New Proposals for reforming the UK Securitisation Framework

On 17 February 2026 the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) published consultation papers (CP26/6 and CP2/26 respectively) setting out proposed reforms to the UK securitisation framework.

These reforms would significantly simplify due diligence, transparency and other elements of the UK rules, making them less prescriptive and more flexible, while also responding to industry requests for some more technical fixes to the UK framework.

At a glance: main points in the proposals

• Due diligence: simplification of investor due diligence requirements, opening the door for UK investment into non-UK securitisations, such as US CLOs.
• Disclosure and transparency: deletion of prescribed reporting templates for most asset classes.
• Risk Retention: a new "L-Shaped" retention option.
• Resecuritisation: exempting two structures from the ban on resecuritisation.
• Credit-granting:  clarification of the requirements.
• Mortgage guarantee scheme loans:  a new approach to capital treatment.
• FCA feedback solicitation: request for market feedback on the potential disapplication of risk retention requirements for CLOs and whole business deals.
• Deadline: feedback due by 18 May 2026.

Background

In 2024 most of the UK securitisation rules were transferred to the FCA and PRA rulebooks, following the repeal and replacement of assimilated European Union law, with the remaining provisions remaining in legislation.

At that time, the PRA and the FCA made some targeted changes to the UK rules, but largely retained the existing UK rules, indicating that a further consultation on more substantive changes to the UK rules would follow. The current consultations reflect the regulators' engagement with industry since 2024. Their conclusion is that the current rules have led to excessive complexity and high compliance costs, without always achieving their intended purpose.

The proposed reforms aim to make the UK securitisation general (or conduct) rules more proportionate and less prescriptive, while maintaining appropriate safeguards. A secondary objective is to make UK lenders more competitive by removing unnecessary barriers to securitisation issuance.

The proposals mainly relate to the securitisation conduct requirements, although certain proposals affect securitisation capital requirements. The FCA and the PRA have worked closely in developing their respective proposals, which are generally aligned and in many instances identical.

The proposals in detail

1.  Due diligence

The FCA and the PRA propose a substantial simplification of due diligence requirements for securitisations. The proposals would remove the requirement for investors to verify (a) credit-granting criteria, (b) risk retention requirements, (c) the availability of specific information, and (d) compliance with simple, transparent and standardised (STS) criteria.

Credit-granting

The requirement for investors to verify specific credit-granting verification requirements would be removed. Instead, investors would be required to consider credit-granting standards in a proportionate manner as part of their due diligence assessment. Similarly, the proposals remove the requirement for sponsors of asset-backed commercial paper (ABCP) programmes to verify the credit-granting standards of the originator or original lender.

Risk retention

The requirement for investors to verify that originators, sponsors or original lenders comply with risk retention requirements would be removed. Instead, investors would be required to verify that the originator, sponsor or original lender maintains, on an ongoing basis, sufficient and appropriate alignment of commercial interest in the performance of the securitisation. This proposal aims to allow UK investors greater flexibility to invest in non-UK securitisations (such as US CLOs, which generally do not comply with UK risk retention requirements), enabling them to better diversify their portfolios and potentially improve risk-adjusted returns.

This proposed revision will be supported by guidance setting out, in a non-exhaustive manner, how a sufficient and appropriate alignment of commercial interest could be achieved between manufacturers and investors. Material alignment may be may be achieved through, for example, management fees due to the originator, sponsor or original lender that are linked to the performance of the securitisation.

Initial due diligence

The proposals would remove the prescriptive list of elements to be included in an investor's initial due diligence assessment. Instead, there would be a more general requirement for an institutional investor to ensure that the originator, sponsor or original lender makes available sufficient information to independently assess the risks of a securitisation position, and commits to making further information available on an ongoing basis.

Prior to holding a securitisation position, an institutional Investor (other than the originator, sponsor or original lender) will still be required to carry out a due diligence assessment which enables it to obtain a comprehensive and thorough understanding of the risks involved. The assessment must consider at least the following:

• the risk characteristics of the securitisation position and the underlying exposures;
• all structural features of the securitisation that can materially impact its performance; and
• where the originator or original lender is not a CRR firm or an FCA investment firm, the credit-granting standards and processes applicable to the underlying assets (unless they are trade receivables not originated in the form of a loan).

The rules would no longer specify a prescriptive list of minimum information that must be made available to investors and the frequency with which such information must be obtained; the investor should be able to tailor the information received, and its frequency, to the specific transaction. The FCA and the PRA also propose to provide guidance as to the type of information that investors should consider obtaining from manufacturers.

