Policy progress for the EU securitisation market? What you need to know about the latest regulatory proposals

On 17 June 2025, the European Commission published proposals to amend the EU regulatory framework for securitisation (the proposals). The proposals have already made headlines, after draft versions were leaked earlier in June, but we now have the official texts. Reflecting a wider shift towards easing regulatory burden to stimulate economic growth, the proposals seek to boost the EU securitisation market by addressing aspects of the existing rules which unduly create barriers to issuance and investment. In this blog, we summarise the key proposals and what they could mean for the industry.

The package of proposals includes draft amendments to the EU Securitisation Regulation (SECR), the EU Capital Requirements Regulation (CRR) and the Liquidity Coverage Ratio (LCR) Delegated Regulation. Proposed amendments to the Solvency II capital requirements for insurers are expected to be published in the next few weeks. 

The proposals focus on simplifying reporting and due diligence requirements and introducing more risk sensitivity into the regulatory capital framework. Overall, the proposals are certainly moving in the right direction and are generally welcomed. However, some concerns remain.

1. Public vs Private Securitisation 

The proposals contain new definitions for “public securitisation” and “private securitisation”. The scope of which transactions are considered to be public securitisations is set to broaden significantly. 

Under the proposals, a public securitisation is one that meets any of the following criteria:

1. a prospectus is required to be drawn up for that securitisation pursuant to the EU Prospectus Regulation;
2. the securitisation is marketed with notes constituting securitisation positions admitted to trading on an EU trading venue, being a regulated market, multilateral trading facility or organized trading facility; or
3. the securitisation is marketed to investors and the terms and conditions are not negotiable among the parties, meaning that the transaction is offered to investors on take-it-or-leave-it basis.

A private securitisation is one that does not meet any of the above criteria.

The first limb of this test is how public and private securitisations are currently distinguished under the SECR, and has the advantage of being clear in its application, but it has been viewed as too narrow. The second limb of this definition intends to widen the scope of the public securitisation definition to catch securitisations which are essentially public in nature but listed on platforms which do not create a requirement to produce a prospectus under the EU Prospectus Regulation. However, many transactions which are essentially private in nature are listed for technical reasons rather than for accessing specific investor markets, and the drafting of this limb may drive such listings outside of the EU. The third limb of this test will be the most difficult with which to confirm compliance, given its subjective nature. 

The reporting templates for public securitisations would be reviewed and simplified, with a target of 35% reduction in the number of fields, by the securitisation sub-committee of the Joint Committee of the European Supervisory Authorities (ESAs) under the leadership of the EBA, rather than responsibility for this being left with ESMA. Loan level data would not be required for granular short term underlying exposures such as credit cards or consumer loans.

A simplified reporting template would be developed for private securitisations. However, marking a significant change to current requirements, these private securitisation reports would need to be filed with a securitisation repository. This would increase compliance and transaction costs for private transactions. Private securitisation reports won’t be made publicly available by the securitisation repositories, in an attempt to preserve confidentiality. Whether this is enough to reduce confidentiality concerns remains to be seen. 

Under the current rules, securitisations with no EU party on the sell-side (here referred to as offshore securitisations) have generally fallen into the private securitisation category due to the EU Prospectus Regulation not applying to the sell-side parties. Under the proposed new definitions, offshore securitisations that meet the third limb of the definition would fall into the public securitisation category. To allow EU institutional investors to satisfy their due diligence requirements in relation to such offshore securitisations, the non-EU sell-side entities would need to report using the EU’s public reporting templates.

Even for private offshore securitisations, given the move to require reporting via securitisation repositories for all securitisations, it seems that reporting for offshore securitisations may need to be done via securitisation repositories to allow EU institutions on the lending/investing side to meet their due diligence obligations, representing an extra cost to the sell-side for involving EU institutions. This could disincentivise non-EU parties from using EU banks in these types of cross-border financings and limit the ability for EU institutional investors to invest in offshore securitisations, thereby reducing diversification opportunities.   

2. Due diligence requirements 

The proposals include some helpful changes which should reduce the due diligence burden in certain cases. Certain verification requirements would be removed where there is a sell-side party in the EU who must comply with the direct sell-side obligations. Risk assessment requirements would be made more principles based and proportionate to the risk of the securitisation; senior trances should require less extensive due diligence than junior or mezzanine tranches. 

Public sector supported transactions would get additional relief. All due diligence requirements would be waived for securitisation positions which are fully and unconditionally guaranteed by a multilateral development bank, and certain verification and on-going monitoring requirements are disapplied for senior positions in securitisations where a 15% first loss piece is held or guaranteed by the EU or national promotional banks and institutions.

However, there are two key concerns with the proposals for the institutional investor requirements.

