The Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) have published the next comprehensive consultation on UK securitisation regulation following the 2023 consultation (see TSI kompakt of 14 August 2023). The aim is to decouple from the EU Securitisation Regulation and to complete the establishment of an independent domestic framework. Following initial technical legislative amendments in 2024 and a period of intensive market dialogue, a broad consultation on more far-reaching structural reforms has now been launched. These reforms are intended to provide noticeable relief to the market while ensuring a consistent supervisory approach between the PRA and the FCA.
Key Elements of the UK Reform Proposals
The two consultations cover a broad range of topics. In particular, the PRA and FCA address the following points:
- Simplified and more principles-based due diligence requirements: Going forward, investors should be able to act in a more risk-based manner and with fewer formalistic requirements.
- Greater openness to international structures: Access to third-country transactions will be facilitated, for example in relation to US CLOs. This creates new investment opportunities and enhances the attractiveness of the UK market.
- Reduction of transparency requirements: The PRA proposes significantly streamlined templates that are more closely aligned with existing Bank of England standards, thereby avoiding operational duplication. In addition, there would no longer be a distinction between private and public transactions.
- Further operational relief measures: The PRA also addresses additional operational simplifications, including the required documentation to be made available and risk retention requirements.
Overall, the UK authorities are therefore pursuing a clearly market-oriented and principles-based approach, with the objective of lowering barriers to market entry and promoting new structures.
Comparison with the European Commission’s Reform Proposals
Although the EU is pursuing objectives similar to those of the UK, the approaches differ significantly: while the United Kingdom is clearly focused on streamlining regulation, the EU has so far seemingly been unable to commit to similarly far-reaching deregulation measures (see also our assessment in TSI kompakt of 15 December). In addition, the EU is considerably less open to international transaction structures. Pro-market measures in the UK will inevitably lead to a decline in the competitiveness of the EU financial sector. It will be interesting to see whether this leads to a wake-up call in Brussels – but one should not bet on it.
Outlook
Both consultations will close in May 2026, with the final rules expected to be published later in the same year and to enter into force in 2027. In this respect, the FCA and PRA are pursuing a timeline similar to that of the EU. Substantively, however, the UK measures are likely to contribute much more strongly to market stimulation than the EU’s reform package.