The European Commission’s proposed reforms to the Securitisation Regulation (EUSR), Capital Requirements Regulation (CRR) and Liquidity Coverage Ratio (LCR), published in June 2025, aim to breathe new life into a securitisation 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.
While the EUSR doesn’t apply directly to U.S. sponsors, it effectively reaches them via EU investor obligations. EU investors can’t buy a security, U.S. or otherwise, unless they can verify EUSR compliance. The same regulations apply to European collateralised loan obligations (CLOs). 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’s recent reforms compare with the current approach in the U.S.?
We sat down with Susan Kil-Hershey, Client Relationship Director at IQ-EQ in the Netherlands, to explore the implications.
For a summary of the reform package, read Strengthening the framework: The EU’s bold move on securitisation.
Why is the EU revisiting securitisation regulation now?
The EU securitisation market has been flatlined for years. After the financial crisis, regulators imposed highly prescriptive requirements around due diligence, transparency and risk retention. While these rules were designed to protect investors and markets from another market freeze, they’ve had an unintended consequence: stifling issuance and limiting investor appetite. The EU securitisation market is currently around $1.85 trillion, a tiny fraction of the $14 trillion market in the United States.
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.
What are the key implications of the EU’s proposed securitisation reform?
Four distinct areas stand out:
- Enhanced due diligence and transparency requirements: 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
- Prudential treatment adjustments: These could improve capital treatment for EU-based banks and insurers, making securitisation a more attractive tool for optimising their balance sheets
- “Sole purpose” test for originators: Despite ESA commentary earlier this year, no changes are proposed to the “sole purpose test” (a requirement for qualifying as an originator). This test has been the subject of significant uncertainty and debate
- Template reporting and standardisation: A renewed push for standardised templates, designed to make transactions easier to analyse and compare
Taken together, these measures signal an important step toward reinvigorating the market – though whether they will go far enough to succeed remains an open question.
How do the EU reforms compare with the U.S. approach to securitisation regulation?
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, EU investors must verify that counterparties meet stringent requirements, effectively acting as proxy regulators. U.S. investors don’t face this same burden, making cross-border transactions more complex.
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.
What impact will EU securitisation reform have on cross-border deal-making?
Cross-border deals highlight the regulatory gap between the EU and other markets. The proposed reforms create both friction and relief:
- Article 7: The EUSR would expressly require EU investors in non-EU securitisations to ensure full Article 7 reporting, using EU-prescribed templates. This effectively codifies the market stance that many EU investors already take on U.S. deals. We expect continued pressure on U.S. sponsors to deliver EU-grade reporting packages, which may discourage cross-border deals
- Public vs. private: The proposal broadens “public” securitisations to include a wider range of transactions. That means some U.S. issues could be treated as public where they might previously have been viewed as private, requiring more robust reporting
- Repository filings extend to private deals: Article 7 filings with EU repositories would extend to private securitisations via a simplified template, though with access limited to regulators. The mechanics and timing for non-EU transactions are still unclear, leaving another area of uncertainty for U.S. sponsors and EU investors to navigate
- Due diligence relief: While the overall compliance lift remains heavier in the EU than the U.S., the European Commission is signalling a more principles-based investor due diligence approach that simplifies procedures for senior tranches and repeat issuers
- Supervisory governance: The European Banking Authority (EBA) will take a permanent lead in overseeing securitisation, aiming to harmonise rule application across EU member states. This should reduce fragmentation and improve legal certainty for cross-border transactions
How do the reforms intersect with Solvency II?
An important market update involves Solvency II, which governs insurers. The proposed changes facilitate greater insurance participation in securitisation markets, potentially broadening the investor base.
For deal-makers, this could translate into more liquidity and a wider pool of counterparties in Europe, which would be a welcome development in a market that has struggled for years to attract a more diverse set of investors.
What’s the bigger picture for Europe’s position as a market competitor?
On one hand, Europe’s framework is still more stringent than the U.S., which could discourage some cross-border participation. On the other hand, these requirements come with reassurance of stability, integrity and investor protection, all of which are qualities that could strengthen Europe’s appeal over time.
These reforms are a balancing act, making securitisation more efficient and accessible without reopening the door to the high-risk practices that created the GFC. Deal-makers will need to navigate these reforms strategically, weighing the regulatory costs against the benefits.
What should asset managers and institutional investors do now?
- Stay informed: The regulatory landscape is shifting, and cross-border transactions will continue to require careful navigation
- Reassess deal pipelines: Consider how enhanced due diligence and reporting requirements could impact structuring, timelines, and counterparties
- Watch the opportunity set: Expanded insurer participation under Solvency II could create new liquidity channels in Europe
While these reforms won’t eliminate the divergence between EU and U.S. frameworks, they do open the door to more strategic deal-making in Europe.
At IQ-EQ, we support clients across the full securitisation life cycle, from establishment, structuring and advisory to ongoing operational support, with end-to-end solutions encompassing all relevant aspects of the new framework. We also offer comprehensive loan administration services and ESMA Article 7 reporting services. Get in touch today to learn more about how you can navigate EU securitisation reform.
