any transaction-specific features.

2.56 In addition, as part of Article 7(1), manufacturers are required to provide a transaction summary where a prospectus is not required. Industry feedback suggests that these summaries are of limited value to investors, particularly as, in the absence of a prospectus, investors tend to undertake their own review of the transaction documentation and may even participate in the negotiation and agreement of such documentation. The PRA, therefore, proposes to remove the requirement to provide a transaction summary.

2.57 Consequently, the PRA also proposes to amend the risk retention provisions of the Securitisation Part, to replace references to a transaction summary with ‘other transaction documentation’. The PRA would further clarify in rules that disclosures relating to risk retention requirements must be included as part of this documentation.

Disapplication of templates for investor reports and inside information or significant event reporting

2.58 The PRA considers that templates can support standardisation and comparability across the securitisation market, thereby reducing operational complexity for both manufacturers and investors in securitisations. In the case of the prescribed templates for investor reports, inside information, and significant event disclosures, feedback from market participants indicates that the templates have not delivered these intended benefits. Manufacturers have highlighted the cost and complexity of producing these templates, while investors have expressed a preference for bespoke reports, tailored to underlying exposure class, the specific details of the securitisation and the structural features such as tests and triggers.

2.59 The PRA considers that investor reports are important in that they inform investors of the ongoing performance of their investments. However, the PRA recognises that the content and format of these reports should reflect investor need.

2.60 Accordingly, the PRA proposes to retain the requirement for investor reports to be made available, but to remove the prescribed template. Instead, the PRA would specify only the type of information that must be included.

2.61 In relation to inside information and significant event disclosures, feedback from investors has indicated that these templates may be duplicative, as such information is already required to be disclosed under market abuse regulations or transaction documentation. The PRA considers that it is essential for investors to be informed of material developments in a timely and effective manner. However, the PRA does not consider that a prescribed template is necessary to achieve this outcome.

2.62 Accordingly, the PRA proposes to delete the template for inside information or significant event reporting, and to replace the existing requirement with a less prescriptive requirement to provide relevant information in a timely manner and accessible format.

2.63 The PRA considers that this approach will reduce unnecessary burden and improve proportionality, while continuing to support investor protection and regulatory oversight by maintaining a minimum standard for information provision.

Disapplication of disclosure template for ABCP securitisations

2.64 Feedback from market participants indicates that the prescribed underlying exposures template for asset-backed commercial paper (ABCP) transactions is not suitable for the operational characteristics of ABCP programmes. Stakeholders have noted that the high turnover of underlying exposures in ABCP transactions results in data that quickly becomes outdated, limiting the value of the template for investors.

2.65 The PRA considers that a less prescriptive approach to disclosure would better reflect the nature of ABCP transactions. The PRA, therefore, proposes to delete the template for ABCP transactions and to introduce a revised disclosure framework for ABCP securitisations.

2.66 Under the proposed framework:

• manufacturers would be required to make aggregated information on underlying exposures available to investors on a monthly basis;
• information at the individual exposure level would be required to be made available to the sponsor and, upon request, to investors, potential investors, and specific regulatory authorities; and
• investor reports for ABCP securitisations would continue to be required to be made available on a monthly basis. Investor reports may also serve as the means through which aggregated exposure information is provided.

2.67 The PRA considers that this revised approach would improve proportionality.

Disapplication of disclosure templates for certain asset classes 

2.68 The PRA considers that the prescribed templates for certain asset classes are not suitable. In particular:

• for short-term highly granular exposures such as credit card receivables and trade receivables, market feedback has indicated that information on underlying exposures is generally not required. Investors have indicated preference to receive aggregated information in tables of stratification data which capture the material credit quality, performance and risk characteristics of the exposure pools as they evolve over time;
• commercial real estate exposures tend to include relatively fewer exposures and there can be considerable variation between transactions. Given these characteristics, as well the relatively low volume of transactions, the PRA considers that it is disproportionate to apply a prescribed template for this asset class;
• the corporate securitisation market is varied. The PRA considers that a standardised template may not be suitable for a varied market; and
• the esoteric exposures template for underlying exposures that do not fall into one of the other asset classes may be a disproportionate requirement for small or new asset classes for which there is no relevant underlying exposures template.

2.69 The PRA, therefore, proposes to delete the underlying exposure templates for credit cards, commercial real estate, corporate, and esoteric exposures, and instead proposes to move to a less prescriptive approach which will specify the type of information required to be disclosed without prescribing a format:

• for short-term highly granular exposures, the PRA proposes to require manufacturers to provide aggregated information on underlying exposures in tables of stratification data reflecting credit quality and risk characteristics. The PRA proposes that this information can be disclosed via investor reports;
• for commercial real estate, the PRA proposes to require manufacturers to provide information on the underlying loans, the tenants and the loan security; and
• for other corporate exposures,^{footnote [8]} the PRA proposes to require manufacturers to provide information on the underlying loans, information on the borrowers including industry and financial information and loan security.

For other small or new asset classes, the PRA proposes to require manufacturers to provide information on the contractual terms of the underlying exposures and the loan security if applicable.

2.70 The PRA considers that this approach is more proportionate and better reflects the nature of the range of underlying asset classes.

Disapplication of disclosure templates for single-loan securitisations

2.71 Industry feedback, including to CP13/24, has reiterated that the operational and cost burden of providing information in templates for loans under the MGS or private schemes like MGS is disproportionate, which can deter firms’ participation in these schemes.

