Savings & Investments Union – Proposal for a Reform of Securitisation

On 17 June 2025, the European Commission unveiled its Securitisation Review Package, proposing key amendments to the Capital Requirements Regulation (CRR) and the Securitisation Regulation (SECR). This reform, which constitutes the first legislative initiative proposed under the Savings and Investments Union (SIU) Strategy, aims to create a more risk-sensitive, proportionate, and efficient securitisation framework for the European Union.

At the heart of the initiative is a revision of prudential capital requirements, which have long been identified as a structural barrier to market development. While the proposal is technical in nature, its implications could be highly practical—particularly for institutions seeking to optimise balance sheet management and diversify funding sources.

WHY IS THIS REFORM IMPORTANT?

The EU securitisation framework is being reformed because, despite its role in enhancing market transparency and safety after the 2008 crisis, it has proven too conservative and operationally burdensome, stifling the market’s potential to support economic growth and the EU’s strategic priorities.

Current rules impose disproportionately high capital requirements—often doubling the capital charge for securitised exposures compared to holding the same loans directly—while also mandating complex, prescriptive transparency and due diligence obligations that drive up compliance costs, particularly for smaller banks and investors.

As a result, the EU securitisation market remains a fraction of its pre-crisis size and lags far behind the US, with annual issuance around €100 billion versus over €1 trillion in the US, and activity concentrated in a handful of Member States and large institutions. This underperformance limits banks’ ability to free up capital for new lending, hinders risk diversification, and undermines the EU’s ambitions for a deeper, more integrated capital markets.

High-level reports—including those by Enrico Letta, Mario Draghi, and Christian Noyer—as well as repeated statements from EU policymakers, have emphasised the need to address these shortcomings. A more risk-sensitive, proportionate, and harmonised framework is seen as essential to unlocking securitisation’s potential to address Europe’s crucial funding needs- be it to finance SMEs, the green transition, or the European defence industrial base.

Below, we outline the most important changes and their potential implications for banks, investors, and originators.

MAKING CAPITAL REQUIREMENTS MORE RISK-SENSITIVE

Under current rules, banks face fixed minimum capital charges for securitised exposures—regardless of the actual risk of the underlying assets. For example, senior tranches in STS (simple, transparent, and standardised) deals are subject to a 10% minimum risk weight, and 15% for non-STS.

The proposed amendments introduce a more granular, risk-sensitive approach, whereby minimum capital requirements are directly linked to the average credit quality of the underlying pool. For instance, securitisations backed by prime residential mortgages could benefit from lower capital charges, while riskier assets would still attract higher weights.

That said, a minimum floor (5% to 15%) will continue to apply to avoid undercapitalisation and maintain consistency with international standards.

This change aims to better align capital requirements with the actual risk profile of the securitised assets, reducing unnecessary capital costs for low-risk transactions in order to make securitisation a more viable balance sheet management tool, allowing institutions to release capital for new lending. In addition, risk-sensitive calibration may offer banks a competitive advantage in deal structuring and pricing.

REDUCING OVERLY CONSERVATIVE CAPITAL ADD-ONS (THE P-FACTOR)

The p-factor is a multiplier applied in the calculation of capital requirements for securitisation exposures. It often results in a significant capital add-on compared to holding the underlying assets directly. Under the current framework, senior positions in STS securitisations are subject to a scaling factor of 0.5 and a floor factor of 0.3—resulting in a 50% and 30% increase, respectively, in capital requirements for those exposures.

The reform proposes to lower the p-factor for senior positions, especially for originators and sponsors, and for STS transactions. There will also be a cap and a lower floor for the p-factor, and a recalibration of the look-up tables for externally rated securitisations.

However, non-STS and non-senior securitisations will not benefit from these adjustments, as the Commission continues to view investments in mezzanine positions as undesirable from a prudential perspective.

This recalibration seeks to address concerns that the current framework is excessively conservative, leading to overcapitalisation and discouraging the use of securitisation. A more proportionate and risk-aligned capital treatment is expected to broaden market participation, especially among small and medium-sized banks.

That said, the p-factor reform is also expected to be one of the more politically sensitive elements of the proposal and may face intense scrutiny during negotiations in the Council of the EU and the European Parliament.

INTRODUCING “RESILIENT SECURITISATION POSITIONS”

A significant innovation in the reform package is the creation of a new category: “resilient securitisation positions.” These are senior tranches that meet enhanced structural criteria and will qualify for further reduced capital requirements.

