On 4 December, the ACC and AIMA submitted a response to the European Commission’s (EC) targeted consultation on the functioning of the EU securitisation framework,

This consultation comes after many calls for reform including by the Eurogroup, the European Council and the Noyer, Letta and Draghi reports.

Our response echoed the points of the ACC’s position paper on ‘Reviving the EU securitisation market’ and highlighted the value of the securitisation market to the real economy and to mobilise capital to invest in SME growth and key strategic areas. 

The key focus of the response was:

• Introducing principles-based and proportionate due diligence and transparency requirements for sophisticated investors and issuers of securitisations:  Detailed due diligence obligations for institutional investors add little value, yet the associated compliance risks are a significant barrier to their investment in securitisation products.
• More risk-based capital and liquidity requirements for prudentially regulated investors:  Capital requirements for insurers have significantly reduced their incentives to invest via securitisations, despite the fact that the asset profile of many securitised products is a natural fit for insurance liabilities.
• Allowing AIFMs to sponsor securitisations: This would broaden the population of financial institutions participating in the production and distribution of securitisations. AIFMs and the AIFs they manage are currently prohibited from acting as sponsors of securitisations under the Securitisation Regulation which envisaged this only being performed by a credit institution or a MiFID licensed entity.

Additionally, our response included:

• Simplifying and broadening the scope of the STS labels:  Actively managed CLOs should be permitted to qualify as Simple, Transparent and Standardised.
• Narrowing the scope of the definition of securitisation to enable the green and digital transitions:   Any type of transaction that involves the tranching of risk, however simple, might fall within the scope of the Securitisation Regulation, which captures transactions that should otherwise not be considered as securitisations, either because they are simple products or because they play a strategic role in mobilising private capital for EU social, economic and political objectives.
• Allowing sophisticated investors to invest in non-EU securitisation markets:  EU investors are prohibited from investing in some of the largest and most liquid US securitisation products, specifically US open-market CLOs. This restricts EU investors and those captured under the definition of institutional investor and hampers their competitiveness in relation to their global peers.

The EC is expected to publish a legislative proposal by Summer 2025.  The European supervisory authorities are also expected to publish their own report on securitisation reform in Q4 2024.

For further information please contact Guillermo Perez Molina ([email protected]).