Reforming UK Securitisation Requirements - Single Loans, Resecuritisation & Mortgage Guarantee

CP2/26, published on 17 February 2026 and closing 18 May 2026, proposes targeted reforms to the PRA's securitisation framework. Key proposals include: disapplying transparency and reporting requirements for single-loan securitisations; exempting two new resecuritisation structures from the existing ban and introducing alternative capital treatment; improving PRA Rulebook readability for securitisation general requirements; and introducing a new capital approach for Mortgage Guarantee Scheme loans.

Context:

Since the UK's post-Brexit restatement of the EU Securitisation Regulation, the PRA has identified specific areas where the rules produce disproportionate outcomes or create unnecessary barriers to market activity without commensurate prudential benefit. CP2/26 addresses four discrete workstreams across the securitisation framework, each targeting a different part of the market from single-loan structures used in trade finance and real estate to the treatment of government-backed Mortgage Guarantee Scheme loans.

The most commercially significant proposal is the exemption of single-loan securitisations from transparency (market disclosure) and regulatory reporting requirements. Currently, even simple bilateral loan structures that are technically 'securitisations' under the UK framework must comply with the full market disclosure and STS (Simple, Transparent and Standardised) reporting regime, a disproportionate burden that adds cost and complexity without meaningful investor protection benefit. CP2/26 proposes to disapply these requirements for single-loan structures, bringing the UK into closer alignment with market practice.

On resecuritisation, the UK currently maintains a near-blanket ban on re-securitising underlying pools of securitised exposures. CP2/26 proposes to exempt two specific resecuritisation structures that serve legitimate risk management purposes, introducing alternative capital treatment to ensure appropriate prudential coverage. The Mortgage Guarantee Scheme (MGS) proposal introduces a new capital approach for loans originated under the scheme, reflecting the government guarantee structure and reducing the capital cost of participating in the scheme, potentially supporting its expansion.

Rules and Guidelines:

• Single-loan securitisations: proposed to disapply market disclosure (transparency) and regulatory reporting requirements, this is a substantive simplification for bilateral lending structures

• Resecuritisation ban: two new structures exempted from the existing prohibition; alternative capital treatment introduced for CRR firms' exposures to these resecuritisations

• PRA Rulebook readability: amendments to improve the structure and clarity of securitisation general requirements, no substantive policy change, but reduces compliance interpretation risk

• Mortgage Guarantee Scheme: new capital treatment for MGS loans or similar private scheme loans (referred to as 'Loans' in the CP), reflecting the government guarantee and providing a clearer, potentially more favourable capital outcome

• Amendment to the Non-Performing Exposures Securitisation (CRR) Part of the Rulebook (Annex D)

• Updates to SS10/18 (Securitisation: General requirements and capital framework) to reflect all proposed changes

• Applicable to all categories of PRA-authorised persons in the UK, including CRR firms, UK Solvency II firms, non-CRR firms (credit unions), non-Directive firms, and qualifying parent undertakings

Businesses Affected:

• Banks and building societies engaged in securitisation origination or investment. The single-loan exemption and resecuritisation reforms will change operational requirements for specific deal types

• Trade finance and real estate finance teams that use single-loan securitisation structures for balance sheet management and risk transfer

• Capital markets and structured finance desks across investment banks and specialist lenders. The resecuritisation exemptions may open new product design options for risk management

• Mortgage lenders participating in or considering participating in the Mortgage Guarantee Scheme. The new capital treatment may improve the economics of MGS-originated lending

• Insurance companies holding securitisation exposures under Solvency II (non-CRR firms) are also in scope of the Rulebook amendments

• Credit unions in the scope of non-CRR firm rules must stay current with changes to securitisation general requirements

Next Steps:

• Respond to CP2/26 by 18 May 2026. The PRA has sought to balance maintaining safety and soundness with facilitating competition and growth; industry feedback on calibration is important

• Structured finance and capital markets teams should assess which existing or pipeline transactions would benefit from the single-loan securitisation exemption and model the operational savings

• Risk and capital teams should evaluate the alternative capital treatment for the two newly exempted resecuritisation structures against existing RWA frameworks to understand the capital impact

• Mortgage lending teams participating in or considering the Mortgage Guarantee Scheme should model the new capital approach against the current treatment to understand the economic implications

• Legal and documentation teams should identify which transaction documents and regulatory reference materials will require updating following the proposed Rulebook readability amendments

• Monitor the Policy Statement timeline (expected late 2026) and begin planning implementation activities, particularly for reporting systems that need to adapt to the single-loan exemption

Source | Prudential Regulation Authority, Reforms to Securitisation Requirements