On 9 October 2024, the European Commission (Commission) published a targeted consultation on the functioning of the EU securitization framework. The Commission writes that the size of the European securitisation market has decreased significantly since the 2008-2009 global financial crisis while the securitisation markets outside the EU have fully recovered and surpassed pre-crisis records.

To revive the EU securitisation market, the Commission introduced a securitisation framework in 2019. The framework consists of the Securitisation Regulation ((EU) 2017/2402), which sets out a general framework for all securitisations in the EU and a specific framework for simple, transparent, and standardised (STS) securitisations, as well as prudential requirements for securitisation positions in the Capital Requirements Regulation ((EU) 575/2013) (CRR) and the Solvency II Delegated Regulation ((EU) 2015/35) (Solvency II), and liquidity requirements in the Liquidity Coverage Requirement Delegated Regulation ((EU) 2015/61) (LCR Delegated Regulation). Although the 2019 framework improved transparency and standardisation in the securitisation market, the Commission writes that it received feedback from the industry that issuance and investment barriers remain high. The Commission has therefore been looking at possible amendments to the framework, and this has given additional impetus by the March 2024 Eurogroup statement of the future of the Capital Markets Union.

The consultation paper is looking for stakeholder feedback on a broad range of issues concerning the EU securitisation framework. These issues include:

  • The effectiveness of the securitisation framework and the impact on small and medium-sized enterprises.
  • The scope of application of the Securitisation Regulation. Here the Commission asks stakeholders whether the current jurisdictional scope of application of the Regulation should be made clearer, and whether the definition of a securitisation transaction should be expanded or narrowed. The Commission also asks for feedback on whether the Alternative Investment Fund Managers Directive (AIFMD) (2011/61/EU) should be amended, taking into account the originate-to distribute prohibition in the AIFMD, to enable Alternative Investment Fund Managers to fulfil the functions of a sponsor in a securitisation transaction.
  • Due diligence requirements. The Commission asks for stakeholder views on the current due diligence requirements and the costs that they entail.
  • Transparency requirements and definition of public securitisation. Stakeholders are asked to estimate the costs associated with the Securitisation Regulation’s transparency regime and to provide views on possible ways forward. The Commission also proposes an expanded definition of a public securitisation.
  • Supervision. The Commission asks general questions on how compliance with the Securitisation Regulation is being supervised and how supervision should look in the future.
  • The STS standard. The Commission asks stakeholders to provide their views on the current STS standard and how the use of this label could be increased in the EU. The Commission also asks for feedback on the STS criteria under the current framework.
  • Securitisation Platform. The Commission asks whether the establishment of a pan-European securitisation platform would be useful to increase the use and attractiveness of securitisation in the EU, and what the scope and objectives of such a platform would be.
  • Prudential framework. In the final sections of the consultation paper, the Commission asks stakeholders to indicate the impact of the prudential requirements under the CRR framework on the securitisation market, and how possible changes to these requirements could increase the issuance of securitisations. The consultation also discusses the risk weight floors for securitisation positions, as well as the liquidity risk treatment in the LCR Delegated Regulation. Finally, the consultation paper discusses the prudential requirements for securitisation positions by insurers under the Solvency II framework and the prudential framework for institutions for occupational retirement provision and other pension funds.
  • Additional questions. The final section of the consultation paper poses a number of general questions on the functioning of the EU securitisation market and wider aspects that may affect the securitisation activity in the EU.

Next steps

The deadline for feedback to the consultation is 4 December 2024. Following this deadline, the Commission will consider the feedback received. A legislative proposal amending the EU securitisation framework is expected in Q2 2025.