COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Review of the Securitisation Framework Accompanying the document 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 and 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
Date: 2025-06-17
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: bank, credit institution, credit policy, financial instrument, financial requirements, financial risk, financial supervision, financial transaction, insurance company, investment

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 17.6.2025  SWD(2025) 825 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT  Review of the Securitisation Framework  Accompanying the document 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 and                        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       {COM(2025) 825 final} - {COM(2025) 826 final} - {SEC(2025) 825 final} - {SWD(2025) 826 final}  
 
 
Table of Contents 

GLOSSARY.............................................................................................................................. 5 

TABLE OF ABBREVIATIONS ............................................................................................. 9 

1. 

INTRODUCTION.......................................................................................................... 10 

1.1. What is securitisation? ................................................................................................... 11 

1.2. Legal context.................................................................................................................... 15 

1.3. Political context ............................................................................................................... 16 

2.  PROBLEM DEFINITION ............................................................................................ 17 

2.1 What are the problems and problem drivers? .............................................................. 17 

2.1.1. Problem Tree .............................................................................................................. 18 

2.1.2. Problem 1: High operational costs for issuers and investors ..................................... 20 

2.1.3. Problem 2: Undue prudential barriers for banks to issue  securitisations .................. 22 

2.1.4. Problem 3: Undue prudential costs for insurers to invest in the EU securitisation 
market .................................................................................................................................. 25 

2.2. What are the consequences? How likely is the problem to persist? ........................... 27 

3.  WHY SHOULD THE EU ACT? .................................................................................. 29 

3.1. Legal basis........................................................................................................................ 29 

3.2. Subsidiarity: Necessity of EU action and Added value of EU action ......................... 29 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ....................................................... 29 

4.1. General objectives ........................................................................................................... 29 

4.2. Specific objectives ........................................................................................................... 31 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? ............................................ 31 

5.1. What is the baseline from which options are assessed?............................................... 31 

5.2. Description of the policy options ................................................................................... 32 

5.2.1. Measures to reduce high operational costs ................................................................ 33 

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5.2.2. Measures to reduce undue prudential barriers for banks ........................................... 35 

5.2.3. Measures to remove undue prudential costs for insurers to invest in the EU 
securitisation market ............................................................................................................ 36 

5.3. Options discarded at an early stage .............................................................................. 38 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS AND HOW DO 
THEY COMPARE?............................................................................................................... 39 

6.1. Measures to reduce high operational costs ................................................................... 39 

6.1.1. Option 1.1 Targeted measures reduce high operational costs .................................... 39 

6.1.2. Option 1.2: Significant measures to reduce high operational costs ........................... 43 

6.2. Measures to reduce undue prudential barriers for banks .......................................... 49 

6.2.1. Option 2.1: Targeted changes to the existing prudential (capital and liquidity) 
framework for banks ............................................................................................................ 49 

6.2.2. Option 2.2: Radical overhaul of the existing prudential (capital and liquidity) 
framework for banks ............................................................................................................ 59 

6.3. Measures to remove undue prudential costs for insurers ........................................... 63 

6.3.1. Comparative impacts of Options 1, 2 and 3 ............................................................... 63 

6.3.2. Comparative benefits and costs of the three options ................................................. 65 

6.3.3. Overall assessment: Effectiveness, efficiency and coherence ................................... 68 

6.3.4. Stakeholders’ views ................................................................................................... 70 

6.3.5. Summary comparison and choice of preferred option ............................................... 71 

6.4 Social, environmental and fundamental rights impact ................................................ 72 

7.  COMPARISON AND PREFERRED COMBINATION OF POLICY OPTIONS .. 72 

7.1. Impact of the preferred policy options on the general objective ................................ 74 

7.2. Social, environmental and fundamental rights impact ............................................... 75 

7.3. REFIT (simplification and improved efficiency) ......................................................... 76 

7.4. Application of the ‘one in, one out’ approach .............................................................. 76 

7.5. Impact on SMEs .............................................................................................................. 77 

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7.6. Impact on EU Competitiveness...................................................................................... 77 

8.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? ....... 77 

ANNEX I: PROCEDURAL INFORMATION (STILL UNDER DEVELOPMENT) .... 79 

1 - Lead DG, Decide Planning/CWP references .................................................................. 79 

2 - Organisation and timing .................................................................................................. 79 

3 - Consultation of the RSB ................................................................................................... 79 

4 - Evidence, sources and quality.......................................................................................... 81 

ANNEX II: STAKEHOLDERS’ CONSULTATION (SYNOPSIS REPORT) ................ 83 

1 - Targeted CONSULTATION ................................................................................................. 83 

2 – Call for Evidence .............................................................................................................. 96 

3 - Bilateral contacts with stakeholders ............................................................................... 97 

4 - Stakeholder Workshop .................................................................................................... 98 

5 - Input from the ESAs and ESRB ...................................................................................... 99 

5 - Input from Member States ............................................................................................ 100 

ANNEX III: WHO IS AFFECTED AND HOW? ............................................................. 102 

1 - Practical implications of the initiative .......................................................................... 102 

2 - Summary of costs and benefits ...................................................................................... 102 

3 - Details of costs and benefits ........................................................................................... 109 

1.  Status quo & Overview of costs and benefits identified in the evaluation ................. 109 

2.  Size of the market for securitisations ......................................................................... 110 

3.  Nature of duties due diligence requirements (Article 5) ............................................ 112 

4.  Cost drivers for Article 5 costs and separation of incremental costs from business-as-
usual costs: ......................................................................................................................... 113 

5.  Classification of due diligence costs from a better regulation perspective ................ 114 

6.  One-off costs due diligence ....................................................................................... 114 

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7.  Recurring costs due diligence .................................................................................... 115 

8.  Benefits of moving to a more principles based and proportionate due diligence 
approach ............................................................................................................................. 116 

9.  Nature of duties transparency requirements (Article 7) ............................................. 119 

Drivers of transparency costs and separation of incremental costs from business-as-
10. 
usual costs: ......................................................................................................................... 120 

11. 

Classification of transparency costs from a better regulation perspective ............. 121 

12. 

