{"id":1042,"date":"2025-10-14T13:41:29","date_gmt":"2025-10-14T13:41:29","guid":{"rendered":"https:\/\/iqeq.com\/nl\/insights\/ask-the-expert-what-the-eus-securitisation-reform-means-for-cross-border-deal-making\/"},"modified":"2025-10-20T08:45:13","modified_gmt":"2025-10-20T08:45:13","slug":"ask-the-expert-what-the-eus-securitisation-reform-means-for-cross-border-deal-making","status":"publish","type":"post","link":"https:\/\/iqeq.com\/nl\/insights\/ask-the-expert-what-the-eus-securitisation-reform-means-for-cross-border-deal-making\/","title":{"rendered":"Ask the Expert: What the EU\u2019s securitisation reform means for cross-border deal-making\u00a0"},"content":{"rendered":"
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The European Commission’s <\/span>proposed reforms to the Securitisation Regulation (EUSR), Capital Requirements Regulation (CRR) and Liquidity Coverage Ratio (LCR)<\/span><\/a>, published in June 2025, aim to breathe new life into a <\/span>securitisation<\/span><\/a> market that has struggled to find its feet since the Global Financial Crisis (GFC). While there is widespread industry debate on whether these reforms will revitalise the market, the intent is clear: simplify due diligence rules, broaden participation, and reduce friction that has discouraged issuance and cross-border investment.<\/span>\u00a0<\/span><\/p>\n

While the EUSR doesn\u2019t apply directly to U.S. sponsors, it effectively reaches them via EU investor obligations. EU investors can\u2019t buy a security, U.S. or otherwise, unless they can verify EUSR compliance. The same regulations apply to European <\/span>collateralised loan obligations (CLOs)<\/span><\/a>. So, what do these changes mean for institutional investors and asset managers, particularly those involved in cross-border deal-making? And how do the EU\u2019s recent reforms compare with the current approach in the U.S.?<\/span>\u00a0<\/span><\/p>\n

We sat down with <\/span>Susan Kil-Hershey<\/span><\/a>, Client Relationship Director at IQ-EQ in the Netherlands, to explore the implications.<\/span>\u00a0<\/span><\/p>\n

For a summary of the reform package, read <\/span><\/i>Strengthening the framework: The EU\u2019s bold move on securitisation.<\/span><\/i><\/a>\u00a0<\/span><\/p>\n

Why is the EU revisiting securitisation regulation now?<\/span>\u00a0<\/span><\/h2>\n

The EU securitisation market has been flatlined for years. After the financial crisis, <\/span>regulators imposed highly prescriptive requirements<\/span><\/a> around due diligence, transparency and risk retention. While these rules were designed to protect investors and markets from another market freeze, they\u2019ve had an unintended consequence: stifling issuance and limiting investor appetite. The EU securitisation market is currently around <\/span>$1.85 trillion<\/span><\/a>, a tiny fraction of the $14 trillion market in the United States.<\/span>\u00a0<\/span><\/p>\n

The proposed reforms are designed to rebalance the market. They aim to simplify certain requirements, align capital treatment more effectively, and broaden investor participation (particularly with insurers), all while maintaining robust safeguards against the problems that sparked the financial crisis in the first place.<\/span>\u00a0<\/span><\/p>\n

What are the key implications of the EU\u2019s proposed securitisation reform?<\/span>\u00a0<\/span><\/h2>\n

Four distinct areas stand out:<\/span>\u00a0<\/span><\/p>\n

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  1. Enhanced due diligence and transparency requirements: <\/span><\/b>Investors will still face strict requirements, especially for non-EU deals. But the reforms take a more proportionate approach, aiming to reduce duplication of effort<\/span><\/li>\n
  2. Prudential treatment adjustments: <\/span><\/b>These could improve capital treatment for EU-based banks and insurers, making securitisation a more attractive tool for optimising their balance sheets<\/span><\/li>\n
  3. \u201cSole purpose\u201d test for originators: <\/span><\/b>Despite <\/span>ESA commentary earlier this year<\/span><\/a>, no changes are proposed to the \u201csole purpose test\u201d (a requirement for qualifying as an originator). This test has been the subject of significant uncertainty and debate<\/span><\/li>\n
  4. Template reporting and standardisation: <\/span><\/b>A renewed push for standardised templates, designed to make transactions easier to analyse and compare<\/span>\u00a0<\/span><\/li>\n<\/ol>\n

    Taken together, these measures signal an important step toward reinvigorating the market \u2013 though whether they will go far enough to succeed remains an open question.<\/span>\u00a0<\/span><\/p>\n

    What impact will EU securitisation reform have on cross-border deal-making?<\/span>\u00a0<\/span><\/h2>\n

    Cross-border deals<\/span><\/a> highlight the regulatory gap between the EU and other markets. The proposed reforms create both friction and relief:<\/span>\u00a0<\/span><\/p>\n

    How do the EU reforms compare with the U.S. approach to securitisation regulation?<\/span>\u00a0<\/span><\/h2>\n

    While the EU is doubling down on due diligence and market transparency, the U.S. continues to operate under a lighter regulatory regime that makes it easier for investors to participate. For example, <\/span>EU investors<\/span><\/a> must verify that counterparties meet stringent requirements, effectively acting as proxy regulators. U.S. investors don\u2019t face this same burden, making cross-border transactions more complex.<\/span>\u00a0<\/span><\/p>\n

    The reforms may ease some of this pressure within the EU, but the overall compliance burden remains heavier than in the States. That divergence has consequences: U.S. issuers are often reluctant to structure deals for EU investors, leaving EU-based stakeholders with a narrower set of opportunities to achieve the same returns.<\/span>\u00a0<\/span><\/p>\n