Revitalising EU securitisation

The European Commission is moving forward with a set of proposals aimed at revitalising the EU's securitisation framework to make it simpler, more effective, and supportive of economic growth. The set of proposals published on 17 June 2025 are the first major initiative under the savings and investments union strategy, which focuses on improving the way the EU financial system works to boost investment and economic growth across Europe.

The main goal of securitisation is to allow banks and other financial institutions to use the loans and debts they grant or hold (like mortgages, corporate, or SME loans), to pool them together, and turn them into different types of securities that investors can purchase. By doing this, banks free up their resources, allowing them to lend more to businesses and citizens, while making it possible to move portions of credit risk to interested investors beyond the banking system.

The reforms aim to boost the EU’s securitisation market, which in terms of its relative size lags considerably behind other major jurisdictions and is highly concentrated, as 80% of EU securitisation activity is found in five Member States (France, Germany, Italy, Spain, the Netherlands).

Addressing stakeholder concerns

The EU established the regulatory framework governing securitisations in 2017‑2018. It aimed to revive the EU securitisation market while addressing concerns about risky practices that had threatened the stability of the financial system in the aftermath of the 2008 global financial crisis, in which EU banks had incurred significant losses, notably from investing in US opaque securitisations of poor credit quality. Since its entry into force in 2019‑2020, the framework has strengthened investor protection, transparency, and financial stability. However, it has also faced criticism from numerous stakeholders, who have expressed concerns that the framework imposes an excessive regulatory and prudential burden.

A targeted consultation conducted in 2024, alongside other outreach activities, indicated that high costs for compliance and complicated requirements have stifled market growth. This valuable stakeholder input informed the regulatory adjustments set out in this package.

Proposed changes

The proposed set of measures aims to simplify unnecessarily burdensome requirements and reduce costs to encourage more securitisation activity, while safeguarding financial stability. For financial institutions that issue securitisations, this means more opportunities to participate and free up capital that they can use for further lending to EU citizens and enterprises. For investors, this means more diverse investment opportunities and deeper capital markets.

The proposal adopted by the Commission includes amendments and adjustments to

The Securitisation Regulation: to reduce the high operational costs for issuers and investors in EU securitisations by simplifying certain due diligence and transparency requirements. In particular, the proposal aims to cut reporting fields by at least 35%. Due diligence requirements for EU securitisations will be simpler, more proportionate, and more principle‑based. Investors will no longer need to verify certain information when the selling party is based and supervised in the EU, as competent authorities are already responsible for checking compliance with these requirements. The homogeneity requirement for simple, transparent and standardised (STS) securitisations will now allow pools composed of 70% of SME loans to be considered homogenous, facilitating cross‑border deals and SME financing
The Capital Requirements Regulation (CRR): to introduce more risk sensitivity in the prudential framework for banks issuing and investing in securitisations. This means that the capital requirements will better reflect the actual risk of the different underlying securitisation portfolios, allowing banks to be more flexible with their resource allocation. Requirements will be lower only for the senior tranches in “resilient securitisations” where specific risks have been largely mitigated, and which comply with a set of safeguards. Our proposal on prudential requirements for banks is in line with the spirit and logic of the Basel standards. It reflects the very low default rates on EU securitisations and the numerous regulatory and supervisory safeguards that have been put in place, such as the introduction of the output floor in the banking package in 2025, the risk retention requirement or the banning of re‑securitisations
Additionally, the package includes draft amendments to the Liquidity Coverage Ratio (LCR) Delegated Regulation which have been published on the ‘Have Your Say' portal, for a four‑week consultation period. The proposed amendments concern the eligibility criteria for securitisations to be included in banks’ liquidity buffers. In the coming weeks, the Commission also plans to publish draft amendments to the Solvency II Delegated Regulation for feedback in the second half of July. The draft amendments aim at enhancing the insurance prudential framework to better account for actual risks of securitisation and remove unnecessary prudential costs for insurers when investing in securitisations. Changes to the prudential treatment of securitisation for insurers will be part of a comprehensive set of draft amendments to the Solvency II delegated act

The overall aim of reform is to make the regulatory framework governing the EU securitisation market more simple and fit‑for‑purpose, rather than overhauling it, without putting financial stability, investor protection, market transparency and market integrity at risk

Looking ahead

The legislative proposal is now with the European Parliament and the Council (co‑legislators). The adoption of the delegated acts by the Commission will also depend on how the legislative negotiations evolve, as the delegated acts include the notion of ‘resilient securitisation’. When adopted, these delegated acts will be subject to a scrutiny period of the co‑legislators.

Overall, with these changes, the EU aims to pave the way for a more dynamic securitisation market. This, in turn, is expected to result in more lending and economic activity and greater risk sharing and diversification within the EU financial system. It’s difficult to estimate the volume of loans that will be extended to the real economy as a result of this reform, as bank lending in general will depend on many factors – such as the overall economic situation, the interest rate environment, the demand for loans by companies.

However, during the COVID crisis, there was a significant loosening of banks’ buffer capital requirements with the supervisors’ approval. As a result, and as documented by the European Central Bank (ECB), banks extended more loans to the economy and the capital releases have given rise to more economic growth. We are expecting similar effects. Our reform is estimated to reduce capital requirements by one third as regards the senior securitisation tranches. By simplifying the system and improving the incentives for securitisation issuers, such as banks, the proposal should also lead to new issuances in Member States where activity has been limited until today.

Of course, this change cannot be achieved by regulation alone. Industry buy‑in is essential for the EU securitisation market to take off. Commissioner Albuquerque has expressed her firm expectation that industry will use the streamlined framework to generate additional funding to European households and businesses, including SMEs, to unlock stronger European resilience and growth.

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Publication date: 27 June 2025
Author: Directorate-General for Financial Stability, Financial Services and Capital Markets Union