UK Securitisation Framework: Regulators Consult on Further Streamlining

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) (together, the Regulators) have published parallel consultations on amendments to their respective securitisation rules. The proposals in the FCA consultation paper (CP26/6) and PRA consultation paper (CP2/26) (together, the Consultation Papers) are intended to make the UK’s securitisation rules more proportionate and less prescriptive, to reduce the compliance burden for affected firms. 

The Regulators worked closely together in developing the Consultation Papers, given the very similar rule sets and identical general requirements.

Proposals

The Consultation Papers include proposals in relation to:

• Simplifying Due Diligence Requirements. The Regulators recognise that sophisticated institutional investors are able to make informed decisions about the risks of investments, and are subject to internal governance, risk frameworks and regulatory oversight requirements. Prescriptive due diligence requirements are therefore disproportionate and duplicative. Proposed amendments to the due diligence requirements therefore include removing the following:
  • the requirement that a prescriptive list of information be provided by manufacturers. Instead, formal guidance will be issued by the Regulators as to the type of information that investors should consider obtaining from manufacturers;
  • the requirement to verify that an originator which is not a UK-established CRR firm or FCA investment firm complied with applicable credit granting standards. Instead, the proposals require institutional investors to form their own view as to whether such originator's credit granting processes are sufficiently robust to suit the investor's risk appetite;
  • the requirement for institutional investors to verify non-UK manufacturers’ compliance with the 5% risk retention rule. Instead, the proposals require investors to satisfy themselves that one of the manufacturers has and will maintain “sufficient and appropriate alignment of commercial interest with the institutional investor in the performance of the securitisation”;
  • the prescribed list of structural features that an investor must assess in its due diligence assessments. The proposals replace this with guidance as to the type of structural features that can materially impact the performance of a securitisation;
  • the prescriptive elements in the ongoing due diligence requirements, such as the stress testing of cash flows and underlying exposures;
• Streamlining Transparency Requirements. The Regulators also note that the transparency requirements placed on manufacturers can be streamlined, to lower the costs of compliance, while still providing comprehensive information for the protection of investors. Proposals include:
  • reducing the number of reporting templates and, in certain cases, replacing templates with a principles-based approach;
  • introducing a new reporting template for collateralised loan obligations (CLOs);
  • ceasing, in most cases, to treat public and private securitisations differently in the application of transparency requirements (the former being, broadly, those that are traded on UK regulated markets);
  • taking steps, in co-ordination with HM Treasury, with a view to no longer requiring reporting to Securitisation Repositories;
  • removing the requirement for manufacturers to produce a transaction summary; and
• Other Proposals:
  • introducing L-shaped risk retention as an eligible form of risk retention (i.e., a combination of vertical and horizontal risk retention); and
  • amending the ban on resecuritisations to exempt two specific types of securitisations, but only in respect of issuances by PRA-authorised persons:
    • the securitisation of securitisation positions which are constituted by one exposure and its related credit protection; and
    • the securitisation of the senior most securitisation positions.

Next Steps

The comment periods for the Consultation Papers close on 18 May 2026. The FCA states that it expects to publish its final rules in the second half of 2026, while the PRA proposes that the implementation date for the changes is the second quarter of 2027.

CP26/6 and CP2/26 are available here and here, respectively.

Further information on the UK securitisation framework is available here and here.