UK PRA publishes a paper on future capital calibrations


Following publication of HM Treasury’s near final statutory instrument and consultations by the PRA and FCA, all aiming to adapt the inherited EU Securitisation Regulation for a post-Brexit UK, the PRA has now issued a Discussion Paper on the Capital Requirements for Securitisation.

The paper focuses on the consequences for the capital requirements of securitisations of the Basel 3 output floor, the hierarchy of methods for determining these capital requirements and a possible STS for on-balance-sheet (synthetic) securitisations.

The initial suggestions of the PRA in all 3 areas deviate from the current trends in EU regulation and are not altogether cheerful: no halving of the p-factor for the purpose of the output floor calculation, a return to the Basel hierarchy of methods and no synthetic STS. However, the PRA did express strong support for a revisiting of the whole capital requirements calibration of securitisations, so some light at the end of the long tunnel might be discerned by optimists.

Responses are requested by 31 January with a consultation paper planned for the second half of 2024.

UK PRA publishes a paper on future capital calibrations
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