As outlined in Edition 6 of this Briefing, the UK Prudential Regulation Authority (PRA) released a detailed Consultation Paper (CP 5/13) in August 2013, setting out the changes required to the PRA's Rulebook to implement the Capital Requirements Directive IV and Regulation (CRD IV / CRR) in the UK for banks, building societies and some PRA-designated investment firms from 1 January 2014. At the time, the PRA noted that a formal Policy Statement, to be released by the end of 2013, would contain the Final Rules and Supervisory Statements for firms. The PRA released Policy Statement 7/13 just before the Christmas break, which contains feedback on the earlier consultation and the Final Rules implementing CRD IV (and CRR) in the UK. The substance of the Final Rules has not changed significantly from the earlier consultation (save that the final text on capital buffers - set out in draft in CP 5/13 - will not be released until HM Treasury has designated the authority responsible for setting the buffer). By way of brief summary, the securitisation aspects of the Final Rules contained in PS 7/13 are now set out in:
The text of CRR itself: the PRA has not copied-out the text of CRR (even on an "intelligent" basis), as it is directly applicable within Member States. Therefore, the CRR has direct application in the UK (see Chapter 5 of the CRR (Securitisation), Articles 242 - 270, and Articles 404 - 410 (risk retention) for the key provisions relating to securitisation transactions). The PRA has implemented some aspects of some CRR provisions where, for example, a discretion is being applied. In addition, as mentioned, certain "Level 2" Regulatory Technical Standards and Implementing Technical Standards and "Level 3" Guidance from the European Supervisory Authorities (in this case, the European Banking Authority and European Securities and Markets Authority) is also directly applicable without the need for separate implementing measures.
The PRA Handbook: certain provisions have been implemented through some parts of the existing Handbook, such as GENPRU and (some remaining parts of) BIPRU (such as the definitions and transitional provisions). The majority of the existing Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU), including Chapter 9 (Securitisation) has now been deleted and is effectively replaced by the CRR Text. Until the launch of the new PRA Rulebook online in 2015, the PRA Rulebook will be implemented into the current online Handbook in PDF format (and the new material is intended to be easily distinguishable from the PRA's inherited Handbook provisions). Please note that not all of the relevant Instruments implementing CRD IV / CRR have been incorporated into the PRA Handbook at this time. One of the key Instruments, the Capital Requirements Regulations 2013, implements the key provisions of CRD IV into UK law in terms of commencement, designation of the PRA (and FCA) as competent authorities, the imposition of coordination and cooperation obligations on the PRA and FCA, the exercise of supervision in relation to "own funds", and numerous procedural aspects.
Supervisory Statement (SS9/13): Securitisation: which contains detailed PRA Guidance on the concept of Significant Risk Transfer (SRT) in securitisation transactions under Article 233 or 234 of the CRR, sets out how the PRA will treat the provision of "implicit support" to a securitisation transaction, and contains a set of tables setting out the long- and short-term 'mapping' of credit rating agencies' external credit assessments to the CRD's equivalent "credit quality steps" (see separate link to SS9/13 here and links to the PRA's "legacy" Supervisory Statements (i.e. those inherited from the FSA) on securitisation here). SS9/13 (and the other Supervisory Statements) accompanies the PRA handbook material and CRR text, and the PRA envisages issuing new and revised Supervisory Statements on an ongoing basis as part of its policy development. Click here for a link to all of the relevant PRA Supervisory Statements implementing CRD IV / CRR.