Executive Summary
On 17 February 2026, the Financial Conduct Authority (FCA) published consultation paper (CP26/6) on reforming the UK securitisation framework. This included multiple proposals to introduce more principles-based requirements in areas of the securitisation framework that are seen as prescriptive for investors and issuers.
The UK changes are calibrated to preserve high standards of investor protection and market integrity while reducing regulatory burden and market fragmentation. These changes will be a true game-changer for the UK securitisation market – showing a level of ambition that will offer significant benefits to UK investors and issuers.
In parallel, the Prudential Regulation Authority (PRA) also published a consultation with similar proposals that would affect firms authorised by the PRA. The FCA noted that they sought to ensure coherence with the PRA’s rules.
The FCA's proposals can be summarised as follows:
Simplification of due diligence
- Replace investors’ verification requirements for credit granting, transparency and risk retention with a principles-based approach. Under this approach investors will have more flexibility to decide if credit granting standards are ‘robust’, whether they have ‘sufficient’ information or that there is sufficient alignment of interest between manufacturer and investor beyond risk retention. The proposed changes to risk retention are seen as necessary to fully unlock UK investors’ access to third-country securitisations that do not comply with the risk retention requirement.
- Introduce a simplified and principles-based assessment process for prospective investments in securitisations. This would no longer make it a requirement for investors to review a specified list of features around the underlying exposures’ credit risk, diversification, structural features and STS compliance.
- Remove the prescriptive elements in the ongoing due diligence obligations, instead requiring investors to establish written policies and internal reporting procedures.
Streamlining transparency
- Removing the differentiation between public and private securitisations in the application of transparency requirements.
- Introducing of a simplified reporting template for CLOs which would have 43% fewer fields than existing template for corporate securitisation.
- A reduction in the number of reporting templates, replacing them with:
- A principles-based approach for: credit card and trade receivables, commercial real estate, corporate loans and esoteric assets.
- Moving to a principles-based approach for investor and significant event reports.
- A simplification of retained standardised underlying exposures templates for more mature and homogeneous asset classes such as residential real estate, auto loans, consumer loans and leasing.
- Exempting single-loan securitisations from the requirement to make underlying exposures information available in the prescribed underlying exposure template.
- Removing the requirement to report to securitisation repositories.
Resecuritisation ban
- Exemptions from the existing resecuritisations ban for: the senior-most securitisation positions; and the positions constituted by one exposure and its related credit protection.
Risk retention
- Permit the use of L-shaped risk retention, to provide manufacturers with additional flexibility by making it easier to issue in overseas markets.
Reviewing the treatment of CLOs
The UK is also demonstrating a willingness to open a discussion around the specific regulation of CLOs and whether there may be value in further exemptions or differentiated treatment. This discussion will be a useful context in which to consider reviewing the definition of ‘sponsor’ to allow Alternative Investment Fund Managers (AIFMs) to sponsor securitisations.
Background
On 30 April 2024, the Financial Conduct Authority (FCA) published Policy Statement PS24/4, outlining the final rules replacing the assimilated EU Securitisation Regulation. The Prudential Regulatory Authority (PRA) also published its own Policy Statement (PS7/24), which mirrors the FCA’s and focuses on the requirements for which it has supervisory responsibility.
The UK also adopted The Securitisation Regulations 2024, which were laid in Parliament on 22 April 2024.
The new rules were significantly similar to the assimilated EU Securitisation Regulation, but introduced some relevant changes related to due diligence and disclosure and to risk retention.
- A more principles-based and proportionate approach to verifying disclosure made by UK and overseas manufacturers, clarifying what information is to be received by institutional investors when investing in both domestic and overseas securitisations.
- Easier risk retention on securitisations of non-performing exposures.
-
Nicholas Smith
Managing Director, Private Credit, Alternative Credit Council
ACC priorities
On 15 May, the Alternative Credit Council (ACC) submitted its response to the FCA’s consultation.
The ACC strongly supported the overall direction of the FCA’s proposals and focused on the areas where the FCA is still considering future policy changes, particularly with respect to the CLO market. The response highlighted the following issues in particular for the FCA’s consideration:
- Exempting CLOs from risk retention: The FCA should consider exempting UK-structured CLOs from risk retention requirements, particularly considering that CLOs have other interest alignment mechanisms that make risk retention unnecessary or duplicative in some circumstances. This would also align UK CLOs with US market practices.
- Allowing AIFMs to sponsor securitisations: Alternative Investment Fund Managers (AIFMs) and the Alternative Investment Funds (AIFs) they manage now play a much larger role financing the corporate sector but are unable to act as sponsors of securitisations under the current securitisation regulatory framework which envisaged this only being performed by a credit institution or a MiFID licensed entity. Permitting AIFMs to act as sponsors will support the development of a middle-market securitisation sector which will improve the availability of finance and liquidity to SMEs.
- Active management and synthetic securitisations in STS: Some of the most common securitisation structures like CLOs are currently considered ineligible under the Simple, Transparent and Standardised (STS) criteria due to the ‘actively managed’ nature of these vehicles. This is despite the actively managed nature of CLOs encouraging a strong alignment of interest between the CLO managers and their investors. CLOs also have a strong track record, showing good performance and lower default rates when compared to other securitisation products. Actively managed CLOs, as well as synthetic securitisations, should be permitted to qualify as STS.
- More risk-based capital and liquidity requirements for prudentially regulated investors: Solvency UK and other requirements on insurers have significantly reduced the incentives for insurers to invest via securitisations, despite the fact that the asset profile of many securitised products is a natural fit for insurance liabilities. The EU has already undertaken a review of Solvency II’s risk factors for securitisation assets to make them more risk sensitive.
Practical Implications
The UK has placed competitiveness at the heart of its reforms. The key benefits of the proposals are that they provide for true simplification and streamlining of due diligence and transparency requirements. This successfully replaces the overly prescriptive rules that investors currently face under the existing UK rules which are closely aligned with the EU framework. These changes will materially improve the access of UK investors to global markets and make the UK securitisation market much more competitive.
Critically, the due diligence and transparency framework will change entirely, removing the prescriptive and burdensome rules inherited from the EU Securitisation Regulation and aligning the UK regulatory framework with global market practices and the US securitisation rules.
Other technical issues have also been improved, including around risk retention and resecuritisations.
Importantly for private credit investors, the FCA is open to review the specific treatment of CLOs, for which a dedicated reporting template has already been proposed. This presents an opportunity for the ACC to highlight issues such as reviewing the definition of ‘sponsor’ to allow Alternative Investment Fund Managers (AIFMs) to sponsor securitisations.
If the current trajectory of both the UK and EU reforms is maintained, the EU will be placed at a longer term structural disadvantage.
Timeline
| Final FCA rules reforming the UK Securitisation Framework expected | Q4 2026 | |
| ACC response to CP26/6 | 15 May 2026 | |
| FCA consultation (CP26/6) on rules for reforming the UK Securitisation Framework | 17 February 2026 | |
| Compliance date for final rules | 1 November 2024 | |
| Publication of final rules in PS24/4 | 30 April 2024 | |
| AIMA response to CP 23/7 submitted | 3 November 2023 | |
| Publication of the FCA’s consultation paper CP23/7 | 7 August 2023 |