Market updates and sector developments

The UK PRA has launched a public consultation on proposed changes to the retained EU Securitisation Regulation and the accompanying technical standards on risk retention and disclosure. Rather than a complete overhaul, the authority is seeking to introduce targeted adjustments to the existing EU securitisation framework by 2Q24.

The key changes include a more principles-based approach to due diligence obligations on PRA-authorised institutional investors in relation to originator disclosures, which is designed to make these requirements more proportionate and facilitate international competitiveness. Similarly, clarifying that in certain circumstances only the managing party and not the delegating party would be subject to due diligence requirements could make them more proportionate and facilitate international competitiveness.

Meanwhile, by making risk retention requirements in non-performing exposure (NPE) securitisations more proportionate, the PRA is seeking to facilitate the use of NPE ABS by authorised persons to reduce their credit risk. Such a move aims to promote their safety and soundness, as well as facilitate competitiveness and growth in the medium to long term.

Other smaller changes to risk retention requirements are intended to make these requirements clearer, including by further specifying their content, as well as make them more proportionate.

Finally, a new statement of policy regarding resecuritisations would increase transparency by indicating that the PRA would usually envisage using section 138BA of FSMA to grant permissions for resecuritisations only in circumstances broadly similar to those in which it could currently grant permissions for resecuritisations under the Securitisation Regulation.

Additionally, the consultation addresses the distinction between public and private securitisations and the associated transparency requirements, in order to seek views and evidence from respondents. The PRA says it may consult on proposals in this area in a future consultation paper.

Feedback is invited on the proposals set out in the current consultation by 30 October.