UK consultations on phase 2 of securitisation reforms

The UK Financial Conduct Authority (FCA) and the UK Prudential Regulation Authority (PRA) have published consultation papers on phase 2 of the UK reforms to the securitisation framework. As a high-level overview, the FCA and PRA consultations primarily concern further changes to non-prudential securitisation rules in the relevant rulebooks.

These include rules in relation to:

• Due diligence.
• Transparency, including changes to UK reporting templates.
• Risk retention, including "L-shaped" risk retention.
• Credit granting standards.
• Notification in respect of simple, transparency and standardised securitisations.
• The ability to invest in certain re-securitisations.

The FCA's consultation paper, CP26/6, further contains a discussion paper on the scope of application of the securitisation rules. The PRA's consultation paper, CP2/26, also contains proposals on the prudential treatment (including an additional internal ratings based capital model treatment) for loans benefiting from the mortgage guarantee scheme or similar private schemes, and also disapplying certain transparency and reporting requirements for such securitisations.HM Treasury has separately confirmed that it will work with the FCA and the PRA on any legislative changes it considers necessary, which will be included in its forthcoming statutory instrument to be laid before Parliament.

The deadline for responses to both consultation papers is 18 May.

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