STS status

There would no longer be a requirement for investors to verify compliance with the STS status of a securitisation prior to investing.

Ongoing due diligence requirements

The proposals would remove: (i) the requirement for investors to establish written procedures for ongoing monitoring; (ii) the prescriptive list of elements to be monitored; (iii) the requirement to conduct stress tests; (iv) the requirement for investors to ensure internal reporting to their management body; and (v) the requirement to be able to demonstrate, upon request by the relevant regulator, a comprehensive and thorough understanding of the securitisation and the underlying exposures.

Instead, there would be a more general requirement that investors monitor performance, on an ongoing basis in a manner proportionate to the risk profile of the securitisation position. The PRA proposes to provide a list of performance indicators as examples of indicators that firms could monitor.

2.  'L-Shaped' risk retention option

The PRA and the FCA propose to introduce an 'L-shaped' retention option, which would allow the 5% retention to be split between a vertical slice and a first loss tranche (e.g. 2.5% of each).

This is intended to help UK issuers to better manage their capital and funding positions. By using a vertical slice for part of the retention piece, issuers can avoid higher capital charges which would result from holding a first loss tranche only. The combination can also reduce funding costs compared to holding solely a horizontal or first loss retention.

In the case of multiple retainers, each retainer must retain the net interest in the securitisation on  a pro rata basis and in the same proportion.

3.  Transparency and reporting requirements

Industry feedback to UK regulators indicates that existing transparency requirements for securitisations are overly prescriptive and impose significant compliance and operational costs. The proposals aim to make the UK reporting regime more useful for investors and less prescriptive and costly for manufacturers, while maintaining a strong level of market transparency.

Provision of underlying documents

The proposals would remove the existing prescribed list of documents that must be made available to investors and instead require the provision of an offering document, prospectus or term sheet, together with all of the transaction documents (excluding legal opinions). In addition, the proposals would remove the requirement to provide a transaction summary.

Investor reports; inside information or significant event reporting

Investor reports would still have to be made available, but there would be no prescribed template – only a specification of the type of information that must be included. The template for inside information and significant events would be deleted and replaced with a requirement to provide relevant information in a timely manner and in an accessible format.

Template for ABCP transactions

The underlying exposures template for ABCP transactions would be removed and replaced with a revised disclosure framework for ABCP securitisations which would require underlying asset information to be made available to investors in aggregated form on a monthly basis. Information at the individual exposure level would have to be made available to sponsors and, upon request to investors, potential investors, and specified regulatory authorities. Monthly investor reports would still be required, but not in a prescribed format.

Disapplication of disclosure templates for certain asset classes

The proposals would delete the underlying exposure templates for credit cards, commercial real estate, corporate, and exotic exposures, and instead would simply specify the type of information to be required to be disclosed, without prescribing a format. A new specific (and simpler) underlying exposure template would be introduced for CLOs (with 43% fewer data fields than the current corporate template. For templates that are being retained, they would be simplified and aligned more closely with the loan-level templates required by the Bank of England for receiving collateral as part of its market operations. 'No data' rules would be simplified by distinguishing between mandatory and optional data fields and allowing only one type of 'no data' response.

The requirement to produce templates in XML format would be replaced with a requirement for an electronic and machine-readable format.

The following information requirements would apply for asset classes with no prescribed template:

• for short-term highly granular exposures, manufacturers would be required to provide aggregated information in the underlying assets in the form of stratification tables (to be disclosed via investor reports).
• for commercial real estate, information on the underlying loans, the tenants and the loan security.
• for other corporate exposures, information on the underlying loans, the borrowers (including industry) and financial information and loan security.

For other small or new asset classes, manufacturers would be required to provide information on the contractual terms of the underlying exposures and the loan security, if applicable.

These transparency reforms dovetail with the Public Offers and Admissions to Trading Regulations 2024, which shifted the focus toward more flexible, 'prospectus-lite' disclosures for debt instruments.

Single-loan securitisations

The PRA proposes to remove the requirement to complete prescribed templates for loans under the Mortgage Guarantee Scheme and similar private schemes, if information that is substantively the same is provided to the holder of the guaranteed position. The proposal also applies to all single loan securitisations, recognising that the operational cost of providing information in template form is disproportionate.

Deletion of PRA templates

The PRA proposes to delete all disclosure templates from the PRA Handbook and require firms to use the templates in the FCA Handbook. This would avoid the duplication of template maintenance and significantly reduce the administrative burden for dual-regulated firms.

Public vs. private securitisations

The proposals would remove the distinction between public and private securitisations for reporting purposes. Information regarding both public and private securitisations would be made available by a method chosen by the manufacturer, provided that access is available to all investors and potential investors.