2.72 The PRA considers that transparency requirements are important for investors. However, it recognises that the nature and format of these reports should reflect the characteristics of the underlying exposures and the structure of the securitisation. Based on this, the PRA has previously clarified that it is not minded to enforce the use of disclosure templates for loans under MGS and similar private schemes, if information that is substantively the same is provided to the holder of the guaranteed position.^{footnote [9]} The PRA now considers that a definitive clarification in rules would be helpful for firms in reducing the compliance burden.

2.73 Accordingly, the PRA proposes to remove the requirement to complete the prescribed templates for single-loan securitisations. Firms would, however, remain subject to applicable broader transparency requirements, which specify the type of information required to be disclosed.

2.74 While industry feedback focussed on loans under the MGS or similar private schemes, the PRA considers similar arguments apply to any single loan securitisation, so the proposal applies to all single loan securitisations. The PRA considers this less prescriptive approach to be proportionate, better reflecting the nature of single-loan securitisation transactions.

Deletion of PRA templates and introducing requirement to use FCA templates, where applicable

2.75 The PRA considers that a single set of disclosure templates would support standardisation and comparability across the UK securitisation market, thereby reducing operational complexity for both manufacturers of and investors in securitisations.

2.76 Placement of these templates in the FCA Handbook, rather than the PRA Rulebook, is more consistent with the FCA’s objectives and would avoid duplication of template maintenance.

2.77 Accordingly, the PRA proposes to delete all applicable disclosure templates from the Securitisation Part of the PRA Rulebook. The PRA proposes to retain the requirement for firms to use the disclosure templates, where applicable, directing firms instead to the FCA Handbook.

2.78 The FCA are proposing revised templates which are broadly aligned to the loan level data templates used by the Bank of England for assessing eligibility of collateral for its lending facilities. Proposals relating to this change are detailed in the FCA’s CP26/6.

2.79 The PRA considers that this approach supports the efficient and the economic use of regulatory resources.

Disapplication of the requirement to report single-loan retail securitisations in COREP C14.00 and C14.01

2.80 The Reporting (CRR) Part of the PRA Rulebook, requires PRA-authorised CRR firms to report information on all securitisation exposures. Template C 13.01 of Annex I and template SC 13.01 of Annex IA, require aggregated information for all securitisation exposures, while templates C 14.00, C 14.01 of Annex I, SC 14.00 and SC14.01 of Annex IA, require detailed information on each securitisation transaction.

2.81 The PRA proposes to exempt single-loan retail securitisations from the requirement to report under templates C 14.00, C 14.01, SC 14.00 and SC 14.01. The PRA recognises that the regulatory burden associated with detailed reporting is disproportionate to the risk posed by such relatively small transactions.

2.82 The PRA considers that firms should continue to report aggregated information for all securitisation exposures under template C 13.01 and SC 13.01 to support continued supervisory oversight.

2.83 The PRA considers this approach to be proportionate and aligned with the wider transparency proposals to reduce undue operational burden for single-loan securitisations, while continuing to facilitate sufficient regulatory oversight.

Removal of the distinction between public and private securitisations

2.84 The Securitisation Part draws a distinction between public and private securitisations regarding transparency requirements. For brevity, public securitisations are those traded on a UK regulated market and are currently subject to more stringent transparency requirements than private securitisations, including additional transparency templates (eg inside information or significant event template), and a requirement to report to a securitisation repository.

2.85 The FCA previously published CP23/17 – Rules relating to Securitisation, which discussed two key issues relating to the delineation between public and private securitisations, and which noted a preference for expanding the public definition to include more transactions which are public in substance. Representations made in response to this proposal noted the following:

• expanding the public definition to capture transactions listed on non-UK venues and UK venues other than regulated markets would be inappropriate because these listings are often created for reasons other than liquidity and secondary trading, such as tax treatment or investor preferences;
• introducing additional criteria to determine the nature of a securitisation, such as public communication about a transaction or number of investors, could introduce ambiguity and interpretation issues; and
• it would be difficult in practice for rules to capture the range of bespoke terms that investors may require in a securitisation, meaning such an approach could result in regulatory ambiguity.

2.86 In further engagement with investors, they argued that transparency obligations should be determined by reference to the nature of the underlying exposures rather than the public or private status of the transaction. Investors emphasised that the same type of information is relevant, regardless of whether the transaction is publicly listed or privately placed.

2.87 In light of this feedback, and in the context of broader proposals to simplify the transparency framework, the PRA proposes to delete the distinction between public and private securitisations in the Securitisation Part of the PRA Rulebook, except for the purpose of private securitisation notifications to the FCA (detailed in paragraph 2.97-2.100 below).

2.88 Consequently:

• the same underlying exposure templates would apply to both public and private securitisations that have the same or similar underlying exposures, with the number of templates reduced and revised as appropriate; and
• information regarding both public and private securitisations, would be made available by a method chosen by the manufacturer, provided that access is available to all investors and potential investors.^{footnote [10]}

2.89 The PRA considers that this change would improve proportionality and better reflect market practice.

Removal of the requirement to make information available by means of a securitisation repository

2.90 Article 7 of the PRA Rulebook currently requires the designated reporting entity to make the information for a securitisation transaction available by means of a securitisation repository registered by the FCA, except where the rules provide otherwise.

