February 27, 2026

The UK Consults on Significant Changes to its Securitisation Framework

Robert Cannon, Assia Damianova, Matthew Duncan, David Kiernan, Sabah Nawaz, Alix Prentice, Nick Shiren Cadwalader, Wickersham & Taft LLP + Follow Contact LinkedIn Facebook X Send Embed

On 17 February 2026, the UK’s Financial Conduct Authority (“FCA”) 1 and Prudential Regulation Authority (“PRA”) 2 published parallel consultation papers proposing the most significant overhaul of the UK securitisation framework since Brexit. Together, the consultation papers span conduct, disclosure, due diligence and prudential capital requirements. This note sets out the key proposals and their potential impact on the securitisation market.

Due diligence

The FCA (in CP26/6 3) and PRA (in CP2/26 4) jointly propose replacing the current prescriptive due diligence framework with more principles-based obligations. The FCA is the primary vehicle for these conduct rules, which apply to FCA-regulated institutional investors; the PRA’s parallel proposals apply to PRA-authorised firms.

The proposals

The key proposals are:

• to remove the credit-granting verification requirements and instead require investors to consider credit-granting standards in a proportionate manner and form their own view as to whether they are robust enough to suit their risk appetite;
• where the originator is UK-based, to remove the requirement to verify compliance with risk retention;
• where the originator is not UK-based, to reframe the risk retention verification requirement so that investors are required to verify that the originator maintains a sufficient and appropriate alignment of commercial interest with investors on an ongoing basis. This may be achieved through a 5% material net economic interest or through alternative mechanisms such as performance-linked management fees. An updated Supervisory Statement (SS10/18) 5 will include guidance on how PRA-authorised firms should appraise originators’ proposed alignment of interest; the FCA will similarly update its guidance for FCA-regulated investors;
• to remove the prescriptive list of information that an investor must verify has been provided to them and to instead introduce a more general rule that requires the investor to ensure that the originator 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. Again, it is expected that the PRA and FCA will provide guidance on the type of information that investors should seek;
• to remove the requirement for investors to verify compliance with STS status of a securitisation. Ongoing monitoring obligations remain but are simplified. Detailed requirements (for example, prescribed stress testing and management reporting formats) are removed. Investors must instead maintain written procedures and monitor positions on a basis proportionate to the risk profile of the securitisation position.

Market impact

The proposed due diligence reforms will be welcomed by investors. The existing regime is seen by many investors as being highly prescriptive – adding significant complexity and associated compliance costs. A more principles-based approach should offer more flexibility to UK investors and, for example, would allow UK investors to invest in a broader range of non-UK securitisations including U.S. CLOs.

Transparency

The proposals

The FCA (in CP26/6 6) leads on the transparency reforms. The key proposals are:

• to remove the reporting templates from the PRA Rulebook and instead have the reporting templates in the FCA’s SECN sourcebook;
• to remove the prescriptive (and non-exhaustive) list of documents required to be made available to investors and instead require the provision of the offering document, prospectus or term sheet together with the transaction documents;
• to remove the requirement of a separate transaction summary when there is no prospectus;

• to remove the prescribed templates for investor reports, inside information reports, significant event reports and underlying exposure reports for credit cards, commercial real estate, corporate, and esoteric exposures and instead specify the type of information that must be included.
  The FCA is also seeking views as to whether a dedicated and simpler reporting template for CLOs should be introduced:

• to remove the template for ABCP transactions and to introduce a revised disclosure framework for ABCP securitisations;

• to remove the distinction between public and private securitisations for the purposes of the transparency requirements;

• to remove the requirement that reporting be made available by means of a securitisation repository and instead require that information be made available in an accessible manner.
  Market impact

The transparency proposals represent a significant part of the reform package. The existing regime involving prescriptive templates and formats was designed to promote standardisation and comparability, but in practice imposes material compliance costs, does not always reflect the needs of investors and is viewed as disproportionately burdensome. The shift to a principles-based approach is designed to reduce compliance costs potentially attracting new orginators to the securitisation markets.