One-off costs transparency .................................................................................... 121 

13. 

Recurring costs transparency ................................................................................. 122 

14. 

Impacts of the preferred policy option ................................................................... 123 

15. 

Summary ................................................................................................................ 124 

4 - Relevant sustainable development goals....................................................................... 125 

ANNEX IV: ANALYTICAL METHODS ......................................................................... 126 

ANNEX V: EVALUATION ................................................................................................ 133 

1. 

Introduction .................................................................................................................. 133 

2.  What was the expected outcome of the intervention? .............................................. 136 

3.  How has the situation evolved over the evaluation period? ..................................... 143 

4.  Evaluation findings ...................................................................................................... 156 

5.  What are the conclusions and lessons learned? ........................................................ 181 

ANNEX VI:  SECURITISATION PLATFORM(S) ......................................................... 184 

ANNEX VII: COMPETITIVENESS CHECK ................................................................. 186 

1 - Overview of impacts on competitiveness ...................................................................... 186 

2 - Synthetic assessment....................................................................................................... 186 

ANNEX VIII: SME TEST................................................................................................... 188 

1 - Identification of SMEs affected ..................................................................................... 188 

2 - Consultation of SME stakeholders ................................................................................ 188 

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3 - Impacts on SMEs ............................................................................................................ 189 

4 - Options to mitigate any negative impacts on SMEs .................................................... 190 

ANNEX X: COMPARISON OF SECURITISATION AND COVERED BONDS ........ 193 

ANNEX XI: FURTHER DETAILS ON THE ASSESSMENT OF IMPACT OF 
INSURANCE OPTIONS ..................................................................................................... 196 

1 - Detailed assessment of stakeholder impact .................................................................. 196 

2 - Detailed discussion of implementation costs ................................................................ 197 

ANNEX XII: COMPARISON OF DUE DILIGENCE AND TRANSPARENCY 
REQUIREMENTS ............................................................................................................... 199 

GLOSSARY 

Asset-Backed 
Security (ABS)  

Agency risk 

Asset-Backed 
Commercial Paper 
(ABCP) 
Securitisation 
Cliff Effects 

CLO 

Covered Bond 

Default risk (also 
“Counterparty” 
default risk) 
European Green 
Bond Standard 
(EUGB) 

A type of financial instrument that is backed (“collateralised”) by an 
underlying  pool  of  assets  –  usually  ones  that  generate  a  cash  flow 
from  debt,  such  as  auto  loans,  corporate  loans,  or  credit  card 
receivables. Asset backed securities are created through the process 
of securitisation.  
Risk arising from the multiple relationships between different agents 
and  parties  involved  in  a  securitisation  structure,  and  related 
information asymmetries. 
A  securitisation  within  an  asset-backed  commercial  paper  (ABCP) 
programme: a programme of securitisations the securities issued by 
which  predominantly  take  the  form  of  asset-backed  commercial 
paper with an original maturity of one year or less. 
Situation  where  small  changes  in  the  parameters  used  in  the 
calculation of banks’ capital requirements for securitisations result in 
large changes in the capital requirements.  
Collateralised loan obligation. A securitisation backed by a pool of 
debt,  usually  corporate  loans,  often  leveraged  loans  made  to 
companies with lower credit rating. 
A  senior  bond  issued  by  a  bank  that  is  characterised  by  a  dual 
recourse:  i.e.  an  investor  has  a  claim  not  only  against  by  the  bank 
issuing  the  covered  bonds,  but  it  also  has  a  priority  claim  against 
specifically assigned cover assets collateralising the bond. 
Risk of losses due to unexpected default, or deterioration in the credit 
standing,  of  the  counterparties  and  debtors  of  an  insurance  or 
reinsurance company. 
Voluntary  standard  introduced  by  the  EU  Green  Bond  Standard 
Regulation  to  define  green  economic  activities  according  to  the 
Taxonomy Regulation. In order to qualify the bond’s issuer needs to 

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GFC  

HQLA 

IG 

Junior/Equity 
tranche 

LCR 

Market volatility 
risk 
Mezzanine tranche 

Model risk 

Non-neutrality  

interventions  and  bailouts 

commit to use the proceeds from the issuance to finance, refinance or 
acquire assets aligned with the EU taxonomy.  
Global  Financial  Crisis  –  a  severe  worldwide  economic  downturn 
between mid-2007 and late 2008, triggered by the collapse of major 
financial  institutions  due  to  risky  lending  and  collapse  of  the  US 
housing market. The crisis spread internationally and led to a sharp 
decline  in  consumer  wealth,  widespread  unemployment,  and  a 
collapse in economic activity. Many banks incurred large losses and 
required  government 
to  prevent 
bankruptcies and stabilise global financial systems. 
High-Quality  Liquid  Assets.  Cash  or  assets  that  can  be  sold  or 
exchanged  easily  and  immediately  into  cash  at  little  or  no  loss  of 
value, to meet liquidity needs.  
Investment Grade. A rating that indicates that a bond has a relatively 
low  risk  of  default.  'AAA'  to  'AA'  (high  credit  quality)  and  'A'  to 
'BBB' (medium credit quality) are considered investment grade. 
A junior/equity tranche in a securitisation is the lowest-ranking class 
of securities, meaning it has the highest risk and is the last to receive 
payments from the underlying assets. This tranche absorbs any losses 
first  if  the  cash  flows  from  the  securitised  assets  are  insufficient. 
Because of the higher risk, junior/equity tranches offer the highest 
potential  returns  (yields),  but  they  are  also  the  most  vulnerable  to 
defaults or shortfalls in the asset performance. 
Liquidity Coverage Ratio. A requirement setting out the amount of 
liquid assets that a bank must have to meet its short-term liquidity 
needs. The LCR standard is part of the Basel III framework. In the 
EU,  it  is  implemented  through  the  CRR  and  a  dedicated  LCR 
Delegated Act that was adopted in 2015.  
Risk  of  losses  due  to  short-term  fluctuations  in  market  prices  of 
financial instruments and other assets.  
A  mezzanine  tranche  in  a  securitisation  refers  to  a  middle-ranking 
class of securities that sits between the senior tranche and the equity 
tranche. It carries a higher risk than the senior tranche because it is 
paid after the senior class, but before the equity/junior tranche. As a 
result, mezzanine tranches offer higher yields to compensate for the 
increased risk. If there are losses in the underlying assets, mezzanine 
tranches are more likely to be affected than senior tranches, but are 
protected from losses until the equity/junior tranche absorbs them. 
Model risk relates to uncertainty surrounding the way in which the 
credit risk of the  underlying  exposures (such as  loans) is  allocated 
across the securitisation capital structure (rather than uncertainty over 
the  scale  of  that  credit  risk).  It  arises  from  models  used,  and 
assumptions made within those models, on the underlying pool and 
structural features of the securitisation, used to estimate distribution 
of losses across the securitisation capital structure. 
Non-neutrality of bank capital requirements means that holding all 
the  securitisation  tranches  in  a  securitisation  is  subject  to  a  higher 
capital charge than a direct holding of all the underlying assets as if 

