May 22, 2018

PRA published the consultation paper CP12/18 that sets out the proposals on its approach to the EU Securitization Regulation and certain aspects of the revised Capital Requirements Regulation (CRR) banking securitization capital framework. The paper also proposes to update firms on the PRA expectations about Significant Risk Transfer (SRT) securitization. Comment period on CP12/18 ends on August 22, 2018.

The scope of application for the proposals in CP12/18 varies, depending on whether the proposals relate to the implementation of the Securitization Regulation, revisions to the banking securitization capital framework, or SRT securitization. The consultation paper is, therefore, split into two parts: Part 1 covers the new EU securitization framework (relevant for all PRA-authorized CRD IV firms and all PRA-authorized Solvency II firms and potentially other firms pending HM Treasury discretions—see paragraph 2.4) and Part 2 covers SRT securitization (relevant for PRA-authorized CRD IV firms only). PRA proposed to introduce a new Supervisory Statement on general requirements and capital framework for securitization, with the aim to set out the PRA approach and expectations in relation to:

  • Chapter 2 (provisions applicable to all securitizations) of the incoming EU Securitization Regulation
  • Firms that intend to sponsor Simple, Transparent, and Standardized (STS) Asset-Backed Commercial Paper (ABCP) programs
  • The incoming securitization capital framework introduced via amendments to the CRR

The Supervisory Statement SS9/13 titled "Securitization," which currently covers only SRT securitization, is proposed to be renamed "Securitization: Significant Risk Transfer." PRA proposed to amend this supervisory statement to clarify the role of firms’ senior management, prudential treatment of excess spread, and certain aspects of the PRA assessment of commensurate risk transfer with respect to SRT securitization. The date of application for the new securitization legislative framework is January 01, 2019. The proposals in the new PRA supervisory statement on general requirements and capital framework for securitization, along with SS31/15, would be effective from January 01, 2019. The proposals that amend SS9/13 would apply immediately after the publication of a policy statement to all PRA-authorized CRD IV firms, as they are equally applicable to the current and amended CRR. 

 

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Comment Due Date: August 22, 2018

Effective Date: January 01, 2019

Keywords: Europe, UK, Banking, Insurance, CRR, CRD IV, Basel III, Solvency II, ABCP Securitization, Securitization Regulation, Significant Risk Transfer, PRA

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