Transatlantic Securitisation Alignment: How 2025 UK and EU Reforms Reshape Compliance for US Structures

Over the past 12 months, United Kingdom and European Union (EU) regulators have introduced a series of clarifications and reforms that materially reshape the securitisation compliance landscape. The UK has embedded a more principles-based framework through the new Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) rulebooks, while the EU has tightened its focus on substance and risk integrity. For US securitisation structures interacting with European investors or UK funding lines, these changes have immediate implications for how compliance, disclosure and risk retention must be structured, monitored and evidenced.

Overview

1. EU clamps down on “paper originators”: The European Commission/EBA Single Rulebook Q&A has now made it explicit that Conditional Sale Agreements (CSA) may not be used to manufacture originator status for risk-retention; the retainer must have genuine asset ownership, not conditional papering. Regulators emphasised that such conditional arrangements undermine genuine risk transfer and erode supervisory confidence in the integrity of the originator designation, as the retainer never assumes actual exposure prior to securitisation.
2. “Sole purpose” test tightened: EU supervisors have clarified the sole-purpose test for originators: Entities set up primarily to pass assets into a securitisation will not qualify, which has direct consequences for many “RetentionCo/originator-of-convenience” constructs.
3. EU reporting relief (finally) on the horizon for private deals: The European Securities and Markets Authority (ESMA) has consulted on and then fed back on a simplified disclosure template for private securitisations under Article 7(1)(a) SECR—this is important for US issuers seeking EU investor eligibility without the full public-style data burden. ESMA’s July 2025 feedback identified core disclosure fields: (i) portfolio summary metrics such as weighted-average debt service coverage ratio, loan-to-value and seasoning; (ii) obligor and sector concentration data; (iii) top-10 exposures; (iv) arrears and performance trends; and (v) key structural features including triggers and credit enhancement levels.
4. UK diverges on process, not outcomes: Since 1 November 2024, UK firm-facing rules moved into the FCA SECN/PRA rulebook. Substantively, retention/due-diligence/transparency end-states remain, but format is principles-based (focus on “sufficient information” over ESMA templates), which matters for private, bilateral back-leverage structures. The PRA has also introduced an express ability to substitute the retainer under Rule 13.3 in stress or insolvency scenarios, representing a pragmatic divergence from the EU framework. Market feedback suggests that UK regulators may in due course consider introducing a streamlined private-deal disclosure regime broadly aligned with ESMA’s proportional approach, signalling potential future convergence in reporting approaches.

A Closer Look

Originator vs. Sponsor After the CSA Ruling (EU)

What Changed

As of August, the EBA Single Rulebook Q&A makes the EU position now unambiguous: An entity that only ever “acquires” exposures under a CSA (i.e., subject to deal closing or other conditions) does not “purchase for its own account” within the meaning of the originator definition. Put differently: No real, pre-securitisation risk = no originator status = no ability to retain under Article 6 via that pathway. Regulators emphasised that such conditional arrangements undermine genuine risk transfer and erode supervisory confidence in the integrity of the originator designation, as the retainer never assumes actual exposure prior to securitisation.

Why It Matters (Especially to US Securitisations Platforms and EU Investors)

The “CSA originator” was a widespread construct used by non-MiFID managers to qualify as originator under the EU rules when they couldn’t qualify as sponsor. That route is now effectively closed; true warehouse ownership (with balance-sheet risk) is the safe harbour if you intend to rely on originator status. Market commentaries flag the impact on EU and EUSR-compliant US securitisation structures (in particular, Collateralised Loan Obligations (CLO)). Note that this restriction primarily affects self-retention under Article 6(1)(a) and does not preclude third-party or consolidated affiliate retention under Article 6(3), provided the relevant eligibility criteria are met.

Practical Adjustments

• Where possible, qualify as sponsor (EU-regulated investment firm/credit institution managing the deal).
• If you must be originator, expect to fund and book the underlying collateral pre-closing (or through a consolidated affiliate that passes the sole-purpose test).
• Re-check side-letters: Forward/conditional sale, repo, total return swap and options that neutralise first-loss exposure remain prohibited under the risk-retention regulatory technical standards logic (net, unhedged retention).

"Sole Purpose" Test: More Than Semantics

What Changed

Supervisors have tightened the interpretation of the “not for the sole purpose of securitising” limb in the originator definition, transforming what was once a qualitative judgment into a quantitative compliance test. Under the European Banking Authority’s (EBA) March 2025 Joint Committee Report and the October 2024 ESA Guidelines, an originator is now expected to demonstrate that more than 50% of its revenues or activities derive from non-securitisation sources. The test is no longer assessed on intent or governance form but on measurable substance: capitalisation, business diversification, and demonstrable economic exposure outside securitisation.