6 

 
Originator 

(P) factor  

RMBS  

RTS 

Securitisation 
repository 
Senior tranche 

SME ABS 

Sponsor 

Spread risk 

SRT 

to 

the  capital  prior 

not  securitised. Non-neutrality  is  the  core  defining  element  of  the 
securitisation capital framework for banks.   
An  entity  which  itself  or  through  related  entities,  directly  or 
indirectly, was involved in the original agreement which created the 
obligations or potential obligations of the debtor or potential debtor 
giving  rise  to  the  exposures  being  securitised  or  purchases  a  third 
party’s exposures on its own account and then securitises them. 
Is the main parameter responsible for the non-neutrality of the bank 
capital requirements for securitisation, aiming to capture principally 
agency and model risks embedded in securitisation. It is one of the 
main parameters used in the formulas for the calculation of banks’ 
capital  requirements  for  securitisation.  The  (p)  factor  of  1  means 
100%  capital  surcharge  compared 
to 
securitisation.  
Residential mortgage-backed securities. Common type of traditional 
securitisation  with  residential  mortgages  used  as  underlying 
exposures.  
Regulatory  technical  standards.  Level  2  measures  adopted  by 
Commission based on drafts from ESAs. Used to modify/supplement 
non-essential  (technical)  elements  of  law.  After  adoption  by  the 
College, the Council and the EP have right of objection for 3 months, 
extendible by another 3 months (reduced to 1 month +1 month, if the 
adopted RTS is the same as the draft submitted by the ESA).  
A  legal  person  that  centrally  collects  and  maintains  the  records  of 
securitisations. 
A senior tranche in a securitisation refers to the highest-ranking class 
of securities in the structure, which has priority in receiving payments 
from  the  underlying  assets.  It  typically  carries  the  lowest  risk  and 
therefore  offers  lower  yields  compared  to  subordinate  (or  junior) 
tranches, which are paid after the senior tranche, but take on more 
risk.  
SME  Asset-Backed  Securities.  Common 
traditional 
securitisation with exposures (loans) to small and medium enterprises 
used as underlying exposures.  
A credit institution or an investment firm (other than an originator), 
that  establishes  and  manages  an  ABCP  programme  (or  other 
securitisation) that purchases exposures from third-party entities or 
establishes  an  ABCP  programme  (or  other  securitisation)  that 
purchases exposures from third-party entities and delegates the day-
to-day active portfolio management involved in that securitisation to 
an entity authorised to perform such activity. 
Risk of financial losses arising from the sensitivity of the values of 
assets, liabilities and financial instruments to changes in the level or 
in the volatility of credit spreads. 
Significant Risk Transfer. Process by which a bank transfers, through 
securitisation, a significant ‘amount’ of credit risk associated with the 
pool of underlying exposures from the bank’s balance sheet to a third 
party. It is a crucial regulatory and supervisory concept in the banks’ 
securitisations. It is a precondition for capital relief for the originator 

type  of 

7 

 
SSPE or SPV  

STS Securitisations 

TPV 

bank, and it is therefore a strategic objective of the banks seeking to 
enhance their capital efficiency and risk management.   
Securitisation Special Purpose Entity or Special Purpose Vehicle. A 
"bankruptcy-remote entity", usually a subsidiary company, with an 
asset/liability  structure  and  legal  status  that  makes  its  obligations 
secure, even if the parent company goes bankrupt.  
Simple,  Transparent  and  Standardised  securitisations.  EU  standard 
identifying  criteria  for  simplicity,  standardisation  and  transparency 
to  differentiate  STS  securitisation  products  from  more  opaque  and 
complex  ones.  STS  securitisations  benefit  from  a  better  regulatory 
treatment than non-STS ones. EU STS framework is an equivalent of 
the  STC  framework  (framework  for  simple,  transparent  and 
comparable securitisations) under the Basel framework 
Third-Party Verifier is an entity authorised to provide verifications 
for originators or sponsors of the STS status of their transactions, in 
line with Article 27 SECR. 

Tranche/Tranching  A contractually established segment of the credit risk associated with 
an exposure or a pool of exposures, where a position in the segment 
entails a risk of credit loss greater than or smaller than a position of 
the same amount in another segment, without taking account of credit 
protection  provided  by  third  parties  directly  to  the  holders  of 
positions in the segment or in other segments. The process of creating 
tranches  when  structuring  a  securitisation  transaction  is  called 
tranching. 
Undertakings  for 
in  Transferable 
the  Collective  Investment 
Securities.  Established  a  regulatory  framework  that  creates  a 
harmonised  regime  for  the  management  and  sale  of  mutual  funds. 
UCITS  funds  are  designed  primarily  for  retail  investors  with 
harmonised regulatory and investor protection requirements. UCITS 
have  become  a  globally  recognised  brand  with  many  non-EU 
jurisdictions allowing funds to be sold in their domestic market.  

