Briefing - Review of the EU securitisation framework - The Securitisation Regulation and the Capital Requirements Regulation - 12-06-2025
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'Securitisation' is the process of pooling financial assets (such as loans, mortgages and consumer credit) and turning them into tradable securities. This process allows banks to transfer the risk of some loans to other banks or long-term investors, such as iBriefing - Review of the EU securitisation framework - The Securitisation Regulation and the Capital Requirements Regulation - 12-06-2025
'Securitisation' is the process of pooling financial assets (such as loans, mortgages and consumer credit) and turning them into tradable securities. This process allows banks to transfer the risk of some loans to other banks or long-term investors, such as insurance companies and asset managers. Banks are then allowed to use the capital which was set aside to cover the risk of those same loans to create and sell new loans. In the European Union (EU), the space freed up in banks' balance sheets through the securitisation process can be used to support the Union's priorities, such as the green and digital transitions. However, if left unregulated, the process of securitisation can increase vulnerabilities across the financial system, as it did in the United States with the subprime mortgage crisis which began in 2007. As part of its Capital Markets Union initiative, launched in 2015, the EU relaunched the framework establishing an EU securitisation market, helping the development of finance and the economy without creating risks to financial stability; this is the securitisation framework, which came into force in 2019. According to the Commission's 2022 review report, while the EU's current securitisation framework has made the EU's market safer, it has also resulted in higher costs for issuers and investors, preventing the development of the EU's securitisation market. The capital requirements it introduced may have reduced incentives to participate in or issue securitisations, and some stakeholders have stated that the EU's due diligence requirements have created entry barriers or disincentives for participation by some investors. With the start of the 10th legislative term, the intention of accelerating work on all European savings and investments measures, including securitisation, was confirmed in Commission President Ursula von der Leyen's political guidelines of July 2024; in the mission letter of the Commissioner for Financial Services, Maria Luís Albuquerque, of September 2024; and in the 2025 Commission work programme. The European Parliament has remained supportive of securitisation as a tool for funding the EU's economy but has remained critical of any dilution of regulatory standards that could raise systemic risk. This briefing focuses on the two legal acts of the securitisation framework that the Commission proposes to review in June 2025: the Securitisation Regulation and the Capital Requirements Regulation. These two regulations govern the general rules for securitisation, and the capital requirements for banks and investment firms that hold securitisation positions, respectively. Source : © European Union, 2025 - EP Read more