2.91 Market feedback indicates that investors do not regularly access data via these securitisation repositories. Instead, feedback suggests that investors prefer to obtain information directly from manufacturers or through commercial data providers.

2.92 The PRA notes that the original EU framework introduced repositories to centralise disclosures and facilitate comparability across manufacturers and transactions. However, after considering market feedback, the PRA considers that the benefits of this approach have not been fully realised in the UK. Moreover, the PRA is mindful that the advantages of centralised data aggregation may no longer justify the operational and compliance costs imposed on manufacturers.

2.93 Following discussions with HM Treasury, the PRA understands that they are considering laying before Parliament a Statutory Instrument (SI) which will amend relevant parts of the UK Securitisation Regulation 2024, requiring securitisation repositories to be regulated by the FCA.

2.94 The PRA is working with HM Treasury and the FCA to reflect changes to the legislation in the Securitisation Part. This will involve the PRA proposing to delete the requirement to make information available via a repository registered by the FCA. Subject to the making of a SI, the PRA proposes that the changes to its rules will come into effect accordingly.

2.95 The PRA proposes to adopt a less prescriptive approach instead, under which manufacturers would be required to make information available in a manner that is accessible to investors and potential investors. While no longer mandated, unregulated repositories may continue to be used to fulfil this requirement.

2.96 The PRA considers that this change would lower barriers to entry, reduce compliance costs, and improve flexibility in how information is shared with securitisation investors.

Submission of the Private Securitisation Notification to the FCA only

2.97 The PRA currently requires manufacturers of private securitisations to submit notifications under the Direction issued jointly by the FCA and PRA.^{footnote [11]}

2.98 The PRA proposes that all private securitisation notifications should be submitted to the FCA only, via email, and no longer to the PRA. The PRA, therefore, proposes to revoke the Direction, instead replacing it with a requirement in the Securitisation Part of the Rulebook to submit the notification to the FCA. The FCA is proposing minor changes to the private notification template, which are detailed in the FCA’s CP26/6.

2.99 Although notifications will be submitted to the FCA, the FCA will periodically share aggregated data from the notification with the PRA. This will ensure that the PRA continues to have timely access to relevant data for supervisory purposes.

2.100 The PRA considers that this change would reduce the duplicative burden of reporting associated with private securitisations while maintaining PRA oversight of information necessary for firm supervision.

Frequency of reporting and long first interest periods

2.101 The FCA has received requests from market participants seeking clarity on the timing of information provision for securitisation transactions that feature a long first interest period, ie the period between issuance and the first interest payment date. In particular, stakeholders have asked whether the obligations in the transparency requirements apply immediately upon issuance or whether they may be deferred until the first interest payment date.

2.102 The PRA considers that timely access to transaction information is essential for investor understanding and oversight. However, the PRA also recognises that in cases where there is a long first interest period, requiring disclosure prior to the first payment date may not be proportionate or practical.

2.103 To address this, the PRA proposes to clarify that the relevant information should be made available no later than one month after the due date for the first interest payment of the relevant securitisation.

2.104 The PRA considers that this clarification will provide greater certainty to manufacturers and investors, while ensuring that reporting obligations remain proportionate and aligned with the structure of the transaction.

Alignment of NPE Definition within the Securitisation Part

2.105 The PRA proposes to delete the non‑performing exposure securitisation definition from Chapter 5 Section 1 Article 2 (now Article 7A) of the Securitisation Part of the PRA Rulebook. This change will ensure consistency by applying a single definition across the Securitisation Part of the Rulebook.

2.106 The PRA considers that this proposal is unlikely to have any practical impact on firms, while supporting the overall coherence of the Rulebook. 

PRA objectives analysis

2.107 The paragraphs below analyse the impact on the PRA’s objectives of its proposal to amend the transparency and reporting requirements,

The PRA’s primary objective

2.108 The proposed changes to the transparency requirements are expected to advance the PRA’s primary objective of promoting the safety and soundness of firms. By adopting a less prescriptive approach, the PRA considers that the revised framework would continue to support investor understanding and regulatory oversight in a more proportionate manner, allowing manufacturers greater flexibility in how disclosures are made.

The PRA’s secondary objectives

2.109 The proposed reforms are expected to support the PRA’s secondary objective of facilitating competitiveness and growth in the UK securitisation market. By adopting a less prescriptive approach, ceasing to distinguish between public and private securitisations, and removing prescriptive templates for single-loan securitisations, the PRA aims to reduce compliance costs.

2.110 The PRA has assessed that this proposal would likely facilitate effective competition by lowering barriers to entry through decreasing the costs associated with securitisations, thereby encouraging increased market participation.

Cost benefit analysis (CBA)

2.111 The proposed changes to the transparency requirements are expected to reduce compliance costs for PRA-authorised manufacturers by approximately £2.2 million, this is further detailed in Appendix 3. This is expected to reduce the overall cost of origination, lowering barriers to market entry thus encouraging increased competition and competitiveness within the UK securitisation market.

2.112 The PRA expects some implementation costs as manufacturers and investors adjust to the new regime; however, these costs are expected to be significantly outweighed by the overall reduction in costs from a more proportionate transparency regime.

Proposal 4: Amendments to the restrictions on resecuritisation and the definition of resecuritisation

2.113 Article 8 of the Securitisation Part prohibits resecuritisations, unless the PRA grants permission. This is subject to transitional provisions for pre-2019 resecuritisations.