UCITS 

8 

 
 
 
 
AFME  
AIFMD  
BCBS  
CoRep  
CRR  
DA 
DR  
EBA  
ECB  
EIOPA  
ESA  
ESMA  
EUGBS 
GDP  
GFC  
IACPM  
IG  
NCA  
NCB  
NPL 
RW  
SECR  
SME  
SSM 
SII 
STS 

TABLE OF ABBREVIATIONS 

Association for Financial Markets in Europe  
Alternative Investment Fund Managers Directive  
Basel Committee on Banking Supervision  
Common reporting framework  
Capital Requirements Regulation  
Delegated Act 
Delegated Regulation  
European Banking Authority  
European Central Bank  
European Insurance and Occupational Pensions Authority  
European Supervisory Authority  
European Securities and Markets Authority  
European Green Bond Standard Regulation 
Gross domestic product  
Global Financial Crisis  
International Association of Credit Portfolio Managers  
Investment grade  
National Competent Authority  
National Central Bank  
Non-performing Loan 
Risk Weights  
Securitisation Regulation  
Small and Medium-sized Enterprise  
Single Supervisory Mechanism 
Solvency II Directive  
Simple, Transparent and Standardised  

9 

 
 
 
 
1. 

INTRODUCTION 

Securitisation is a financial practice that involves pooling various types of contractual debt, 
such as mortgages, auto loans, or credit card debt, and selling their related cash flows to third-
party  investors  as  securities.  This  practice  emerged  prominently  in  the  U.S.  in  the  1970s. 
Securitisation increases the depth and liquidity of financial markets by converting the illiquid 
debt  instruments  into  tradable  securities  that  capital  market  investors,  such  asset  managers, 
insurers  or  banks,  can  buy.  On  the  buy  side,  securitised  assets  are  an  attractive  investment 
opportunity for investors seeking exposure to new risks, as they enable greater diversification 
and superior returns in comparison to some more established fixed income assets. In the EU’s 
bank-centric financial system, it allows banks to free up capital and provide more financing to 
individuals, households, and businesses, including SMEs1. Securitisation also allows banks to 
transfer risks outside of the banking system, thus fostering greater risk diversification within 
the  financial  system.  By  increasing  the  amount  of  financing  available  in  the  real  economy, 
well-functioning  securitisation  markets  can  also  contribute  to  higher  economic  growth  and 
facilitate funding EU strategic objectives like defence or green and digital transitions. These 
elements  make  the  securitisation  review  an  important  initiative  under  the  Savings  and 
Investment Union (SIU). 

However,  there  are  also  risks  associated  with  securitisation,  as  was  seen  during  the  Global 
Financial  Crisis  (GFC)2.  Complex  structures  exposed  investors  to  large  losses.  Similarly, 
misaligned  incentives  between  issuers  and  investors  incentivised  issuers  to  securitise  ‘bad 
loans’3.  At  the  same  time,  securitisation  amplified  asset  price  bubbles  by  increasing  credit 
growth and the risk appetite of investors, which increased risks to financial stability. Moreover, 
securitisation  increased  risks  within  the  financial  system  by  increasing  leverage  (i.e. 
securitisation allows to increase lending within the financial system while holding less capital) 
and interconnectedness between financial market entities.   

For these reasons, as a response to the GFC, the EU Securitisation Framework has sought to 
tackle the risks associated with this instrument, in particular agency and model risks. Agency 
risk  in  the  case  of  securitisation  arises  when  issuers  have  more  information  than  investors. 
Model risk occurs when imperfect economic modelling is used to value and assess the risk of 
securitisation. Several measures have been introduced to deal with these risks, including risk 
retention,  transparency,  due  diligence,  and  prudential  requirements.  Addressing  these  risks 
effectively continues to be a key objective of the Securitisation Framework today.  

The evaluation of the current framework, however, shows that the Securitisation Framework 
has been designed and implemented mostly in response to the shock of the GFC and as a result 
is too strict and hinders market development. At the time, strict requirements were considered 

1 SMEs can be exposed to different segments of the securitisation market, for example selling trade receivables 
to a program of asset backed commercial paper, taking out a new leasing contract on a commercial vehicle or 
assuring new financing against company real estate which are then pooled and securitised by their lease company 
or bank with other similar assets (see Annex VIII: SME test). 
2  See  for  example  the  International  Monetary  Fund’s  paper  on  Securitization:  Lessons  Learned  and  the  Road 
Ahead 
https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Securitization-Lessons-Learned-and-the-
Road-Ahead-41153  
3 See The Great Collapse: How Securitization Caused the Subprime Meltdown, Kurt Eggert, Connecticut Law 
Review May 2009, for another detailed investigation of the use of securitisation to proliferate risks in the build-up 
of the GFC  

10 

 
 
necessary  to  rebuild  the  securitisation  market  which  had  been  suffering  from  inadequate 
protections  and  severe  investor  distrust.  Now  that  appropriate  safeguards  have  been  firmly 
embedded  in  the  market’s  organisation  and  securitisation  is  gaining  back  investors’  trust,  a 
better  balance  between  safeguards  and  growth  opportunities-  both  for  investments  and 
issuance- needs to be found. 

The European public securitisation market, including CLOs, stood at approximately EUR 1.2 
trillion in terms of outstanding volumes at the end of 2023 (compared to EUR 2 trillion at its 
peak during the GFC4). Despite showing signs of gradual recovery (the EU public market was 
only EUR 790 billion in the second half of 2020 compared to EUR 900 billion by the end of 
2023), securitisation issuance as a percentage of GDP remains much lower in the EU than in 
other major jurisdictions (according to AFME, 10-year average issuance is approximately 3% 
of  GDP  for  the  US  and  around  0.5%  for  the  EU).  A  significant  portion  of  the  traditional 
securitisation transactions (see Section 1.1 right below for further details on the different types 
of securitisation) remains retained on banks' balance sheets (slightly over 40%) to be used as 
collateral for obtaining liquidity from the ECB, rather than being placed on the market with 
external  investors.  At  the  same  time,  the  current  investor  base  (i.e.  the  number  of  active 
investors participating in the market) remains small5, resulting in a limited capacity to absorb 
increased supply. In addition, the EU securitisation market remains highly concentrated in five 
Member  States  (France,  Italy,  Germany,  Netherlands  and  Spain).  This  can  lead  to  uneven 
development  of capital  markets  within Member  States and limit  the tool's potential for  risk 
diversification. Furthermore, banks often prefer to issue covered bonds to obtain funding since 
they are subject to less strict regulatory requirements.  