Why It Matters

This development effectively codifies the supervisory expectation that risk-retention vehicles must be operating entities with real balance-sheet activity, not shells designed purely to warehouse exposures. Originators failing to meet the quantitative threshold risk invalidating their retention status under Article 6(2), with downstream implications for investors’ due-diligence obligations and capital treatment. The move reflects a broader regulatory trend toward substance-based compliance, mirroring the EU’s focus on genuine risk ownership and away from contractual formality.

While the rule applies across all securitisation types, its operational impact is most acute for CLOs and private securitisations, where bespoke originator structures have historically been used.

Practical Adjustments

While the EBA’s quantitative interpretation is technically a clarification of the existing rule, market consensus is that it will be applied on a prospective basis. Transactions closed prior to the March 2025 Joint Committee Report are not expected to face retroactive scrutiny, although refinancings or resets may trigger reassessment under the new threshold.

If you run dual-track (US + EU) issuances, design your European originator with substance—funding capacity, non-securitisation activities and clear board/controls, or pivot to sponsor compliant status.

EU Private-Deal Reporting: Templates Are Being Right-Sized

Where We Are

ESMA has consulted on (Feb 2025) and later reported back (July 2025) regarding a simplified reporting template for private securitisations under Article 7(1)(a). Objective: proportionality (i.e., move from public-style, line-item loan tapes to streamlined, aggregate and key-metric reporting sufficient for investor diligence and supervisory oversight).

Why It Matters

Since 2022 the Commission signalled that EU investors in non-EU deals (e.g., US CLOs) are expected to receive Article 7-grade information. The private template path offers a tractable way to meet that expectation without retrofitting full ESMA public templates into US reporting infrastructures. ESMA has further indicated that the templates will be issued as machine-readable XML schemas consistent with the data dictionaries used for public securitisations to preserve cross-comparability.

Practical Adjustments

With the new ESMA private-deal templates expected to take effect in mid-2026, transactions closing in the interim should build in flexibility rather than hard-wiring fixed reporting annexes. Documentation should anchor disclosure obligations to Article 7(1)(a), requiring information “in a form agreed between the parties”, and expressly permit updates once the final Implementing Technical Standard is adopted. This approach avoids costly amendments and ensures continuing compliance as the EU’s proportional-reporting regime transitions into force. Market participants are increasingly incorporating dynamic reporting provisions to “future-proof” documentation and minimise amendment risk once the new templates become mandatory

The UK’s Post-Nov-2024 Regime: Substance Over Form

The UK Securitisation Regulations 2024 moved firm-facing requirements into the FCA/PRA rulebooks (FCA PS24/4, SECN). Two shifts matter to US groups:

• Transparency is principles-based. For investors, the test is whether “sufficient information” is available to independently assess risk. A format is not prescribed. Private/bilateral structures (e.g., back-leverage against equity) can therefore be run on bespoke reporting packs agreed with the investor, while still meeting UK obligations.
• Continuity of retention / hedging nuance. The UK materials preserve the “net, unhedged” concept but are more explicit about permissible pre-securitisation hedging and change-of-retainer mechanics in stress (insolvency), aligning form to commercial reality while preserving substance. 

Capital Angle

From a prudential perspective, capital treatment remains a key driver of structural choices: UK banks taking securitisation exposure will need to demonstrate Article-6-equivalent retention and Article-7-sufficient information avoids punitive capital (1,250% RW) and enables the standard securitisation RWA framework.

Takeaways

These developments mark a prudentially significant divergence: The EU crystallising substance-based eligibility and data proportionality, the UK embedding procedural flexibility but maintaining equivalent end-state transparency and retention outcomes.

For US platforms, this means re-engineering originator pathways in Europe and harmonizing reporting across regimes, while ensuring the retained piece remains genuinely net and unhedged.

Sources Worth Bookmarking (Primary and Authoritative)

• EBA Single Rulebook Q&A (Final 14 Aug 2025) CSA cannot confer originator status; view Q&A 2021_5851 entry and derivatives. (EBA)
• ESMA (Feb 2025 consultation; Jul 2025 feedback) Simplified private-deal disclosure under Article 7(1)(a) SECR. (ESMA)
• FCA PS24/4 / SECN (Apr 2024) UK firm-facing rules and principles-based transparency (sufficient information). (FCA)
• Securitisation Regulations 2024 (SI 2024/102) UK statutory backbone for designated activities. (Legislation.gov.uk)
• Bank of England - Securitisation General Framework Central hub for PRA policy, supervisory statements (like SS10/18) and links to the UK Capital Requirements Regulation (CRR) text relevant to securitisation prudential rules. (Bank of England)
• Akin (Dec 2022) Early flag that the Commission wanted private-deal templates and that Article 5 due-diligence reaches non-EU deals - context for today’s changes. (Akin)