2.114 This general prohibition was introduced to address the complexity and opacity of resecuritisations observed during the GFC, which hindered investors’ ability to assess the true level of risk associated with these structures. The PRA is aware that this prohibition may inadvertently restrict firms from undertaking certain prudentially beneficial resecuritisations that do not present the same risks of complexity and opacity.

2.115 The PRA therefore proposes to:

• exempt two specific resecuritisation structures from the ban, subject to safeguards;
• specify a new alternative capital treatment for CRR firms’ exposures to exempted resecuritisations; and
• amend the definition of resecuritisation to exclude contiguous retranching.

Exemption 1: Resecuritisation of securitisations created by tranched credit protection on an individual exposure basis

2.116 The PRA has previously clarified that retail residential mortgage loans under the MGS and certain private mortgage insurance schemes with similar contractual features meet the definition of a securitisation. For brevity, those mortgage loans under these schemes that meet the definition of a securitisation are referred to as ‘Loans’.

2.117 Market participants have, including in response to CP13/24, noted that the restrictions on resecuritisations prevent the use of these Loans in securitisation structures, restricting firms’ ability to obtain funding and gain access to liquidity, including central bank liquidity, as the inclusion of these Loans in a securitisation would constitute a resecuritisation. Market participants have also noted the restriction on using these Loans for credit risk mitigation purposes.

2.118 The PRA has considered this feedback and considers that resecuritisations where the underlying securitisations positions are created solely by tranched credit protection, such as these Loans, have important funding, liquidity and credit risk management benefits to firms. The presence of credit protection on the underlying exposures can support effective credit risk management, which the PRA considers to be prudentially beneficial.

2.119 The PRA, therefore, proposes to exempt from the existing ban, resecuritisations of securitisation positions created solely by tranched credit protection, where the credit protection applies on an individual exposure basis, subject to the following safeguards:

• the originator of the resecuritisation must be a PRA-authorised person;
• the originator of the resecuritisation must also be the originator and risk retainer of the underlying securitisation;
• the resecuritisation must be limited to a single round; and
• the resecuritisation is expected to be homogeneous in terms of the asset class of the underlying exposures.

2.120 For the avoidance of doubt, this exemption would not be limited to the Loans. However, the exempted resecuritisation must include all positions in the underlying securitisation.

2.121 These safeguards are designed to reinforce due diligence and transparency requirements, by ensuring that there remains full visibility of exposures and cashflows and by preventing the emergence of complex structures.

2.122 In developing this proposal, the PRA has sought to carefully balance the prudential benefits against the potential risks posed by resecuritisations. The PRA would continue to monitor market practices to ensure that this exemption remains appropriate for this balance.

2.123 The PRA invites feedback on whether there would be benefits to drawing the scope of this exemption more broadly, in a manner consistent with the PRA's objectives.

Exemption 2: Resecuritisation of senior securitisation positions

2.124 The PRA, through its supervisory experience, has observed that the current restrictions on resecuritisation prevent another resecuritisation structure that may offer prudential benefits to firms. This structure involves the resecuritisation of senior securitisation positions.

2.125 Senior securitisation positions are the highest-ranking tranche in a securitisation structure. These positions are generally of high credit quality, as they have the highest priority claim on the cashflows and absorb losses only after all subordinate tranches have been exhausted.

2.126 The PRA considers that the resecuritisation of senior securitisation positions, subject to appropriate safeguards, would not materially increase the prudential risk associated with a securitisation structure. Exempting this structure from the existing ban could enable firms to use these positions in securitisation structures for capital management and liquidity purposes, including central bank liquidity. For example, where a firm retains a 10% first-loss position on several pools of exposures, the remainder of those pools could be resecuritised.

2.127 Accordingly, the PRA proposes to exempt resecuritisation of senior securitisation positions from the prohibition on resecuritisation, subject to the safeguards noted in paragraph 2.119 above.

2.128 Consistent with the PRA’s approach, this proposal reflects a careful balance between potential prudential benefits and the risks generally associated with resecuritisations, subject to the aforementioned safeguards. As noted, the PRA would continue to monitor market developments around resecuritisations.

Alternative capital treatment for CRR firms’ exposures to the exempted resecuritisations

2.129 Article 269 of the CRR^{footnote [12]} sets out the current regulatory capital treatment for resecuritisations. This requires firms to use SEC-SA with certain modifications eg a fixed p-factor of p = 1.5,^{footnote [13]} and a risk weight floor of 100%. The p-factor and risk weight floor are important parameters contributing to capital non-neutrality, which is the capital surcharge from holding all tranches of a securitisation relative to holding the underlying pool of assets. The PRA considers that the generally higher capital requirements for resecuritisations are prudentially justified, given the additional complexity arising from the resecuritisation process.

2.130 The PRA, however, considers the proposed exempted resecuritisation structures, with additional safeguards to limit complexity and opacity, merit a proportionate reduction in the capital requirements. Accordingly, the PRA proposes an alternative (to the current Article 269) capital treatment for the exempted resecuritisations:

• for resecuritisation of securitisations with tranched credit protection on underlying exposures (Exemption 1), the PRA proposes that firms calculate capital requirements disregarding the credit risk mitigation.
• for resecuritisation of senior securitisation positions (Exemption 2), the PRA proposes that firms treat the underlying senior positions as unsecuritised pro-rata slices of the underlying exposures.

