EU securitisation reform: Unlocking the market and driving growth – our view
We set out four key pillars that should shape reform of securitisation regulations, in the process potentially unlocking funding for Europe’s growth and delivering a diverse range of allocation opportunities for pension funds and other institutional investors.
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Schroders Capital believes that a pragmatic and market-focused EU regulatory framework for securitisation is essential to a competitive and well-functioning European economy.
Securitisation plays a pivotal role by enabling banks and other originators to convert pools of loans or other financial assets into investment instruments that can be bought and sold, thereby enhancing market liquidity and facilitating the flow of credit to the real economy.
For instance, securitisation is a robust tool for funding critical financial and infrastructure assets, enabling small businesses to access financing, helping individuals obtain mortgages or consumer loans, and funding strategic projects.
In short, well-functioning securitisation ultimately supports efficient risk transfer and balance sheet management for financial institutions – and diversifies sources of funding for businesses and consumers.
However, the European securitisation market has been in effective hibernation since the global financial crisis. From an outstanding face value of nearly €1 trillion prior to the crisis, the investor-owned securitised market stood at just €267 billion in 2024, a drop of 70%. At the same time new issuance stood at €244 billion, of which just €144 billion was “placed” (i.e. was sold to investors vs being retained by bank issuers).
This drop off was primarily the result of more stringent regulations brought in following the global financial crisis, especially strict and targeted rules under the current Securitisation Regulation, introduced in 2017.
To genuinely unlock funding for Europe’s growth, thereby fulfilling one of the strategic objectives of Europe’s Savings and Investment Union, we believe the regulatory framework for securitisation in Europe must be re-calibrated in such a way as to foster market participation by a broad range of both issuers of securitisation transactions and investors in securitisations.
Specifically, the market needs a level playing field between EU and non-EU transactions, ultimately leading to better funding for EU businesses, enhanced diversification for EU savers, and broader competitiveness of EU capital markets.
Our position
Click on the download button above or below to read our full Position Paper on the new rules, in which we set out the four pillars that we believe are key to achieving these objectives:
- Proportionate, principles-based disclosure and due diligence requirements: Enabling EU investors to invest on equal terms in both EU and third country securitisations, cutting red tape and levelling the playing field to allow for optimal returns.
- Clarity in definitions: Introduction of clear definitions for “public” and “private” securitisations, facilitating transparent assessment of regulatory implications.
- Investor sanctions: Recalibration of sanctions related to due diligence obligations to avoid the threat of duplicative and disproportionate penalties that could otherwise disincentivise investors.
- Solvency II capital charges: More risk-sensitive calibration of capital charges under Solvency II to enable insurers to meaningfully participate in securitisation markets.
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