Securitisation is a process that allows an originator to pool the risk of securitised assets (such as mortgages, leasing/factoring agreements, or credit card exposures), slice that risk into tranches with different risk profiles, and transfer it to the broader financial system. On the one hand, it can serve as both a funding tool and a credit risk and balance sheet management instrument for financial institutions, freeing up capital that can be used to grant further loans and contributing to the deepening of EU capital markets; on the other hand, it provides investors with access to a broader range of asset classes they might otherwise not be able to reach, allowing for greater portfolio diversification.
The current securitisation framework addresses the risks identified in the aftermath of the global financial crisis, during which opaque products and misaligned incentives between issuers and investors led to losses that harmed both investors and financial stability.
The framework notably includes requirements on risk retention, transparency, due diligence, and other regulatory provisions designed to address the specific risks associated with these instruments, alongside appropriate prudential frameworks applicable to banks and insurers. Addressing these risks remains a key objective of the regulatory regime.
While previous EU initiatives on securitisation have made the market safer, they have also led to high regulatory costs for issuers and investors. Persistent barriers to issuance and investment continue to hinder the development of the EU securitisation market, representing a missed opportunity to further deepen EU capital markets and enable investors to finance the real economy more effectively.
The most recent review of the Securitisation Regulation, conducted in 2022 and culminating in a report by the European Commission published that December, marked the first assessment of the Regulation’s impact on the functioning of the EU securitisation market. Given that the framework had been amended in April 2021 in response to the unprecedented external shocks of the COVID-19 crisis, and that its full implementation was still ongoing at the time the 2022 report was drafted, the Commission concluded that more time was needed for a comprehensive evaluation of its impact and effectiveness.
Against this backdrop, the Commission is now preparing to present a legislative proposal to revise the securitisation framework in early June.
This review forms part of the broader Capital and Investment Union initiative.
Various political statements have highlighted the need to take action to remove barriers to both securitisation issuance and investment within the EU market.
The intention to accelerate work on all European measures related to savings and investment, including securitisation, was reaffirmed in the July 2024 political guidelines of Commission President Ursula von der Leyen.
Reviving the use of securitisation also features as a priority in the mission letter of Commissioner Maria Luís Albuquerque.
Promoting a strong securitisation market in the EU is essential to meeting future investment needs in strategic priorities (such as the green and digital transitions), achieving greater diversification and risk-sharing within the financial system, and making the EU economy more productive, competitive, and resilient.
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