2.131 The PRA considers that any further reduction in capital requirements would be prudentially unjustified.

Amendment to the definition of resecuritisation

2.132 The PRA proposes to make a minor amendment to the definition of resecuritisation to exclude contiguous retranching. Contiguous retranching is where two or more contiguous tranches of a securitisation are combined into one tranche or a tranche is split into two or more tranches.

2.133 The PRA considers that contiguous retranching by the originator does not increase the prudential risk associated with a securitisation, while noting the benefit of flexibility for manufacturers. This definitional exemption would align the PRA with international standards.

PRA objectives analysis

2.134 The paragraphs below analyse the impact on the PRA’s objectives of its proposal to amend restrictions on resecuritisations.

The PRA’s primary objective

2.135 The proposed exemptions to the prohibition on resecuritisation are expected to advance the PRA’s primary objective by enabling firms to access additional sources of funding and liquidity, including central bank facilities, and by supporting more effective credit risk management. For example, Exemption 1 would permit the inclusion of Loans in resecuritisation structures, for funding or credit risk management purposes, and Exemption 2 would permit certain resecuritisation structures to be prepositioned with the Bank of England's liquidity facilities as eligible collateral. The proposed safeguards are intended to ensure that the exempted resecuritisations do not unduly increase prudential or conduct risk.

2.136 The PRA considers that the proposed alternative capital treatment remains prudent. Specifically, the capital requirement would be calculated as if the underlying exposures were not securitised, thereby not recognising the benefit of the credit protection on the underlying exposures in Exemption 1, or the seniority of the senior securitisation position in Exemption 2.

The PRA’s secondary objectives:

2.137 The proposed exemptions to resecuritisations are expected to facilitate the secondary objectives by enabling firms to access additional funding and manage risks, which can be used to grow lending, supporting both competition and competitiveness and growth.

Cost benefit analysis (CBA)

2.138 The proposed exemptions and associated safeguards could provide firms with additional funding options without introducing material prudential risk. In addition, the proposed exempted structures could facilitate access to liquidity, including central bank liquidity through eligibility as collateral for the Bank of England’s lending facilities. Access to liquidity creates a benefit to safety and soundness of PRA-authorised firms.

2.139 The cost to firms of implementing the proposed exempted resecuritisation structures is expected to be broadly equivalent to the cost of other similar securitisation transactions. Accordingly, the proposal does not create additional cost relative to the counterfactual set out in Appendix 3.

2.140 This proposal is expected to result in a minimal increase in the PRA’s supervisory resource utilisation. This impact is expected to be limited as the PRA will specify the scope and capital treatment of the exemptions in the PRA Rulebook, reducing interpretative issues and supporting efficient supervisory review.

Proposal 5: Clarification to the credit-granting criteria

2.141 Article 9(1) of the Securitisation Part sets underwriting standards, while requiring firms to determine the metrics for obligors’ creditworthiness. It establishes two ‘tests’:

• ‘Relative’ test: the requirement to apply the same sound and well-defined criteria for credit-granting and the same clearly established processes for approving and, where relevant, amending, renewing and refinancing credits, to both the exposures to be securitised and to the ‘non-securitised exposures’.
• ‘Absolute’ test: the requirement to have effective systems in place to apply the criteria and processes mentioned under the ‘relative’ test to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness. For the assessment of the obligor’s creditworthiness, appropriate account must be taken of factors relevant to verifying the prospect of the obligor meeting its obligations under the credit agreement.

2.142 In the PRA’s view, the purpose of Article 9(1) is to prevent exposures of lower underwriting quality being created with the sole purpose of them being securitised. Achieving a minimum standard of underwriting quality also aligns the interests of manufacturers with the ones of investors, while preventing the spread of the risk associated with poorly underwritten loans, as was the case with some securitisations prior to the GFC.

2.143 The PRA considers that the present wording of the rule does not reflect the above policy intent with sufficient clarity, creating a risk of inconsistent interpretations being taken by market participants.

Enhancing clarity of the credit-granting requirements

2.144 In order to enhance regulatory clarity, the PRA proposes to:

• amend the wording, to clarify that sound and well-defined criteria for credit-granting shall apply to any exposure to be securitised, irrespective of the existence (or not) of non-securitised exposures;
• replace the term ‘non-securitised exposures’ with a simpler and clearer reference to the ‘comparable assets remaining on the [firm’s] balance sheet, if any’. The phrase ‘if any’ would cater for the case in which no comparable assets remain on the balance sheet; and
• clarify that firms cannot apply to securitised exposures ‘less stringent’ criteria than those applicable to comparable assets remaining on the balance sheet.

PRA objectives analysis

2.145 The paragraphs below analyse the impact on the PRA’s objectives of the proposal to clarify the credit-granting criteria.

The PRA’s primary objective

2.146 The PRA considers that clarifying the credit-granting requirements would better reflect the policy intent of ensuring minimum standards of underwriting and minimising the proliferation of poor-quality originations, in turn promoting the safety and soundness of PRA-authorised firms. Clarity would reduce compliance risk, by improving the likelihood of firms meeting requirements fully as they understand the policy intent, thus, promoting firms’ safety in securitisation transactions.

The PRA’s secondary objectives

2.147 The PRA anticipates that the increased clarity of the credit-granting requirement would support uniform implementation of the rule. Increased clarity also benefits smaller firms who are less able to devote resource to understanding complex regulatory rules. Each of these aspects could promote competition and competitiveness.