Firstly, provision would be made in the SECR for administrative sanctions, including the possibility of large fines, to be applied where institutional investors fail to meet their due diligence requirements. Alongside this, the proposed amendments would mean that an institutional investor which delegates investment decisions and the associated due diligence activities to a managing party is not able to pass the regulatory responsibility for satisfaction of the SECR due diligence requirements to that managing party, even if that managing party is an EU institutional investor, which could result in significant operational difficulties for EU institutional investors in securitisations. 

Secondly, there has been no alleviation of the “article 5(1)(e)” problem in relation to offshore securitisations. EU institutional investors in offshore securitisations would continue to require reporting in the format required for EU securitisations to satisfy their own due diligence requirements which requires the non-EU sell-side parties to report using the EU’s reporting templates and, under these proposals, via securitisation repositories, further increasing compliance cost. Even with the proposed simplification of the reporting templates, this is likely to reinforce barriers to investment by EU institutional investors in offshore securitisations; not all offshore securitisation sell-side parties are willing to comply with the full EU disclosure requirements. The reasoning behind this policy is not clear. Limiting investment choice in this way could limit portfolio growth and diversification opportunities, and in consequence have a negative impact on EU savers.  

3. Risk retention requirements 

The only proposed change to the risk retention requirements is to disapply the retention requirement for senior positions in securitisations where a 15% first loss piece is held or guaranteed by certain member state governments or central banks, national promotional banks or institutions, multilateral development banks or the EU. 

Notably absent, there is no comment relating to the sole purpose test. There is nothing in the proposals around the term ‘sole purpose’, nor is there a mandate for the ESAs to reconsider the detailed guidance set out in the risk retention technical standards or comments on the interpretation of the term ‘predominant source of revenue’ recently included in the report on the functioning of the SECR published by the Joint Committee of the ESAs on 31 March 2025.

4. Changes to capital requirements for credit institutions

The Commission has proposed adjustments to risk weight floors, focussed on senior positions in low-risk portfolios. The (p) factor (a factor which increases the amount of capital that credit institutions need to hold against securitisation positions compared with a direct holding of the underlying exposures if they were not securitised, under the formula-based approaches) would also be adjusted, with a focus on reductions for originators/sponsors positions and for investments in certain senior positions of STS securitisations. The potential implications of these proposals are still being digested by the market. 

5. Resilient securitisation positions

Proposed amendments to the CRR include introducing a whole new class of “resilient securitisation positions”, creating an additional way for credit institutions and investment firms to hold less capital against qualifying securitisation positions. Under this regime, senior positions in securitisations which satisfy a set of eligibility criteria (being a sub-set of the STS criteria) aimed at ensuring low agency and model risk and robust loss absorbing capacity could benefit from additional reductions in associated capital requirements. An originator/sponsor may have a resilient position in a non-STS securitisation, where minimum credit enhancement requirements are met. A non-originator/sponsor investor could only have a resilient securitisation position in an STS securitisation. 

6. Amendments to the SRT framework

Under the proposals, the main elements of the Significant Risk Transfer (SRT) assessment would be set out in the CRR, with further technical details to be set out in technical standards which would be prepared by the EBA. The stated aim here is to make the application of the SRT rules more consistent and predictable. A new Principles-Based Approach test is introduced to replace the existing mechanical tests, which requires the originator to transfer at least 50% of unexpected losses of the exposures to third parties. 

7. Amendments to the STS criteria 

In order to make it easier for securitisations of SME loans to meet the STS criteria, the homogeneity requirements would be modified to state that a securitisation where at least 70% of the underlying exposures are SME loans would comply with homogeneity requirements.

In relation to STS on-balance-sheet synthetic securitisations, the eligibility criteria for credit protection would be modified to permit unfunded guarantees by certain large insurers.

8. Supervision

Changes would be made to the supervision processes, with the general aim of making the application of the rules more consistent across the EU. The proposals include an increased role for the securitisation sub-committee of the Joint Committee of the European Supervisory Authorities, which would be permanently chaired by the EBA. Where a securitisation has sell-side parties in multiple EU member states, a lead supervisor would be appointed by the NCAs involved. 

When will the proposed changes become applicable to transactions?

The proposals will now be submitted to the European Parliament and Council of the EU for approval. This procedure is likely to result in some changes being made to the draft texts before the final texts of the amending legislation are agreed. The texts would then need to be translated in the EU member state languages before they can be published in the Official Journal of the EU and take effect. It is uncertain how long this process will take, but it would typically be expected to take at least 18 months. 

New reporting templates will follow later; once the regulations to amend the SECR and the CRR are finalised, the new reporting templates will need to be drafted by the Joint Committee of the ESAs (under the leadership of the EBA) and go through the normal legislative processes before they can become applicable. 

For detailed insights or to discuss how these changes may affect your transactions, please contact our team.