Prudential Regulation Authority (PRA) Consultation Paper CP12/18 of 22 May 2018: “Securitisation: The new EU framework and Significant Risk Transfer” (the CP)

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The PRA's new CP comes ahead of the incoming EU Securitisation Regulation5, due to come into effect on 1 January 2019 and the incoming securitisation capital framework implementing revisions to the Basel securitisation capital framework, introduced via amendments6 to the CRR7.

In summary, the CP sets out the proposals relating to the following:

  • Part 1 – The New Securitisation Framework – the Prudential Regulation Authority's (PRA) proposals on its approach to the European Union's Securitisation Regulation and certain aspects of the revised Capital Requirements Regulation (CRR) banking securitisation capital framework (relevant for all PRA-authorised CRD IV8 firms and all PRA-authorised Solvency II firms and potentially other firms pending HM Treasury discretions) and
  • Part 2 – Significant Risk Transfer (SRT) – the PRA's expectations with regard to SRT (relevant for PRA-authorised CRD IV firms only)


Part 1 – The New Securitisation Framework

The proposals relating to the Securitisation Regulation aim to communicate the PRA's approach to supervising certain aspects of the new securitisation framework.

The proposals relating to CRR amendments primarily clarify the PRA's proposed approach to exercising its discretions in relation to the methods used to calculate risk weights on their securitisation exposures.

The proposals also include an updated mapping of External Credit Assessment Institutions (ECAI) ratings to the Credit Quality Steps (CQS) used in the SEC-ERBA, as an interim measure before an updated Implementing Technical
Standard (ITS) is adopted.

In summary, the topics covered are as follows:

  • ……General requirements
    • Securitiser requirements
    • Investor requirements
  • Sponsors of STS and ABCP programmes
  • CRR securitisation capital framework


Part 2 – Significant Risk Transfer

The PRA intends to provide clarity on the PRA's expectations for firms undertaking SRT securitisations that incorporate excess spread features or use standardised approach (SA) portfolios and clarify the accountability of senior management in relation to these transactions.

In summary, the topics covered are as follows:

  • SRT in the presence of excess spread
  • Assessing CRT for securitisations of SA portfolios
  • Senior management engagement in SRT securitisation
  • The consultation closes on Wednesday 22 August 2018.



Derivatives Newsletter
July 2018


5 Regulation (EU) 2017/2402 of the European Parliament and Council of 12 December 2017, laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012, available at:
6 Regulation (EU) 2017/2401 of the European Parliament and Council of 12 December 2017, amending Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms, available at:
7 Capital Requirements Regulation (575/2013), available at:
8 The Capital Requirements Directive (2013/36/EU) (CRD) and the Capital Requirements Regulation (575/2013) (CRR) (available at:, are referred to together as "CRD IV".



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