This article was first published in the 23rd edition of the Fact Book on 24 June 2025.
The European Commission’s decision to review the EU legal framework for securitisation is a significant step in enhancing the European Savings and Investment Union and ultimately in increasing EU competitiveness. As recommended in the reports of Christian Noyer, Enrico Letta and Mario Draghi, this review is aimed at facilitating the greater use of securitisation in Europe. This would in turn allow banks to free up balance sheet capacity and ultimately enhance their lending capacity and support broader economic growth. From an asset management perspective, securitisations represent an attractive asset class that offer investors opportunities for diversification, enhanced yield and tailored risk exposure. To date, however, regulatory complexities and onerous due diligence obligations have rendered this asset class less attractive to investors.
Background
The EU securitisation framework was established in 2019, in the wake of the global financial crisis. It aimed to revitalise the EU securitisation market, which had shrunk from EUR 2.0 trillion in 2008-2009 to EUR 1.2 trillion at the end of 2023. The new framework introduced rules on due diligence, risk retention and transparency as well as creating the ‘STS’ label. However, despite this new framework, the European securitisation market has not recovered at the same rate as other jurisdictions such as in the US.
In October 2024, the European Commission launched a consultation on the EU securitisation framework, seeking to identify regulatory obstacles hindering the issuance and investment in securitisation transactions. The consultation received input from 133 respondents - including from asset managers - with a focus on several key areas; transparency, due diligence, capital requirements and overall regime flexibility. In addition, ESMA (European Securities and Markets Authority) launched its own consultation, with a closing date of March 2025, on potential amendments to disclosure templates for private securitisations. Also in March 2025, the ESAs (European Supervisory Authorities) released a joint report offering targeted recommendations for legislative changes.
Key Concerns for Asset Managers
European asset managers voiced the following concerns and recommendations during the consultation process:
- Principles-Based Due Diligence: Asset managers strongly supported the adoption of a more- flexible, principles-based approach to due diligence under Article 5 of the SECR (Securitisation Regulation). The current rules set out an overly-prescriptive approach which is particularly inappropriate for private securitisations and repeat issuances. A more-flexible framework would allow asset managers to maintain a high standard of due diligence while exercising discretion in assessing the risks and quality of underlying assets, rather than adhering to a one-size-fits-all approach. This shift is viewed as vital for enhancing the attractiveness of securitisation for investors.
- Disclosure Templates for Private Securitisation: ESMA's proposal for a simplified disclosure template for private securitisations is another area of interest for asset managers. While the new templates aim to reduce the complexity and regulatory burden associated with disclosure obligations, particularly for private transactions, EFAMA members advocate for a substance-over-form approach. This method which would permit those party to the securitisation to determine their own format for disclosures. This would align better with existing market practice, whereby investors in certain private securitisations continue to receive disclosures via bilaterally designed reports in addition to the SECR-mandated disclosure templates. These bilateral reports are viewed as much more useful than those mandated by the legislation.
- Geographical Scope: Asset managers also stressed that any changes should not further broaden the divide between EU and non-EU securitisations. Currently, European investors are limited to investing in only 25% of the global securitised market; this is because as the remainder of the investible universe opts not to comply with SECR reporting templates. This forces EU funds to operate within a constrained market, meaning their investment strategies become less diversified and less scalable, limiting their ability to achieve optimal returns as a result. Enabling EU funds to invest in a broader range of securitisations would not only make their investment strategies more competitive on the global scale but also make securitisation investments more attractive and drive greater liquidity in the market. This in turn would increase demand and growth in this asset class.
Public Securitisation: In the joint report issued by the ESAs in March 2025, there were recommendations to broaden the definition of ‘public securitisation’. In EFAMA’s response to the Commission’s consultation in December 2024, asset managers emphasised that such an expansion to the definition of public securitisations would be counterproductive, as it would inadvertently include, within its scope, certain securitisations that should remain classified, notably certain CLOs which should remain classified as private in nature.
Looking ahead
The revisions to the EU securitisation framework are expected to take a number of years to finalise, beginning with a legislative proposal by the Commission this year. Changes to the disclosure templates for private securitisations may take place in the meantime, as an interim measure. With the right regulatory changes, asset managers will be better able to leverage securitisation as a tool for diversification, risk management and liquidity, contributing to the broader goal of a more-integrated and competitive European capital market.
Notes to Editors
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