Cost benefit analysis (CBA)

2.148 The PRA considers that that the proposal could reduce costs for firms, given that a clarification could reduce the compliance costs associated with the credit-granting standards. Costs to the PRA could also be reduced via a reduced number of interpretative queries from firms.

2.149 The PRA anticipates no cost to safety and soundness as the requirement is not compromised, rather the clarifying articulation could prevent arbitrary interpretations and risky transactions.

Proposal 6: Improving readability of securitisation rules in the PRA Rulebook

2.150 Currently, the structure of the Securitisation Part of the PRA Rulebook, reflects the EU legislative distinction of regulation and regulatory technical standards. This structure has not been amended following the UK’s departure from the EU, and results in provisions addressing the same issues being located in different chapters of the Securitisation Part of the PRA Rulebook. This is the case with the risk retention and transparency former regulatory technical standards, which currently sit under Chapter 4, and Chapters 5 and 6 of the Securitisation Part, while the main provisions on risk retention and transparency, Articles 6 and 7 respectively, sit in Chapter 2 of the Securitisation Part.

2.151 In this CP, the PRA proposes to make the Securitisation Part more accessible by gathering the related provisions under the same Chapter. Thus, all the risk retention and transparency rules would be under Chapter 2, with the necessary adjustments to the article numbering. The PRA expects that this proposal would facilitate the readability and effective understanding of risk retention and transparency rules.

PRA objectives analysis

2.152 The present proposal is a restructuring of the rules and does not involve any policy change beyond those required to implement the other proposals discussed in this CP, for example, the introduction of the L-shaped risk retention and amendments to the transparency requirements. Therefore, no impact is anticipated on the PRA’s primary or secondary objectives.

Cost benefit analysis (CBA)

2.153 The PRA considers that the costs to firms would be negligible and limited to, familiarising themselves with the new structure of the Securitisation Part.

3: Risk-sensitive IRB approach to single loan mortgage securitisations

Background

3.1 This chapter sets out the PRA’s proposal to introduce a new capital treatment for single loan residential mortgage securitisations for firms using the IRB approach.

3.2 In July 2025, HMT launched a permanent version of the MGS, which is a UK Government scheme aiming to support prospective homebuyers who only have access to a small deposit. The scheme aims to support availability of 91-95% loan-to-value (LTV) residential mortgage products by providing participating firms with a government-backed guarantee on a portion of the first losses (net of recoveries) on the retail residential mortgage loan.

3.3 The PRA has clarified that each loan under the 2025 and previous versions of the MGS, will be treated as a pair of securitisation positions,^{footnote [14]} as the first loss guarantee is provided on each individual loan under the scheme. Some private mortgage insurance schemes with similar contractual features to the MGS will also be treated as securitisation positions.^{footnote [15]} For brevity, mortgage loans under these schemes that meet the definition of a securitisation are referred to as ‘Loans’.

3.4 In PS3/26 – Restatement of CRR requirements – 2027 implementation, the PRA introduced new standardised approach (SA) and IRB approach regulatory capital treatments for Loans, as it considered the current treatments to not be properly calibrated. However, the PRA also recognised that the new ‘pari passu’ IRB treatment did not fully reflect the first loss nature of the credit protection in Loans. Therefore, the PRA now proposes to introduce a new treatment for Loans, in addition to pari passu, for firms using the IRB approach, enabling these firms to adjust loss given default (LGD) models to better reflect the economic substance of these exposures.

Areas covered

3.5 The scope of this chapter is the Securitisation (CRR) Part and related policy materials as published in PS3/26.

Current regulatory capital treatment

3.6 The current requirements, as set out in UK CRR, allow a firm, subject to meeting the significant risk transfer (SRT) requirements, to reduce risk-weighted capital requirements for Loans to an extent commensurate with the risk transferred. In cases where firms choose not to recognise the credit protection for the purpose of calculating capital requirements or where SRT requirements are not met, firms must calculate capital requirements as if the guarantee did not exist, and as if the underlying exposure had not been securitised.

3.7 For illustrative purposes, if a 95% LTV mortgage under MGS met the SRT requirements, then it would achieve a 0% risk weight on the guaranteed portion of the exposure, because the guaranteed part is effectively an exposure to the UK Government. The remaining unprotected tranche would receive a 15% risk weight under the SEC-SA approach.

3.8 For a typical 95% LTV mortgage under MGS, the guarantee applies to the part of the loan exceeding 80% of the value of the property. From the firm’s perspective, an MGS exposure therefore resembles an 80% LTV exposure in terms of Loss Given Possession (LGP), a subcomponent of Loss Given Default (LGD), as the guarantee would result in additional recoveries for the firm, should the obligor default and the property be possessed. The risk weight for an 80% LTV exposure is 37% under the SA credit risk framework in the Basel 3.1 rules as published in PS1/26 – Implementation of Basel 3.1: Final rules.

3.9 The disparate risk weight outcomes for the same exposures on the SEC-SA (15%) compared to the SA (37%) for Loans implies that these exposures would generally not achieve SRT, because the reduction in capital requirements would not be justified by the commensurate transfer of risk. For that reason, it may not be possible for firms to recognise the credit protection in capital requirements under current rules.

