PRA Publishes Final Policy on Capital Framework for Securitization

By Regulatory News

November 15, 2018

Basel III, Solvency II

PRA published the policy statement PS29/18, which provides feedback to responses to the consultation paper CP12/18 on the new EU framework and significant risk transfer for securitization. The recent updates also include the final policy of PRA in the form of SS10/18 on general requirements and capital framework for securitization (Appendix 1); updated SS9/13 significant risk transfer in related in to securitization (Appendix 2); and updated SS31/15 on the Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process, or SREP (Appendix 3).

The date of application for the new securitization legislative framework is January 01, 2019. SS10/18 and amendments to SS31/15 also become effective from January 01, 2019. The updated policies amending SS9/13 apply immediately to all PRA authorized Capital Requirements Directive (CRD IV) firms after the publication of PS29/18. PRA has published both the current and future versions of these supervisory statements. Different parts of the PS20/18 are relevant to different firms, depending on whether the policy relates to the implementation of the EU Securitization Regulation, revisions to the banking securitization capital framework, or Significant Risk Transfer securitization. Policy relating to the implementation of the Securitization Regulation will be relevant to all PRA-authorized CRD IV firms and all PRA-authorized Solvency II firms (and potentially other firms pending HM Treasury discretions). Policy relating to the revision to the banking securitization capital framework and Significant Risk Transfer securitization will be relevant to PRA-authorized CRD IV firms only.

SS10/18 is relevant to PRA-authorized CRD IV firms and PRA-authorized Solvency II firms to which the Securitization Regulation applies, unless stated otherwise. This includes PRA-authorized UK banks, building societies, PRA-designated UK investment firms, UK insurance firms, UK reinsurance firms, and UK insurance special purpose vehicles (ISPVs). SS10/18 sets out the PRA expectations of firms in respect of securitization in the following chapters:

General requirements under the Securitization Regulation (Chapter 2)—general expectations of firms and processes under Chapter 2 of the Securitization Regulation
STS ABCP Sponsors (Chapter 3)—general expectations of firms seeking to become sponsors of Simple, Transparent, and Standardized (STS) Asset-Backed Commercial Paper (ABCP) programs
Capital Requirements Regulation (CRR) securitization capital framework (Chapter 4)—PRA expectations and approach regarding the securitization capital framework for firms to which Directive 2013/36/EU (CRD) applies.

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Effective Date: January 01, 2019

Keywords: Europe, EU, UK, Banking, Insurance, Securitization Regulation, CRD IV, Solvency II, Significant Risk Transfer, Basel III, PS29/18, PRA

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