On 17 February 2026, the Prudential Regulation Authority (PRA) published Consultation Paper CP2/26 (CP2/26), which sets out proposals to reform the UK’s securitisation requirements with the aim of making them more proportionate and less prescriptive, while maintaining appropriate prudential safeguards.

Background

The securitisation requirements were developed in the aftermath of the global financial crisis and were subsequently onshored with certain changes from EU legislation into UK law. Industry participants have consistently fed back that these requirements are highly prescriptive and create substantial administrative burdens for firms and investors. The PRA has concluded that the desired policy outcomes can be achieved through a more targeted, less prescriptive framework.

CP2/26 is relevant to all categories of PRA-authorised persons established in the UK, including firms subject to the Capital Requirements Regulation, Solvency II firms, and credit unions. The PRA has worked closely with the Financial Conduct Authority (FCA), which has published a parallel Consultation Paper (CP26/6), and the proposals are broadly aligned between the two regulators.

Key proposals

Due diligence requirements

The PRA proposes a substantial simplification of investor due diligence requirements for securitisations. Industry has reported that approximately 30% of start-up costs for investors entering the securitisation market are directly attributable to due diligence compliance.

The proposals include:

  • Removing the requirement for investors to verify a UK-based originator’s compliance with risk retention standards.
  • Allowing greater flexibility for investment in non-UK securitisation structures while still minimising the risk from ‘originate-to-distribute’ models by prohibiting investors from entering into transactions where no such alignment exists.
  • Removing the requirement for institutional investors to verify that non-UK-based originators comply with Article 6 risk retention standards to offer further flexibility for UK investors in securitisation structures. For example, this would allow PRA firms to invest in US Collateralised Loan Obligation structures which are currently prohibited due to not complying with Article 6 risk retention standards.
  • Removing prescriptive lists of information that an investor must verify has been provided to them by the originator, sponsor or securitisation special purpose entity (SSPE) prior to investment in a securitisation position. The PRA proposes to instead introduce a more general rule that requires the investor to ensure that the originator, sponsor or SSPE makes available sufficient information to enable the investor to independently assess the risks of a securitisation position and commits to making further information available on an ongoing basis.
  • Removing specific ongoing monitoring requirements while introducing a more general proportionate monitoring obligation.

L-shaped risk retention

The PRA proposes to introduce a new L-shaped risk retention modality that combines portions of both vertical and first-loss retention. This option is familiar to overseas investors and could encourage their participation in UK transactions. The combined retention must total at least 5% of the nominal value of securitised exposures.

Transparency and reporting

The proposals provide for a significant streamlining of disclosure requirements that include the:

  • Deletion of several underlying exposure templates from the Securitisation Part of the PRA Rulebook, with firms directed to use revised FCA templates.
  • Disapplication of templates for single-loan securitisations, Asset-Backed Commercial Paper transactions, and certain asset classes including credit cards, commercial real estate and corporate exposures.
  • Removal of the distinction between public and private securitisations in the Securitisation Part of the PRA Rulebook except for the purpose of private securitisation notifications to the FCA (detailed in paragraph 2.97-2.100 of CP2/26).
  • Removal of the requirement to make information available by means of a securitisation repository.
  • Exemption of single-loan retail securitisations from detailed Common Reporting (COREP) under templates C 14.00 and C 14.01.

Resecuritisation

The PRA proposes two exemptions from the current prohibition on resecuritisations:

  • Exemption 1: Resecuritisations of securitisation positions created solely by tranched credit protection, where the credit protection applies on an individual exposure basis.
  • Exemption 2: Resecuritisations of senior securitisation positions.

Both exemptions are subject to certain safeguards. For example, as regards exemption 1, the safeguards include requirements that the originator of the securitisation be PRA-authorised, that the resecuritisation be limited to a single round, and that exposures are expected to be homogeneous in terms of the asset class of the underlying exposures.

The PRA also proposes an alternative capital treatment for exposures to exempted resecuritisations.

Additionally, the definition of resecuritisation would be amended to exclude contiguous retranching, aligning with international standards.

Credit-granting criteria

The PRA proposes certain clarifications of credit granting requirements. This includes amending the wording to clarify that sound and well-defined criteria for credit granting shall apply to any exposure to be securitised, irrespective of the existence (or not) of non-securitised exposures. The PRA also proposes to replace the term ‘non-securitised exposures’ with a simpler and clearer reference to the ‘comparable assets remaining on the [firm’s] balance sheet, if any”.  

IRB treatment for single-loan mortgage securitisations

For firms using the internal ratings-based (IRB) approach, the PRA proposes a new optional capital treatment for loans under the Mortgage Guarantee Scheme and similar schemes, enabling adjustment of loss given default models to better reflect the economic substance of the credit protection.

CBA

The PRA estimates market-wide cost savings of between £1.6 million and £3.3 million from the due diligence reforms, and approximately £2.2 million from transparency requirement changes. The PRA considers that the proposals would lower barriers to entry, facilitate competition, and support international competitiveness and growth.

Next steps

The deadline for comments on CP2/26 is 18 May 2026.

The PRA proposes an implementation date of Q2 2027, to be confirmed in a policy statement following the consultation period.