Section 3.2 of Annex V (Evaluation) provides a more detailed assessment of the market context 
and  market  developments  of  the  different  parts  of  the  securitisation  market  as  well  as  the 
development in different countries. 

1.1. What is securitisation? 

Broadly speaking, there are two main types of securitisations: traditional (also known as “cash” 
or “true sale”), and synthetic (for an overview of the different parts of the EU securitisation 
market, see the market context in Annex V).  

Traditional  securitisation  (outstanding  public6  and  bank  originated,  sponsored  or  invested 
private7 volumes within the EU securitisation market stood at more than EUR 1,1 trillion as of 
end 2023) is used primarily to obtain funding and to transfer risk out of the balance sheet of 
the lender. An example of a traditional securitisation is a bank selling a pool of mortgages to a 
securitisation  special  purpose  entity  (SSPE).  As  a  result,  the  credit  risk  associated  with  the 
mortgages is transferred, and the mortgages are ‘erased’ from the balance sheet of the originator 
bank. If a bank transfers a sufficient amount of the risk to investors, it is allowed to reduce the 
capital it holds against the securitised assets, i.e. achieving ‘capital relief’ that is available for 
further lending. The SSPE issues notes (debt instruments) divided into tranches of varying risk 

4 Source:  AFME/SIFMA Securitisation Market Data Reports. 
5 We estimate the investor base to 80-115 investors, see Annex III for details. 
6 Source: AFME Securitisation Data Report Q3 2024. 
7 Source: EBA COREP statistics. 

11 

 
 
profiles (usually into three tranches – junior, mezzanine and senior), which are then sold to 
investors. The money raised through selling the notes to investors is paid by the SSPE to the 
bank for the purchase of the mortgage loans. This gives the bank immediate access to funds 
that  can  be  used  for  further  lending.  Common  types  of  traditional  securitisations  include 
commercial-mortgages  backed 
residential  mortgage-based 
securitisation  (CMBS),  asset-backed  securitisation  (ABS),  collateralised  debt  obligations 
(CDOs), and others.  
Instead of placing the notes of a traditional securitisation on the market, banks can also choose 
to retain part of the transaction. This allows banks to access central bank liquidity, but prevents 
them from achieving ‘capital relief’. These ‘retained’ traditional securitisations currently form 
an important part of the traditional securitisation market segment.  

securitisation 

(RMBS), 

Figure 1: Traditional Securitisation Structure 

A  specific  type  of  traditional  securitisation  is  Asset-Backed  Commercial  Paper  (ABCP) 
securitisation. It is a short-term securitisation where the securities issued take the form of asset-
backed commercial paper with a maturity of less than one year. ABCP is usually used to finance 
very  short-term  assets,  such  as  trade  receivables.  ABCP  is  a  popular  form  of  financing  for 
corporates because it allows them to access short-term funding at a lower cost than they would 
be able to obtain through traditional bank loans. The EU public and private outstanding ABCP 
volume by the end of 2023 is estimated to EUR 180 million.8 

8 AFME Securitisation Data Report and EBA COREP statistics. For a more detailed market analysis of the private 
ABCP market in Europe (with a broader coverage including the UK) see: AFME/European DataWarehouse and 
True Sale International, European Benchmarking Exercise, https://www.true-sale-international.de/fileadmin/tsi-
gmbh/tsi_downloads/aktuelles/EBE_2024-H1_Report_2025-02-24_final.pdf. 

12 

 
 
 
Synthetic securitisation (outstanding volumes in the EU securitisation market stood at EUR 
295 billion as of end 20239) is a type of securitisation that differs from traditional securitisation. 
In  traditional  securitisation,  assets  are  transferred  off  the  bank's  balance  sheet.  In  contrast, 
synthetic securitisation does not involve the physical transfer of assets. These assets remain on 
the  originator's  balance  sheet,  but  the  risk  is  managed  using  financial  instruments  such  as 
guarantees, 
contract. 
like 
Just  as  an  insurance  policy  compensates  the  policyholder  when  an  adverse  event  occurs, 
synthetic  securitisation  allows  banks  to  be  compensated  when  losses  materialise  to  the 
underlying  pool  of  assets.  Thus,  the  banks  transfer  the  risk  of  default  on  a  set  of  loans  to 
investors,  without  selling  the  actual  loans  themselves.  This  allows  banks  to  obtain  ‘capital 
relief’ i.e. reduce the amount of capital that they need to hold for these assets, but it does not 
allow them to obtain funding. The investors get remunerated for accepting the credit risk of the 
originating bank. 

insurance 

making 

an 

it 

Figure 2: Synthetic Securitisation Structure 

9 Source: EBA COREP statistics. In addition, the International Association of Credit Portfolio Managers (IACPM) 
performs  regular  market  surveys  on  synthetic  SRT  securitisations,  for  details  see:  IACPM  2016-2022  Survey 
Confirms that Risk Sharing is Becoming Mainstream - International Association of Credit Portfolio Managers.  

13 

 
 
 
 
 
 
Figure 3: Example of synthetic securitisation and regulatory capital relief  

Source: The European significant risk transfer securitisation market”, González and Triandafil (2023) 

Figure  3  illustrates  how  a  bank  can  obtain  capital  relief  through  synthetic  securitisation, 
enabling  them  to  lower  capital  requirements  compared  to  an  alternative  scenario  without 
securitisation. The underlying reference loan pool is EUR 2 billion. With a risk weight of 53% 
and  a  8%  minimum  capital  requirement,  this  bank  would  face  a  EUR  85  million  minimum 
capital requirement for this portfolio.  

However,  through  a  synthetic  securitisation  the  bank  may  save  on  capital  requirements  by 
transferring the risk of the mezzanine tranche to an investor (credit risk protection provider). 
The  portfolio  is  split  in  accordance  with  the  capital  requirements  prescribed  by  the  bank’s 
regulatory securitisation approach. The senior tranche has only a 15% risk weight so requires 
only EUR 22 million of capital; the mezzanine and first loss tranches have a 0% risk weight as 
the risk is transferred to an external protection provider and no longer affects the bank’s balance 
sheet.  