Securitisation repositories

The PRA proposes to delete the requirement for manufacturers to make information available via a securitisation repository registered by the FCA. The PRA also proposes that all private securitisation notifications should be submitted to the FCA only, by email, and no longer to the PRA.

Long first interest periods

The PRA proposes to clarify that in the case of securitisations with a long first interest period, relevant information should be made available no later than one month after the due date for the first interest payment (and not immediately upon issuance).

4.  Resecuritisation

The PRA proposes to exempt two structures from the ban on resecuritisation, subject to certain conditions, and also to specify a new capital treatment for CRR firms' exposures to exempted resecuritisations.

Securitisations created by tranched credit protection on individual loans

Currently tranched single loans cannot be included in securitisations because that would create a prohibited resecuritisation. The proposals would allow resecuritisation of these types of loans, subject to the following safeguards:

1. the originator of the resecuritisation must be a PRA-authorised person and must be the originator and risk retainer of the underlying assets;
2. the resecuritisation must be limited to a single round (i.e. no more than one additional layer of tranching beyond the original securitisation); and
3. the resecuritisation must be and be homogeneous in terms of asset class.

Firms would be required to calculate capital requirements disregarding the credit risk mitigation

Resecuritisation of senior securitisation positions

The PRA proposes to exempt resecuritisation of senior securitisation positions from the ban on resecuritisation in order to enable firms to use these positions in securitisation for capital and liquidity management purposes.

For capital purposes, the underlying senior positions would be treated as unsecuritised pro rata slices of the underlying assets.

Contiguous retranching

The proposals would amend the definition of resecuritisation to exclude contiguous retranching – i.e. where two or more contiguous tranches of a securitisation are combined into one tranche or a tranche is split into two or more tranches. Retranching encompasses both the where a mezzanine piece is retranched into smaller, contiguous horizontal slices and also where an investor takes several small, contiguous tranches which they have bought in the secondary market and collapses them into one larger, more liquid tranche. Although the exclusion of contiguous retranching from the ban on resecuritisation is already in the rulebooks (but less prominently), the regulators are proposing a more explicit exclusion to the securitisation prohibition and so are giving a positive signal to the market in relation to on these types of transactions.

5.  Miscellaneous proposals

Clarification of credit-granting criteria

The PRA and the FCA propose to amend the wording in the criteria for credit-granting in order to avoid inconsistent interpretations being taken by market participants. The PRA proposes to amend 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 of non-securitised exposures and the term 'non-securitised exposures' will be replaced with a reference to 'comparable assets remaining on the [firm's] balance sheet, if any'.

Improving readability of securitisation rules in the PRA Rulebook

In a welcome move, the PRA proposes to make the Securitisation Part of its Rulebook more accessible by putting the related provisions in the same Chapter – accordingly the risk retention and transparency rules will all be combined in Chapter 2.

Conclusion

2026 is shaping up to be a landmark year in the reform of EU and UK securitisation rules. The proposals reflect the industry-friendly direction of travel of the reforms proposed by the European Commission in June 2025 (shortly to enter into 'trilogue' negotiations between the  European Parliament, Council, and Commission), but go much further than any of the current EU proposals in eliminating prescriptive template requirements and allowing 'principles-based' flexibility in the conduct of investor due diligence.

The UK proposals address many long-standing issues which the industry has raised with regulators. Some issues, however, still remain, such as the inability to change risk retainer except in very narrow circumstances.

Although the proposed reforms simplify domestic UK deals, any 'dual-compliant' deals intended for EU-regulated investors will still need to meet the more structured and prescriptive EU Securitisation Regulation standards. The FCA states that, in formulating its proposals, it has sought, where possible, to minimise the frictions from operating on a cross-border basis - for instance there are no changes to the rules on STS securitisations. However greater divergence between the EU and the UK rules looks likely.

Next steps

The consultations close on 18 May 2026.

The FCA consultation paper also includes a chapter discussing the scope of the securitisation rules and inviting feedback on various types of securitisations (e.g. CLOs and whole business securitisations) to better understand whether exemptions should be introduced from certain of the conduct rules. One specific area where feedback has been solicited is on whether risk retention requirements should be disapplied for CLOs; if adopted, this would see the UK align with the US position where US CLOs are not generally subject to US risk retention rules.

Implementation of the proposals would require changes to legislation, as well as to the FCA and PRA rulebooks.

The FCA intends to finalise its rules in H2 2026, while the PRA anticipates an implementation date of Q2 2027 (to be confirmed after the consultation), creating a potentially complex transition period for firms overseen by both regulators.