By Joanne McEnteggart, Global Head of Debt, Capital Markets and Corporates
The European Union has taken a decisive step toward revitalising its securitisation market. On 17 June 2025, the European Commission published its proposed reforms to the Securitisation Regulation, Capital Requirements Regulations (CRR) and Liquidity Coverage Ratio (LCR). These reforms aim to boost the EU’s securitisation market while maintaining robust financial stability safeguards.
In this article, we explore the key components of these reforms and their potential impact on European central markets.
Market sentiment shifts ahead of reform
Even before the Commission’s official announcement, the reform had already begun to shape market sentiment. At the Global ABS 2025 Conference, held just days prior to publication, participants expressed cautious optimism in anticipation of the reforms.
This positive sentiment was driven by several converging factors: early signs of recovery in residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS), national support measures for SME and consumer lending, and expectations that capital relief measures will encourage banks to offload assets. In addition, non-bank lenders are also expanding into SME and sustainable finance, with faster decision-making and attractive yields, which are key to diversifying funding sources and strengthening the broader securitisation market.
What’s in the reform package?
The EU reform package introduces several targeted measures designed to revive securitisation by reducing friction, easing capital rules and broadening investor participation, particularly among insurers and SME lenders. The proposals include amendments to four key regulatory frameworks:
- The Securitisation Regulation – streamlining some due diligence and transparency requirements to reduce compliance burdens
- The Capital Requirements Regulation (CRR) – introducing a new category of ‘resilient transactions’ with more risk-sensitive capital treatment and a shift from mechanical to principle-based Significant Risk Transfer (SRT) assessments. This aims to make securitisation more effective for risk management and capital relief while mitigating regulatory arbitrage.
- The Liquidity Coverage Ratio (LCR) Delegated Regulation – addressing inconsistencies to improve the eligibility of securitisation instruments in banks’ liquidity buffers
- Solvency II (forthcoming) – planned adjustments to capital charges that will ease insurers’ participation in the securitisation market
Why these reforms matter
The reforms represent a strategic response towards reviving Europe’s underutilised securitisation market, which is just 17% the size of the U.S. market. The package includes targeted amendments to the Securitisation Regulation, aiming to reduce operational costs, simplify due diligence and transparency requirements and ease compliance for issuers and investors. It also seeks to reduce complexity and foster a deeper, more integrated EU capital market.
Complementary changes to the Capital Requirements Regulation (CRR) aim to enhance risk sensitivity in bank capital rules. Draft amendments to the Liquidity Coverage Ratio (LCR) Delegated Regulation, now under consultation, address inconsistencies in securitisation eligibility for liquidity buffers. Forthcoming amendments to the Solvency II are expected to ease prudential costs for insurers investing in securitisations.
By easing capital rules, streamlining reporting, and improving risk alignment, the proposals aim to support SME lending, restore investor confidence, and strengthen the EU’s financial resilience.
No reform without responsibility
These reforms are not without trade-offs. Critics have raised concerns that some measures risk undercutting Basel standards and long-term financial stability. While disclosure requirements have been simplified for private deals, concerns remain about the obligation to report all private transactions to data repositories and the potential liability of investors for due diligence breaches.
As Maria Luís Albuquerque, Commissioner for Financial Services and the Savings and Investments Union, rightly cautioned: “A vibrant securitisation ecosystem cannot be achieved by regulation alone and is not an end in itself.” The success of these reforms will ultimately depend on industry implementation and commitment to maintaining the market’s long-term resilience.
The path forward
These proposals represent the first steps in what will be a comprehensive legislative process. Stakeholders have until 15 July to voice their concerns and provide feedback during the consultation period The final impact of these reforms will depend on how effectively the industry embraces the changes and leverages them to build a more robust and dynamic securitisation market.
The Commission’s willingness to address regulatory burdens while maintaining prudential standards signals a mature approach to market development. As the EU continues to strengthen its position in global capital markets, these securitisation reforms could prove instrumental in bridging the gap between Europe’s financial potential and its current market reality.
How can IQ-EQ help
At IQ-EQ, we support clients across the full securitisation life cycle, from structuring and advisory to ongoing operational support. Our multi-servicing locations cover all types of securitisation transactions and fund management, from private and warehouse transactions to complex multi-currency and significant risk transfer (SRT) structures.
Our expertise spans the full cycle of asset-based securities transactions, including auto, consumer, equipment, credit cards, CMBS, RMBS and insurance-linked securities (ILS), ensuring tailored solutions and regulatory EU reporting for issuers, advisers and investors.
Still have questions about EU securitisation reform? Contact our expert team for support.