The emerging divergence between the UK and EU securitisation regimes is likely to increase execution complexity for cross-border transactions. Under the UK proposals, a more principles-based approach to due diligence and disclosure could enable UK institutional investors to participate more readily in transactions that do not follow EU reporting templates. On the other hand, EU investors are expected to remain subject to more prescriptive verification requirements under the proposed amendments to the EU Securitisation Regulation and related prudential rules. In practice, arrangers marketing transactions across both jurisdictions may need to calibrate disclosure to the higher EU standard, or adopt parallel compliance strategies where a single disclosure framework is not feasible.

Resecuritisations

The proposals

The PRA and the FCA acknowledge that a broad ban on resecuritisation inadvertently restricts manufacturers from undertaking specific transactions that do not pose the same level of complexity and opacity of resecuritisations witnessed during the financial crisis. Both the FCA 7 and PRA 8 therefore propose two targeted exemptions to the prohibition on resecuritisations:

• resecuritisations created solely by tranched credit protection on underlying exposures; and
• resecuritisations of senior securitisation positions. Guardrails include: (1) PRA-authorised originators; (2) alignment of originator and retainer roles where applicable; (3) a single-round resecuritisation structure; and (4) homogeneous asset class requirements. The exemptions may only be used once and cannot be combined or used for further resecuritisations involving the same underlying positions.

The PRA proposes modified capital treatment for qualifying resecuritisations. For tranched-credit-protection resecuritisations, credit-risk-mitigation effects would be disregarded; 9 for resecuritisations of senior positions, exposures would be treated as pro-rata slices of the underlying assets, subject to an alternative risk-weight framework including a floor lower than the existing CRR Article 269 treatment. 10

The PRA and the FCA 11 also propose an amendment to the definition of resecuritisation to exclude contiguous retranching (where two or more contiguous tranches of a securitisation are combined into one tranche or a tranche is split into two or more tranches).

Market impact

The limited exemptions provide modest flexibility for structured‑finance participants to reuse senior tranches or create credit‑protection structures, potentially enhancing liquidity.

Credit granting

The proposals

The FCA’s CP26/6 12 includes a dedicated chapter providing further clarity on the application of the credit-granting criteria rules. The FCA proposes guidance to assist manufacturers and investors in understanding how the credit-granting standards apply in practice, including in the context of acquired portfolios and non-standard lending models. The PRA 13 also proposes clarifications in this rule with the aim of preventing exposures of lower underwriting quality being created with the sole purpose of them being securitised.

Market impact

These proposals provide greater clarity and certainty to manufacturers and the broader market regarding the minimum underwriting quality of loans that are to be securitised.

Risk retention

The proposals

Both the FCA and PRA propose introducing an additional “L-shaped” risk-retention modality, combining a first-loss (horizontal) element with a vertical slice. The combined retention must equal at least 5% of the nominal value of the securitised exposures. When multiple retainers are involved, each must hold the net economic interest on a pro-rata basis and in the same proportions across both components of the L-shaped structure.

Market impact

This proposal gives originators more flexibility to demonstrate alignment with investors in a way that reflects the specific economics of a transaction. Notably, the holding of a vertical strip with a horizontal first-loss piece is closer to how CLO managers take on their economic exposure to the CLO in practice.

Scope of securitisation rules

The FCA’s CP26/6 14 also includes a discussion chapter on the scope of application of the securitisation rules. The FCA is seeking views as to whether the current scope — including which entities and transactions fall within the regime — remains appropriate, and as to whether any adjustments would better serve the policy objectives of the framework. This is a discussion topic rather than a firm proposal at this stage. Specifically, the FCA is soliciting feedback on CLOs, whole business securitisations and correlation trading portfolios.

Consultation response deadlines and next steps

The consultations close on 18 May 2026; final rules are expected later in the year with implementation anticipated in Q2 2027.

1 https://www.fca.org.uk/publication/consultation/cp26-6.pdf.

2 https://www.bankofengland.co.uk/prudential-regulation/publication/2026/february/reforms-to-securitisation-requirements-consultation-paper.

3 Chapter 3.

4 Proposal 1.

5 No timetable is provided yet.

6 Chapter 4.

7 Chapter 6.

8 Proposal 4.

9 Exemption 1 under Proposal 4.

10 Exemption 2 under Proposal 4.

11 Chapter 6.9.

12 Chapter 7.

13 Proposal 5.

14 Chapter 10.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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