Overall, the transaction saves the bank EUR 63 million of capital in comparison to holding the 
portfolio on its balance sheet without risk transfer. 

In the EU, securitisations can also be classified as public or private. Public securitisations (EU 
outstanding volumes (excluding ABCP volumes) stood at EUR 900 billion as of end of 202310) 
are  those  that  must  provide  a  prospectus  to  investors.  Private  securitisations  (outstanding 
volumes stood at EUR 632 billion as of end 202311) are defined as securitisations where no 
prospectus has to be drawn up in accordance with Directive 2003/71/EC. Private securitisations 
have  to  fulfil  the  same  regulatory  requirements  as  public  securitisations,  but  they  are  not 
required to use a securitisation repository to disclose the information prescribed by Article 7 

10 Source: AFME Securitisation data report 
11 Source: EBA COREP covering transactions with bank involvement 

14 

 
 
 
 
 
of  the  SECR.  Most  traditional  securitisations  are  public,  while  the  majority  of  synthetic 
securitisations are private.  

The securitisation market is therefore not a homogeneous market but is composed of various 
different  segments  or  types  of  securitisations.  See  Annex  IX  for  a  selection  of  case  studies 
which elaborate how securitisation has been used for the benefit of the real economy. 

1.2. Legal context 

The Securitisation Framework was adopted in 2017-18 and entered into application in 2019-
2012. It aimed to revive a safe securitisation market that improves financing of the EU economy. 
It consists of a Securitisation Regulation (SECR)13 as well as amendments to the pre-existing 
Capital Requirements Regulation (CRR)14, Liquidity Coverage Ratio Delegated Act (LCR)15, 
Solvency  II  (SII)  Delegated  Regulation16.  The  SECR  laid  down  a  general  framework  for 
securitisation applicable to all involved parties. It consists of detailed rules on risk retention, 
transparency, due diligence, the prohibition of re-securitisation, and credit-granting standards. 
It also introduced an additional voluntary framework for Simple, Transparent and Standardised 
(STS) securitisations, originally limited to traditional securitisations only. 

The CRR defines  the prudential  framework for banks and sets  out  how much capital  banks 
need  to  hold  for  their  securitisation  exposures,  whether  as  originators  or  investors  in 
securitisation.  SII  defines  the  prudential  framework  for  insurers  and  establishes  capital 
requirements for insurers’ investments in securitisation. The LCR defines eligibility conditions 
for securitisation to be included in the banks’ liquidity buffers.  Both CRR and LCR are largely 
consistent with and implement the Basel III securitisation standards.  

In 2021, as part of the Capital Markets Recovery Package to help the EU economy to recover 
from  the  COVID-19  pandemic,  limited  amendments  to  the  SECR  and  to  the  CRR  were 
introduced.  These  amendments  expanded  the  scope  of  the  STS  framework  to  synthetic 
securitisations  and  removed  certain  regulatory  impediments  to  the  securitisation  of  non-
performing exposures.  

12 While the different constituent elements of the Framework came into application in January 2019, the CRR 
allowed existing transactions to use the old rules until the end of 2019 so effectively the new CRR securitisation 
rules only became fully applicable in January 2020.  
13 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,  and  amending Directives  2009/65/EC,  2009/138/EC  and  2011/61/EU  and Regulations  (EC)  No 
1060/2009 and (EU) No 648/2012 (https://eur-lex.europa.eu/eli/reg/2017/2402/oj/eng) 

14 Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on  prudential 
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (https://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02013R0575-20240709) 
15    Commission  Delegated  Regulation  (EU)  2015/61  of  10  October  2014  to  supplement  Regulation  (EU)  No 
575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for Credit 
Institutions (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02015R0061-20220708) 
16 Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of 
the  European  Parliament  and  of  the  Council  on  the  taking-up  and  pursuit  of  the  business  of  Insurance  and 
Reinsurance (Solvency II) (EUR-Lex - 02015R0035-20241114 - EN - EUR-Lex) 

15 

 
 
Furthermore in 2024, a dedicated regime for green securitisations was introduced as part of the 
European Green Bond Standard Regulation (EUGBS)17. The EUGBS introduces a voluntary 
standard  for  securitisation  bonds  to  be  labelled  as  green.  In  order  to  qualify,  assets  in  the 
securitisation pool have to fulfil certain requirements and originators must allocate the proceeds 
from securitisation to economic activities compliant with the EU Taxonomy Regulation.  

The  evaluation  in  Annex  V  (section  2.2)  explains  the  intervention  logic  of  the  current 
framework, i.e. the problems it intended to tackle, the solutions found and their expected and 
observed impacts. It assesses how the Securitisation Framework has performed over the past 
five years and how it can be further improved. 

1.3. Political context  

In response to the global financial and sovereign debt crises, the EU took multiple actions to 
create a safer financial sector for the EU single market, including a framework to revitalise the 
use  of  securitisation  while  preserving  financial  stability.  In  that  context,  the  Securitisation 
Framework was an important initiative under the initial Capital Markets Union (CMU) Action 
Plan. Although reviving the securitisation market following the shock of the GFC was part of 
the  general  objective  of  the  Securitisation  Framework,  the  focus  was  more  on  making  the 
market extremely safe, and fighting the stigma associated with securitisation. As a result, most 
measures  that  were  introduced  made  the  regulatory  treatment  of  securitisation  more 
conservative and aimed to primarily mitigate risks, rather than stimulate market development.  

In light of several years of experience with the current rules and taking into account several 
recent  high  level  political  statements18  that  have  highlighted  the  need  to  take  additional 
measures  to  remove  issuance  and  investment  barriers  in  the  EU  securitisation  market,  this 
review  aims  to  strike  a  better  balance  between  safety  and  market  development.  Annex  II 
provides for a detailed description of inputs received and positions of Member States, ESAs, 
ECB and other stakeholders.  