To qualify as “resilient,” positions must meet conditions such as sequential amortisation (where losses are absorbed by junior tranches first), high granularity (no single exposure exceeds 2% of the pool), and robust credit enhancement. For synthetic transactions, only high-quality collateral or guarantees from sovereigns or supranational entities are permitted.

These enhanced requirements are intended to reward well-structured transactions that genuinely transfer credit risk and protect senior investors. In doing so, the framework aims to incentivise best practices in deal design and risk management, improving the overall quality and credibility of the market.

OVERHAULING THE SIGNIFICANT RISK TRANSFER (SRT) FRAMEWORK

The current significant risk transfer (SRT) rules rely on mechanical tests and, in some cases, require prior regulatory approval. This has often created uncertainty and delays for originators seeking capital relief through securitisation.

The proposed amendments replace these with a principle-based approach, requiring originators to submit a self-assessment—including cash-flow modelling—to demonstrate that significant risk has been transferred to investors, even under stress scenarios. The European Banking Authority (EBA) will set out detailed technical standards, and a fast-track process will be available for straightforward deals.

The overhaul is designed to make the SRT framework more robust, transparent, and harmonised across Member States. It should also enhance supervisory predictability, giving originators and investors greater confidence in the regulatory outcome.

SIMPLIFIED TRANSPARENCY AND DUE DILIGENCE

The package also includes a review of the Securitisation Regulation (SECR), introducing several amendments to the due diligence and transparency requirements.

The reform introduces clear definitions for “public” and “private” securitisations. Public deals are those with a prospectus, listed on a trading venue, or marketed on a “take-it-or-leave-it” basis. Private deals are everything else, typically involving bilateral negotiations with a small group of investors. This distinction matters because public deals will continue to face more extensive transparency and reporting requirements, while private deals will benefit from simplified templates and restricted data access to protect confidentiality.

Investors will no longer be required to duplicate checks on EU-based originators, sponsors, or SSPEs, as these entities are already subject to EU supervision. The list of required structural checks is being streamlined, and due diligence can be delegated (with ultimate responsibility remaining with the delegating party). Investments fully guaranteed by multilateral development banks will be exempt from due diligence requirements

The commission also plans to review the implementing texts that describe reporting templates for securitisations, in order to “lower the reporting burden on issuers.” It aims to reduce the number of required fields by at least 35%, and to “consider distinguishing between mandatory and voluntary fields.” The template for private securitisations is intended to be “much lighter than the one for public securitisations.”

SME SECURITISATION AND CREDIT PROTECTION

Several amendments aim to facilitate SME lending and attract a broader range of non-bank investors, enhancing both market depth and risk-sharing across the financial system.

Previously, only pools made up entirely of SME loans could qualify as “homogeneous” for STS purposes. The new rule lowers this threshold to 70%, allowing mixed pools with a strong SME component to benefit from the STS framework.

Unfunded guarantees from robust, diversified insurance and reinsurance companies will now be eligible as credit protection for STS on-balance-sheet synthetic securitisations, provided they meet strict solvency, diversification, and size criteria,

SUPERVISORY CONVERGENCE AND GOVERNANCE

The EBA will take a leading role in the Securitisation Committee, which will develop guidelines for common supervisory procedures and coordinate cross-border supervision. A lead supervisor will be for cross-border deals, and failure to comply with due diligence will be explicitly sanctionable.

This should lead to more consistent supervision and enforcement across the EU, reducing regulatory fragmentation and uncertainty for market participants.

FINAL THOUGHTS: A STEP FORWARD—WITH SOME DEBATE TO COME

While the reform package represents a meaningful effort to make EU securitisation more efficient and attractive, some proposals—especially those related to capital relief—may prove politically sensitive. Memories of the 2008 financial crisis still shape perceptions, particularly around the risks of structured finance.

The reform will be complemented by amendments to two delegated acts: the Liquidity Coverage Ratio Delegated Regulation (EU) 2015/61, concerning liquidity requirements for credit institutions, and the Solvency II Delegated Regulation (EU) 2015/35, addressing the prudential regime for insurance and reinsurance undertakings.

Nonetheless, the reforms offer real opportunities for institutions prepared to adapt and develop their securitisation practice. From improved capital treatment to simplified compliance, this could mark a turning point for Europe’s securitisation market. To a large extent, this proposed reform will be the first test of the willingness of policymakers to adopt a truly more ambitious approach towards building up European capital markets.

As always, we are available to assist clients in assessing the impact of the reforms and navigating the forthcoming changes in detail.