Loan-splitting and pari passu treatments

3.10 In PS3/26, the PRA confirmed two new capital treatments for Loans. The new treatment for firms using the SA applies a loan splitting approach to Loans, which is consistent with the general SA treatment for residential mortgage exposures as set out in PS1/26. For 95% LTV MGS Loans this new approach means: for the exposure, up to 55% LTV the risk weight is 20%, from 55% to 80% LTV the risk weight is 75%, and from 80% to 95% LTV the risk weight is 0% (which is the risk weight applied to exposures to the UK Government). For Loans under private schemes, the risk weight applied to the protected part (80% to 95% LTV in the example here) would instead be the appropriate risk weight for the protection provider.

3.11 For firms using the IRB approach, the PRA has introduced a treatment allowing firms to treat the protection for each Loan as if it was a pari passu protection; that is, a ‘vertical’ risk-sharing agreement. This allows firms to recognise some reduction in risk weights from the protection. However, the protection provided under MGS and similar private schemes is not vertical; it is a first loss protection, and so the pari passu treatment may not adequately reflect the economics of the protection. The PRA acknowledged this issue in CP13/24 – Remainder of CRR: Restatement of assimilated law, and committed to further consult on introducing an alternative treatment for firms using the IRB approach in near-final PS19/25 – Restatement of CRR requirements – 2027 implementation – near final. The following section sets out the PRA’s proposal for this alternative treatment.

Proposal 1: Adjustment to Loss Given Possession (LGP)

3.12 The PRA proposes to introduce a new optional treatment for Loans as an addition to the pari passu approach. Under this new treatment, firms would make an adjustment to the LGP component of LGD models for the unprotected part of the exposure. The PRA considers that, for MGS loans, the other components of LGD, Loss Given Cure (LGC) and Probability of Possession Given Default (PPGD), are not impacted by the guarantee. This is because the MGS guarantee only pays out after the property collateral has been sold, which means LGC should not be affected. In addition, the firm’s possession policies should not be different for MGS exposures compared to other mortgage exposures, which means PPGD also would not be impacted by the guarantee.

3.13 The LGP adjustment would be applied to the LGD estimate used to calculate capital requirements, rather than a direct modelling of the impact of the credit protection, which could be disproportionately complex in comparison to the current relatively small volume of such exposures. LGP estimates would be floored at zero and the final LGD values would be subject to the LGD input floor of 5% that is set out in Article 164(4) of the Credit Risk: Internal Ratings Based Approach (CRR) Part of the PRA Rulebook.

3.14 The remaining elements of the pari passu treatment would remain unchanged. Therefore, for 95% LTV MGS Loans with a guarantee on the exposure from 80% to 95% LTV, the new treatment would be as follows: the guaranteed portion of the exposure (80%-95% LTV) would be risk weighted using the risk weight applicable to the guarantor, and the remaining unguaranteed part of the exposure (0%-80% LTV) would be risk weighted using the risk weight applicable to the borrower with an overlay adjustment applied to LGP.

3.15 The PRA proposes that the adjustment to LGP would have the following features:

• firms would only be allowed to apply the adjustment where their LGD model uses a component-based approach that includes at least PPGD and LGP components. This is so that the LGP component can be adjusted.
• firms would adjust the LGP component using a formula set out in PRA rules (see Annex C of Appendix 1). The effect of this formula would be to amend the calculation of LGP by reducing the exposure at default (EAD) of the underlying exposure by the amount of discounted recoveries that would be received under the credit protection. The PRA considers that this approach would broadly reflect the economic impact of the credit protection.
• firms would additionally assess whether the adjusted LGD resulting from the formula leads to an underestimation of LGD. Where an underestimation is identified, firms would reduce the size of the LGP adjustment to eliminate this underestimation.
• to support the adjustment, firms would need to:
  • collect data on recoveries received under the credit protection and validate the resulting LGD estimates; both the data and the resulting validation would be used to inform the assessment referred to above;
  • have suitable policies and procedures in place for revising the adjustment; and
  • have suitable governance procedures in place.

3.16 The PRA proposes to make minor clarifications to Article 249(3C)(c) and Article 260A(3) of the Securitisation (CRR) Part, in order to improve the clarity of the proposed LGP adjustment when read in conjunction with these provisions.

3.17 In DP1/25 – Residential mortgages: Loss given default (LGD) and probability of default (PD) estimation the PRA set out ideas for a new foundation IRB (FIRB) approach for residential mortgage exposures. If the PRA decides to consult on implementing an FIRB approach for residential mortgages it would consider whether to also consult on a suitable adjustment to capital requirements for Loans risk weighted under such an approach.

PRA objectives analysis

3.18 The paragraphs below summarise the expected impact on the PRA’s objectives of its proposed optional new treatment for Loans.

The PRA’s primary objective

3.19 The proposed adjustment to LGP for Loans would better reflect the credit risk of such exposures compared to both the current treatment and the treatments set out in PS3/26. The increase in risk sensitivity of the proposed treatment would be consistent with advancing the PRA’s primary objective of promoting the safety and soundness of PRA-authorised firms, and the PRA considers that the proposed 5% LGD input floor would ensure that risk weights remain prudent.