Relaunching securitisation has also been recommended in the reports from Enrico Letta and 
Mario  Draghi  as  a  means  of  strengthening  the  lending  capacity  of  European  banks  for  the 
financing needs of EU priorities including defence, creating deeper capital markets, building 
the Savings and Investments Union and increasing the EU’s competitiveness. Finally, the need 
to  accelerate  work  on  all  the  measures  developing  banking  and  capital  markets,  including 
securitisation,  was  highlighted  in  the  political  guidelines  of  Commission  President  von  der 
Leyen from July 2024, and reiterated in the mission letter to Commissioner Albuquerque. One 
issue, which is mentioned in the public debate, is the possibility of setting up securitisation 

17 Regulation (EU) 2023/2631 of the European Parliament and of the Council of 22 November 2023 on European 
Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-
linked bonds. 
18 The Eurogroup statement of 11 March 2024 invited the Commission to assess all the supply and demand factors 
hampering  the  development  of  the  securitisation  market  in  the  EU,  including  the  prudential  treatment  of 
securitisation  for  banks  and  insurance  companies  and  the  transparency  and  due diligence  requirements  (while 
taking into account international standards). Similarly, the ECB Governing Council statement of 7 March 2024 
suggested  exploring  the  use  of  public  guarantees  and  further  standardisation  of  securitisation  issuances.  The 
European Council conclusions of 18 April 2024 called to relaunch the European securitisation market, including 
through regulatory and prudential changes. The European Council conclusions of June 2024 called again on the 
Council and the Commission to accelerate work on all identified measures under the Capital Markets Union. 

16 

 
 
platform(s), with various ideas being put forward on the possible characteristics and functions 
of such platforms (see Draghi report)19. Annex VI discusses the issues more in detail.  

Increasing  the  competitiveness  of  the  EU  economy  requires  substantial  investments  for  the 
green  and  digital  transitions,  and  for  funding  our  strategic  priorities  including  the  defence 
sector  (see  the  Competitiveness  Compass20  for  a  more  comprehensive  list  of  the  European 
Commission’s  strategic  priorities).  By  allowing  banks  to  lend  more,  securitisation  can 
contribute to the financing of these large investment needs. Securitisation is an additional tool 
to  meet  the  financing  needs  of  corporates  and  SMEs.  Against  this  background,  this  impact 
assessment outlines the problems with the current framework based on the evaluation (Annex 
V), identifies areas for improvement, and explores reform options that could further enhance 
the  EU's  securitisation  markets,  ultimately  contributing  to  a  more  resilient  and  integrated 
Savings and Investments Union.  

2.  PROBLEM DEFINITION  

2.1 What are the problems and problem drivers? 

As the evaluation (Annex V, section 4) has demonstrated, the current framework has served to 
make the EU securitisation market safer. At the same time, it has resulted in high operational 
costs for issuers and investors, and high prudential costs21 for banks and insurers. Ultimately, 
these high costs constitute a regulatory failure, which disincentivises issuance and investment 
in the EU securitisation market. The evaluation shows that the specific objectives set out in the 
2015 Impact Assessment (see below for a summary of this assessment) remain unmet or are 
only  partially  achieved.  The  Securitisation  Framework  has  not  been  effective 
in 
reducing/eliminating  unduly  high  operational  costs  (Problem  1  below),  while  it  has  been 
partially  effective  in  removing  (i)  regulatory  disadvantages  for  simple  and  transparent 
securitisations, and (ii) investor stigma. In addition, the evaluation and stakeholder feedback 
have identified undue prudential barriers that disincentive banks to issue and invest (Problem 
2 below) and for insurers to invest (Problem 3 below) as two new problems that need to be 
addressed.  

19 Action by Member States and industry, in particular in those countries where issuance is limited, would help 
issuers, investors, supervisors and the local legal community to develop platforms to encourage the issuance of 
securitisation. 
20 See: EU competitiveness - European Commission 
21 The term ‘prudential cost’ is probably not fully accurate. It is used in this impact assessment for the sake of 
simplicity although it should not be assimilated to an ‘accounting cost’. In fact, both banks and insurers are subject 
to  ‘risk-based’  capital  requirements.  These  funding  requirements  determine  how  much  capital  financial 
institutions should hold to cover the risks arising from their investments. Capital requirements are a necessary 
feature of prudential rules to protect policyholders and depositors by limiting the risk of failure of an insurer or a 
bank. The use of the term ‘prudential cost’ does not mean that capital requirements are undesirable or that the 
ultimate objective of any initiative on securitisation should be to set all capital requirements to (almost) zero. At 
the same time, capital requirements still can act as a limiting factor in insurers’ and banks’ ability to invest  in 
and/or issue securitisation. Therefore, by referring to ‘prudential costs’, the impact assessment simply underlines 
that the appropriateness of the calibration of capital requirements needs to be reassessed, without challenging the 
existence of such requirements. 

17 

 
 
Table 1: Assessment of objectives from the 2015 Impact Assessment 

Objective 

Reduce/eliminate  unduly  high  operational 
costs for issuers and investors 
Remove stigma from investors 
Remove 
simple 
products 

for 
securitisation 

regulatory  disadvantages 

transparent 

and 

Assessment  (see  Annex  V,  section  4  for  a 
detailed assessment) 
Not achieved 

Partially achieved 
Partially achieved 

2.1.1. Problem Tree 

Figure  4  displays  the  problem  tree,  covering  the  three  problems  that  were  identified  in  the 
evaluation of the Securitisation Framework, as well as during the targeted consultation and in 
meetings with various stakeholders. They are described in the following sections, together with 
their problem drivers and related consequences.  

The first problem groups together all issues related to the high operational costs faced by issuers 
and  investors  in  the  EU  securitisation  market.  The  second  problem  focuses  on  prudential 
factors that unduly disincentivise banks to issue or invest in securitisations. The third problem 
focuses on the prudential factors that act as an undue disincentive for insurers to invest in the 
EU securitisation market. 

