On 22 May 2018, the PRA published Consultation Paper 12/18: Securitisation – the new EU framework and Significant Risk Transfer (CP12/18). The proposals in CP12/18 are relevant to all PRA authorised Capital Requirements Directive IV (CRD IV) firms and all Solvency II firms.  In CP12/18 the PRA sets out proposals on its approach to the EU Regulation laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation (the Securitisation Regulation) and certain aspects of the revised Capital Requirements Regulation (CRR) banking securitisation capital framework. The PRA also proposes to update firms on the PRA’s expectations with regard to Significant Risk Transfer (SRT) securitisation.

The PRA proposes to introduce a new Supervisory Statement, Securitisation: general requirements and capital framework (the new Supervisory Statement). The new Supervisory Statement will set out the PRA’s approach and expectations in relation to:

  • chapter 2 (provisions applicable to all securitisations) of the Securitisation Regulation;
  • firms that intend to sponsor simple, transparent and standardised (STS) asset backed commercial paper programmes; and
  • In the incoming securitisation capital framework introduced via amendments to the CRR.

The PRA also proposes to update Supervisory Statement 9/13: Securitisation, renaming it Supervisory Statement 9/13: Securitisation: Significant Risk Transfer (SS9/13). The PRA proposes to amend SS9/13 in order to clarify the role of firms’ senior management, prudential treatment of excess spread and certain aspects of the PRA’s assessment of commensurate risk transfer with respect to SRT securitisation.

In addition, the PRA proposes to update Supervisory Statement 31/15: The Internal Capital Adequacy Assessment Process and the Supervisory Review and Evaluation Process (SS31/15). The PRA is amending SS31/15 to clarify how firms should assess the appropriateness of different methods in measuring securitisation risk, and also to specify minimum information which should be included in a firm’s Internal Capital Adequacy Assessment Process document.

The date of application for the Securitisation Regulation is 1 January 2019. The new Supervisory Statement and the updated version of SS31/15 will be effective from 1 January 2019. The updated version of SS9/13 will apply immediately after the PRA publishes its Policy Statement as the proposals are equally applicable to the current and amended CRR.

The deadline for comments on CP12/18 is 22 August 2018.