Textures Setup - And Recommendations

These settings will already be applied if you are importing them into
Unreal Engine 5.1 and above

You can set them up as follows:

Mip Gen Settings: Blur 2 Compression Settings: Grayscale (G8/16, RGB8 sRGB) sRGB: Disabled Composite Texture Mode: Add Normal Roughness To Alpha Tip: select all assets you want to modify > right click > Asset Actions > Edit Selection in Property matrix to apply settings in bulk. Though note that the more assets you modify at once in the property matrix the longer the engine will take to process it. After this it is recommended to check the following page if you are using later engine versions, such as 5.3 and above, due to differences in how they handle color curves:

Textures Look Different Between Engine Versions