Revocation of retained EU law Transitional amendments Amendments to the EU Securitisation Regulation 2017 Simple, Transparent and Standardised (STS) Securitisations
Under the UK Securitisation Regulation, certain securitisations can be designated as Simple, Transparent and Standardised (STS). Such STS securitisations are designed to make it easier for investors to understand and assess the risks of a securitisation investment by excluding more complex features. The UK STS framework is in line with international standards for Simple, Transparent, and Comparable (STC) securitisation, set by the Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO).
	Some firms who invest in securitisations (in particular banks, building societies, investment firms and insurance firms) are subject to prudential regulation. Prudential regulation seeks to ensure that financial institutions have adequate financial resources and risk management processes so they can continue to provide vital services to the real economy throughout economic and financial cycles. Banks, building societies, and PRA-designated investment firms are subject to prudential requirements in the Capital Requirements Regulation and relevant PRA rules (‘CRR firms’), and some insurance firms are subject to prudential requirements under the Solvency II regime (‘Solvency II firms’). These two regimes require firms to hold capital against their exposures, including exposures to securitisations, dependent on the risk attached to them.
	CRR firms and Solvency II firms who invest in STS securitisations can benefit from preferential capital treatment for these investments, compared to investing in non-STS securitisations. Preferential treatment means they can be eligible for lower capital requirements compared to other securitisations, reflecting their adherence to simple, transparent, and standardised criteria.
	In order for a securitisation to be designated as STS, the UK Securitisation Regulation currently requires the originator and sponsor of an STS securitisation to be established in the UK.  5 In addition, securitisations designated as STS under the EU Securitisation Regulation (with the originator and sponsor in the EU) before 31 December 2024 are also recognised as STS in the UK for the lifetime of the securitisation. This approach was adopted as part of the process of addressing deficiencies in retained EU law, to ensure that legislation continued to operate effectively at the point at which the UK left the EU.
	Under the UK Securitisation Regulation, securitisations with originators and sponsors established outside the UK (or the EU until 31 December 2024) cannot be designated as STS. As a result, CRR firms and Solvency II firms cannot get preferential capital treatment for investing in those securitisations originated overseas, even if this is appropriate to reflect their adherence to STS criteria. This limits the availability of STS securitisations for UK investors, which can have a negative impact on their liquidity and on the STS securitisation market as a whole.