European Commission Publishes Landmark Review and Reform Proposal for the EU Securitisation Framework

On 17 June 2025, the European Commission published its long-awaited review of the EU Securitisation Framework, accompanied by a comprehensive legislative proposal to amend the EU Securitisation Regulation (Regulation (EU) 2017/2402), the EU Capital Requirements Regulation (Regulation (EU) No 575/2013), the EU Solvency II Delegated Regulation (Commission Delegated Regulation (EU) 2015/35) and the EU Liquidity Coverage Requirement Delegated Regulation (Commission Delegated Regulation (EU) 2015/61).

Below, we provide a summary of the key elements of the Commission's report and legislative proposal, highlighting areas of alignment and divergence with recent input from expert groups and supervisory authorities.

Key Objectives of the Review

• Revitalise the EU Securitisation Market: The Commission recognises that the current framework, while successful in restoring market integrity post-crisis, has become overly conservative, stifling market growth and innovation.
• Reduce Operational and Prudential Barriers: The proposals seek to lower unnecessary costs and compliance burdens for issuers and investors, while maintaining high standards for transparency, investor protection, and financial stability.
• Enhance Risk Sensitivity: Adjustments to the prudential framework are designed to better reflect the actual risks of securitisation exposures, particularly for banks and insurers, and to remove undue capital and liquidity constraints.
• Support EU Strategic Priorities: By freeing up bank capital and facilitating risk transfer, securitisation is positioned as a key tool to finance the green, digital, and social transitions, as well as to strengthen the EU's competitiveness and resilience.

Headline Reforms and Proposals

1. Targeted Amendments to the Securitisation Regulation

• Public vs. Private Securitisation (Article 2): The proposal introduces definitions for public and private securitisation.
• Simplified Due Diligence (Article 5): Duplicative verification requirements for investors are removed when EU-based sell-side parties are involved, recognising that these are already subject to EU supervision. Due diligence requirements are waived where multilateral development banks fully guarantee the securitisation position. Lighter due diligence, specifically via waiving the verification and documentation requirements, applies when a first loss tranche, representing at least 15% of the nominal value, is guaranteed or held by certain public entities.
• Risk Retention (Article 6): Risk retention is waived in case the securitisation includes a first loss tranche that is guaranteed or held by a narrowly defined list of public entities and where that tranche represents at least 15% of the nominal value of the securitised exposures.
• Transparency Requirements (Article 7): Reporting templates for public securitisations will be reduced by at least 35% in mandatory data fields. A lighter, dedicated template will be introduced for private securitisations, which will be reported to repositories with confidentiality safeguards.
• Homogeneity Criterion for SME Securitisation (Articles 20(8), (15) and Article 26b(8)): Pools with at least 70% SME exposures will be deemed homogeneous, facilitating SME securitisations.
• STS On-Balance-Sheet Securitisation (Article 26e(8)): The eligibility of (re)insurers as protection providers is expanded, subject to solvency and diversification criteria.
• Supervisory Convergence and Market Oversight (Articles 29, 30, 32 and 36): The role of the securitisation sub-committee of the Joint Committee of the European Supervisory Authorities will be strengthened, with the European Banking Authority taking a permanent lead. The aim is to reduce fragmentation and ensure consistent rule application across Member States, including for third-party verifiers and cross-border transactions.

2. Adjustments to the CRR

• Risk-Sensitive Capital Requirements (Articles 260 and 262 CRR): A risk-sensitive risk weight floor for senior securitisation positions is instructed to replace the current flat-rate approach, allowing lower capital charges for high-quality, low-risk portfolios.
• Recalibration of the (p) Factor (Articles 259-262 CRR): The (p) factor, which drives the non-neutrality of capital requirements, will be reduced for senior, STS, and originator/sponsor positions, particularly under the standardised approach (SEC-SA).
• Resilient Securitisation Positions (Article 243 CRR): A new category of "resilient" senior positions is introduced, subject to additional eligibility criteria (e.g., granularity, amortisation, credit enhancement), and benefiting from further capital relief.
• Significant Risk Transfer (SRT) (Articles 244 and 245 CRR): The current mechanical SRT tests are replaced by a principle-based approach, requiring originators to demonstrate, via self-assessment and cash-flow modelling, that at least 50% of unexpected losses are transferred to third parties. A fast-track assessment process is envisaged for straightforward transactions.

