On 9 October, the European Commission (EC) published its targeted consultation on securitisation, which comes after many calls for reform including by the Eurogroup, the European Council and the Noyer, Letta and Draghi reports.

The EC seeks to gather input from stakeholders on the current securitisation framework to inform the legislative proposal that is expected for summer 2025.  The consultation follows a holistic approach and is comprised of 175 questions on a wide range of issues, including:

• Effectiveness of the current securitisation framework: This section considers indicators such as the revival of a safer market, the reduction of investor stigma and the improvement of financing of the EU economy.
• Impact on SMEs: This section seeks input on the barriers to securitise SMEs loans and on how securitisation can contribute to the access to finance for SMEs.
• Scope of application of the current Regulation: This section seeks input on the jurisdictional scope of the Regulation and the legal definitions of “securitisation transaction” and “sponsor”, including considering AIFMs as sponsors. The EC is also considering whether to expand the definition of public securitisations.
• Due diligence and transparency requirements: This section seeks quantitative evidence on costs derived from compliance with these requirements.
• Supervision): The EC states that supervision should be streamlined and improved in the EU to enhance consistency, coordination and a level playing field.
• STS standard: The EC seeks input on the functioning of the STS standard, which it acknowledges might be too burdensome to comply with.
• Securitisation platform: Input on its potential usefulness, including a common safe asset. Questions also touch upon the establishment of guarantees.
• Prudential and liquidity risk treatment of securitisation for banks:
  • Identifying which prudential provisions in the CRR have the strongest impact on banks' securitisation activities;
  • How potential changes to the prudential treatment could affect the volume of securitisation;
  • The role of national legislation or supervisory practices in either restricting or enabling banks' participation in securitisation;
  • The use of the capital and funding released through securitisation;
  • How the risk-weight floors for banks might be adjusted.

• Prudential treatment of securitisation for insurers:
  • How recalibrating capital requirements under Solvency II, particularly for mezzanine and junior tranches, could incentivise greater securitisation investments;
  • Whether internal models play a role in limiting participation;
  • What additional safeguards might be needed to ensure stability if regulatory changes are made.
• Prudential framework for pension funds: This section seeks input on the segments and seniority of securitisations that might attract more investments from these pension institutions, along with recommendations to eliminate existing barriers.

In expectation of this new effort toward reform, the ACC published a position paper on ‘Reviving the EU securitisation market’ in July 2024.

Lastly, the European supervisory authorities will publish their own report on securitisation reform in Q4 2024.

AIMA and the ACC are working on a response.  The consultation will be open for stakeholder input until 4 December 2024 and respondents can submit their feedback through this link.   For more information, please contact Guillermo Pérez Molina, Private Credit Associate ([email protected])