The PRA’s secondary objectives

3.20 The proposed approach would allow PRA-authorised firms to recognise capital reduction from the protection provided by the UK Government or other providers. The PRA considers that, as a result, the proposal may free up capital for overall lending (not limited to mortgage lending) in support of competitiveness and growth in the medium to long term.^{footnote [16]}

3.21 The PRA considers that the proposed LGP adjustment would also result in a better alignment of the SA and IRB treatments for Loans. The SA loan-splitting treatment for Loans captures the first loss nature of the guarantee, while the pari passu treatment does not. The proposed LGP adjustment would increase the risk sensitivity of the IRB treatment of Loans, thereby allowing all firms to better account for the economic substance of Loans. The PRA considers that this alignment may facilitate effective competition in this market. However, the PRA acknowledges that differences in the risk sensitivity of the SA and the IRB approach may result in different end risk weights across the two approaches.^{footnote [17]}

Cost benefit analysis (CBA)

3.22 The largest residential mortgage lenders in the UK all have permission to use the IRB approach. The availability of the optional LGP adjustment treatment would improve business model flexibility for these firms.

3.23 The PRA expects there would be some costs for firms that choose to implement their adjustment because of system changes, but that after this initial outlay, ongoing costs should be minimal and outweighed by the additional risk-sensitivity and flexibility of the treatment. This cost would only be incurred by firms which have IRB permission and opt to use the proposed adjustment treatment for Loans.

4: Other legal requirements

‘Have regards’ analysis

4.1 In developing these proposals, the PRA has had regard to the FSMA regulatory principles^{footnote [18]} and the aspects of the Government’s economic policy set out in the HMT recommendation letter from November 2024. The following factors, to which the PRA is required to have regard, were significant in the PRA’s analysis of the proposal:

1. Proportionality: The proposals aim to make securitisation policy more proportionate by removing overly stringent regulation in favour of less prescriptive requirements. The current regulatory environment can create barriers to entry in certain instances, reducing innovation which can lead to inefficient resource allocation and market functioning.
2. Growth: The proposals aim to make the securitisation regime more proportionate and less prescriptive leading to lower costs, helping firms to grow and innovate. The proposals could attract greater investment into UK securitisations, allowing UK firms to diversify, potentially leading to greater lending by UK banks, promoting UK business growth.
3. Financial inclusion and home ownership: The proposals would incentivise firms to engage, or further engage, with home ownership schemes such as the MGS. These schemes support homeownership in the UK, and our proposals could allow firms to increase their overall lending, including mortgages, as some capital may be released and they may have better access to funding.
4. Coherence of the securitisation framework: The proposals have been developed with due consideration to the wider securitisation framework, across the PRA Rulebook, the FCA Handbook and UK legislation. The PRA has worked closely with the FCA on the proposed reforms, and it considers that they would not hinder the overall coherence of the wider framework.
5. Efficient and economic use of PRA resources: The PRA considers that the proposals are likely to lead to a more efficient use of the PRA’s resources. The proposed rule clarifications may reduce the need for follow-up supervisory engagement on particular transactions, and where proposals may require additional PRA resource, it is content that this is proportionate to the risk to its objectives.

Statutory duty to consult

4.2 The PRA has a statutory duty to consult when introducing new rules and changing rules (FSMA s138J), or new standards instruments (FSMA s138S). When not making rules, the PRA has a public law duty to consult widely where it would be fair to do so. 

4.3 The Practitioner’s Panel were consulted about the proposals in this CP, and their feedback has been reflected.

4.4 The Cost-Benefit Analysis (CBA) Panel were also consulted on a voluntary basis. The CBA (see Appendix 3) reflects the Panel’s feedback as follows:

• The CBA panel commented that a key factor influencing benefits of the CP proposals would be the impact on overall securitisation volumes, and also that the proposals may encourage greater use of securitisation by banks to transfer assets off balance sheet, releasing capital for alternative activities. The panel suggested using scenario-based quantitative estimates to illustrate the increase in securitisation volumes required for the proposals to deliver a significant impact. The PRA conducted analysis which hypothesised a 5% increase in the value of the UK securitisations market and estimated how that increase may generate capital for additional lending. This analysis can be seen in paragraphs 1.42-1.43 of Appendix 3.
• The CBA Panel supported the use of the European Commission (EC) report analysis, noting that despite a differing cost base, the data provided a useful starting point. The CBA has therefore made use of the EC survey results in quantifying relevant costs and benefits.
• The Panel suggested if there was an indirect impact of further liquidity for firms from the resecuritisation proposals, this should be considered a benefit. This is noted in paragraphs 1.27-1.28 of Appendix 3.
• The Panel noted that as the volume of the market (74 annual UK public securitisation issuances) is relatively small, it may take longer for benefits to materialise. This is noted at paragraph 1.7 of the Appendix 3.
• The Panel commented that the benefit arising from an increased level of US investors interest following the L-shaped format risk retention securitisation revision may be limited, and should not be overstated. The PRA has taken this into account in its assessment of this proposal (paragraph 1.34 of Appendix 3) which focusses on the flexibility afforded to PRA authorised firms.

Impact on mutuals

4.5 The proposals set out in this CP would apply equally to mutuals as they would to other firms. As several building societies are active in the mortgage market, the PRA considers that such firms may benefit from the reduction in regulatory burden and greater access to funding and liquidity that the proposals would allow. However, such benefits would also be applicable to other firms that are not mutuals. Therefore, overall, the PRA considers that the impact of the proposed rule changes on mutuals is expected to be no different from the impact on other firms.

Equality and diversity

4.6 In developing its proposals, the PRA has had due regard to the equality objectives under s.149 of the Equality Act 2010. The PRA considers that the proposals do not give rise to equality and diversity implications.