The Commission drafted the reform in response to flaws in the post‑2008 securitization regime. While those rules introduced greater transparency, standardization and harmonization, they now impose heavy compliance costs that choke market growth. European securitization volumes have stalled since the crisis, whereas the US market has expanded, as noted critically in recent reports by Enrico Letta and Mario Draghi.
There is broad agreement in the financial sector that barriers to issuing and investing in securitizations remain high, preventing the EU economy from fully tapping the benefits this market can offer. Both originators and investors attribute these hurdles in part to conservative features of the regulatory framework, especially the burdensome rules on transparency, due diligence, and the capital and liquidity treatment of securitizations.
To tackle these constraints, the European Commission’s reform proposes sweeping changes. The EU Securitization Regulation, which governs all parties involved in such transactions, will be amended to lower operational costs for issuers and investors and to simplify certain due diligence and transparency requirements. The Capital Requirements Regulation (CRR), which sets prudential standards for banks and determines capital levels for securitization exposures, will be revised to introduce more risk-sensitive rules. The package also proposes an update to the delegated regulation on the liquidity coverage ratio (LCR), which sets out the amount of liquid assets banks must hold to meet short-term obligations.
Finally, the Commission has launched a public consultation alongside a proposal to amend the Solvency II Delegated Regulation. The aim is to improve the prudential framework for insurers so it better reflects the real risks of securitizations and eliminates unnecessary costs when investing in them.
The Commission’s package moves the EU securitization market in the right direction. By tying prudential treatment more closely to risk, and by cutting back on due diligence and disclosure burdens, it answers the sector’s core demands.
Nevertheless, the reforms raise contentious points in the proposed amendments to the EU Securitization Regulation and the Capital Requirements Regulation. Critics flag the new definition of “public securitization,” the “resilient securitization” concept, the penalty regime for institutional investors, the revised risk‑weighting schedule for securitization exposures, and the overhaul of the Significant Risk Transfer (SRT) framework.
These issues could lengthen and complicate the three-way debate among the European Commission, the European Parliament and the Council, and risk yielding a package that falls short of the ambition needed to revive the market and advance the goals of the Savings and Investment Union.