Alignment and Divergence with Expert and Supervisory Reports

The Commission's proposals are broadly aligned with other recent recommendations of the Expert Group on Banking, Payments and Insurance (EGBPI) set out in the "Non-Paper on the Review of the EU Securitisation Framework" (May 2025), the European Systemic Risk Board (ESRB) set out in "Unveiling the impact of STS on-balance-sheet securitisation on EU financial stability" (May 2025), and the Joint Committee of the ESAs set out in the "Joint Committee Report on the Functioning of the Securitisation Regulation" (March 2025), particularly regarding the need for proportionality, simplification, and supervisory convergence.

Key Points of Alignment: All reports support a more risk-sensitive and proportionate regulatory framework, streamlined due diligence and transparency, and harmonised oversight.

Notable Deviations:

• STS On-Balance-Sheet Securitisation: While the ESRB expresses reservations about allowing (re)insurers to provide unfunded credit protection under the STS framework (citing contagion and counterparty risk), the Commission's proposal allows this, subject to strict eligibility criteria.
• Definition of Public Securitisation: The ESAs recommend a specific, post-closing market test to determine if a transaction is public, while the Commission’s proposal does not include such a test, instead relying on the offer’s characteristics.
• Risk Retention and Homogeneity: The Commission introduces more flexibility in the homogeneity criterion for SME pools and clarifies risk retention requirements, reflecting but not fully mirroring the ESAs' recommendations by setting a specific threshold: at least 70% of the pool must be SME exposures for the pool to be considered homogeneous.

Conclusion and Next Steps

The Commission's proposal introduces several welcome changes that align with the recommendations of expert groups and supervisory authorities, such as providing relief from due diligence requirements in certain circumstances. However, it also introduces areas of uncertainty, for example, regarding limb (b) of Article 2(32) in the definition of public securitisation. Securities issued in private transactions are sometimes listed solely for regulatory purposes, but this does not necessarily render the transaction a public securitisation. The proposed amendments to the CRR are complex and detailed, and it remains to be seen whether they will effectively achieve the intended outcomes in practice. It should also be noted that the proposals for the Securitisation Regulation and the CRR amendments do not contain grandfathering rules or transitional provisions for existing transactions, except for the continued reference to the output floor transitional measure already present in the CRR. The new rules are intended to apply directly and uniformly from their entry into force, without a phase-in period for legacy transactions.

As the legislative process with respect to the Securitisation Regulation and the CRR advances through the EU's ordinary procedure, further consultations and amendments are expected. The amendments to the Solvency II Delegated Regulation will be included in a broader package, expected for consultation in the second half of 2025. The draft amendments to the Liquidity Coverage Ratio Delegated Regulation are scheduled to be published for a four-week consultation on the same date as the adoption of the amendments to the Securitisation Regulation and the CRR by the Commission.

We will continue to monitor developments and provide updates as the legislative process advances. For further information or tailored advice on how these changes may affect your transactions, please contact our team.

References

EU Commission – "Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation", 17 June 2025 (https://finance.ec.europa.eu/document/download/6f7d242e-3aff-40ce-8b8c-578ffd6e3067_en?filename=250617-proposal-securitisation_en.pdf)

EU Commission – "Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 575/2013 on prudential requirements for credit institutions as regards requirements for securitisation exposures", 17 June 2025 (https://finance.ec.europa.eu/document/download/946faf8f-dd34-4f79-86e5-0177bd0f8b0f_en?filename=250617-proposal-crr_en.pdf)

EU Commission – "Impact assessment accompanying the proposals for amendments to the Capital Requirements to the Securitisation and the Capital Requirements Regulations", 17 June 2025 (https://finance.ec.europa.eu/document/download/ffee0818-fc14-4f2e-befb-40e8277791ca_en?filename=250617-impact-assessment_en.pdf)

Expert Group on Banking, Payments and Insurance (EGBPI) – "Non-Paper on the Review of the EU Securitisation Framework", 07 May 2025

European Systemic Risk Board (ESRB) – "Unveiling the impact of STS on-balance-sheet securitisation on EU financial stability", May 2025 (https://www.esrb.europa.eu/pub/pdf/reports/esrb.report202505_syntheticSTSsecuritisation.en.pdf?6c3885349149fe9b6edb268d98d24490)

Joint Committee of the ESAs – "Joint Committee Report on the Functioning of the Securitisation Regulation", 31 March 2025 (https://www.eiopa.europa.eu/publications/joint-committee-report-functioning-securitisation-regulation-secr_en)