On 30 April 2024, the Prudential Regulation Authority (PRA) published PS7/24 on Securitisation General Requirements, providing feedback to responses the PRA received to consultation paper CP15/23 and setting out its final policy. The FCA has also published its Policy Statement on securitisation.

Background

The PRA published CP15/23 in July 2023, setting out its proposed rules to replace retained EU law requirements in the provisions of the UK Securitisation Regulation for which the PRA has supervisory responsibility, the related Risk Retention Technical Standards and the related Disclosure Technical Standards. The proposed approach set out in CP15/23 was to largely preserve the relevant requirements when transferring them into PRA rules, but with certain targeted changes to address known existing issues.

The final rules

The responses to CP15/23 were largely supportive of the policy changes proposed in CP15/23. However, respondents also requested a number of changes and clarifications relevant to the policy changes, and as a result the PRA has made some adjustments to the policy package consulted on in CP15/23, including:

  • Allowing for a 6-month period between publication of PS7/24 and the implementation date for the new rules and revised SS10/18.
  • Adding transitional provisions for pre-transfer securitisations to largely preserve their treatment under the UK Securitisation Regulation and related technical standards.
  • Better aligning PRA and FCA rule drafting.
  • Clarifying the meaning of ‘before pricing’ in the due diligence and transparency requirements.
  • Adjustments to the due diligence requirements for secondary market investors in relation to what disclosures are made by manufacturers.
  • Clarifying that it is possible for a UK institutional investor to delegate its due diligence to another investor, which is not an ‘institutional investor’ as defined for purposes of the Securitisation Part of the PRA Rulebook, in which case the UK institutional investor retains the responsibility for compliance with the due diligence requirements.
  • Clarifying that firms may comply, as before, with the transparency requirements by disclosing data only in aggregated or anonymised form (or in relation to underlying documentation, as a summary) in circumstances where UK law relating to confidentiality and/or processing of personal data or any confidentiality obligation relating to customer, original lender or debtor information do not allow more ‘granular’ disclosures.
  • Clarifying the prohibition on hedging of the material net interest required to be retained under the risk retention requirements.
  • Clarifying that there is no need for risk retention in relation to securitisations of own liabilities (e.g. own issued covered bonds).
  • Not proceeding with the draft Statement of Policy – Permission for resecuritisations.

The final policy is contained in:

  • A new Securitisation Part of the PRA Rulebook (together with consequential amendments to the Liquidity Coverage Ratio (CRR) Part and the Non-Performing; Exposures Securitisation (CRR) Part of the PRA Rulebook (Appendices 1 and 2).
  • An updated PRA supervisory statement (SS) 10/18 – Securitisation: General Requirements and capital framework (Appendix 3).

PS7/24 is relevant to all categories of PRA authorised persons who are established in the UK, including CRR firms.

Next steps

The changes resulting from PS7/24 will come into force on 1 November 2024, subject to the Securitisation Regulation and related technical standards being revoked. The FCA flags that HM Treasury has not yet made the commencement order to revoke these pieces of onshored legislation but that it is expected to do so later in 2024 once the draft Securitisation (Amendment) Regulations 2024 have been approved by Parliament. The PRA will delay or revoke these rules if the commencement order is not made.

The FCA and PRA also expect to consult on further changes to their securitisation rules in Q4 2024 / Q1 2025, although timings are potentially subject to change.