Figure 4: 

Problem tree 

External factors 

Beyond the regulatory framework, there are external factors that affect financial institutions' 
decisions to issue and invest in the EU securitisation market.  These include, among others, 
monetary policy, credit growth, and the availability of alternative funding sources like covered 

18 

 
 
bonds. Evaluating the combined impact of these external factors on the development of the EU 
securitisation market since the GFC is challenging due to their interdependent nature—such as 
the  interaction  between  monetary  policy,  credit  growth,  and  the  availability  of  alternative 
funding  sources—and  the  significant  variation  in  elements  like  credit  growth  and  funding 
alternatives across different Member States. Although some of these factors were mentioned 
by  stakeholders,  they  primarily  focused  on  the  impact  of  the  regulatory  framework  on  the 
securitisation market. 

The  impact  of  accommodative  monetary  policy  on  the  EU  securitisation  market  since  the 
Global Financial Crisis is unclear. On the one hand, accommodative monetary policy (up until 
2022) could have disincentivised banks to issue traditional securitisations as they had access to 
cheap funding alternatives: central bank funding, stable deposits and liquid EU covered bond 
markets22.  On  the  other  hand,  the  low-for-long  interest  rate  environment  could  have 
incentivised banks to lend more, thus providing banks with more opportunities to transfer risk 
and  increase  their  activity  in  the  securitisation  market23.  Nevertheless,  the  low-interest  rate 
environment was a common factor across many other economies and therefore may not explain 
on its own the slower pace of market development in the EU vis-a-vis other jurisdictions like 
the  United  States  or  Australia  where  this  market  has  recorded  much  higher  issuance  as  a 
percentage of GDP in the last 10 years (see Evaluation Section on Market Context for more 
details).  

Regarding  credit  growth,  it  is  generally  expected  that  higher  credit  growth  would  have  a 
positive  impact  on  securitisation  activity.  This  is  because,  all  else  being  equal,  financial 
institutions  need  to  fund  their  increasing  loan  portfolios  and  free  up  their  balance  sheets  to 
facilitate further lending as demand for loans rises - and securitisation can fulfil both functions. 
Credit growth in the EU experienced varying trends since the GFC, so its impact on the market 
is ambiguous.  

It is normal for market conditions to affect the attractiveness of financial instruments, including 
securitisation. Financial institutions should be able to select the instrument that best suits their 
needs, based on the prevailing market conditions. The objective of this initiative is therefore to 
focus  on  eliminating  any  unnecessary  regulatory  hurdles  that  may  be  holding  back  the 
securitisation market, so that financial institutions can access this tool whenever it is needed 
and are not constrained by undue regulatory burden. 

Cross border securitisation activity is also impacted by the lack of harmonisation in regulatory 
frameworks outside of financial services, including insolvency24 and taxation, which can create 

22 See academic paper that shows that low policy interest rates decrease the cost of funding, thus reducing bank 
incentives to securitise loans. Source: Bakoush, M., Mishra, T. and Wolfe, S. (2018) ‘Securitization, monetary 
policy and bank stability’, SSRN Electronic Journal [Preprint]. doi:10.2139/ssrn.3630704. 
23 Zhang, J. and Xu, X. (2019) ‘Securitization as a response to monetary policy’, International Journal of Finance 
& Economics, 24(3), pp. 1333–1344. doi:10.1002/ijfe.1721 and Maddaloni, A. and Peydro, J.-L. (2010) Evidence 
from 
lending  standards,  European  Central  Bank.  available  at: 
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1248.pdf (Accessed: 10AD). 
24 See: How Europe can reap the benefits of securitisation- Jacques Delors Centre 

the  euro  area  and 

the  U.S. 

19 

 
 
 
 
complexity and uncertainty for market participants trying to issue or invest in securitisations 
that pool assets from multiple jurisdictions. This limits the possible scale of the securitisations, 
as  they  are  constrained  by  underlying  loans  structured  along  national  legal  requirements 
(typically mortgages). 

Changes to  the regulatory framework might  modify incentives for issuers and investors but 
cannot guarantee on their own market growth. While regulatory changes can help scale up the 
securitisation  market,  market  participants  also  have  an  essential  role  to  play  in  developing 
standardised  products  that  are  more  attractive  to  investors  and  facilitate  the  work  for 
supervisors to approve securitisation issuances. For example, the ECB is currently developing 
a  fast-track  process  for  the  supervisory  assessment  of  the  significant  risk  transfer  in 
securitisation,  in  close  dialogue  with  the  European  Banking  Federation,  which  aims  to 
substantially  reduce  the  duration  of  the  supervisory  assessments  for  simple  transactions 
meeting some requirements – this initiative is which expected to further stimulate the market25.  

2.1.2. Problem 1: High operational costs for issuers and investors  

The evaluation (see Annex V, section 4.1.3) highlights the existence of high operational costs 
arising  from  the  application  of  the  current  Securitisation  Framework  for  EU  issuers  and 
investors in securitisations, also in comparison to other asset classes. High operational costs 
disincentivise institutional investors26 from investing in securitisations and prevent financial 
institutions from using securitisation to manage their credit risk, diversify exposures and obtain 
new funding. Overly burdensome and detailed transparency and due diligence requirements 
result  in  high  operational  costs  that  put  EU  issuers  and  EU  investors  at  a  competitive 
disadvantage  relative  to  their  international  counterparts  who  are  not  subject  to  the  same 
requirements.  This  makes  entering  the  market  particularly  difficult.  The  current  framework 
negatively  impacts  also  non-EU  issuers  when  they  want  to  sell  their  securitisation  to  EU 
investors.  

From  a  better  regulation  perspective,  these  costs  link  to  “administrative  burdens”27.  We 
estimate that annual recurring operational or administrative costs currently amount to EUR 780 
million  for  the  financial  market  as  a  whole28.  While  these  operational  costs,  may  appear 
moderate when compared to the total market size, they accumulate annually. Apart from the 
annual recurring costs, one-off costs linked to the implementation of the SECR requirements 
represent a significant barrier to entry29,Administrative hurdles therefore represent a significant 

25 Securitisations: a push for safety and simplicity 
26 Institutional investors based in the EU who invest in securitisations. For more details see Article 2(12) of SECR. 
Please note that securitisations are not marketed and sold to retail investors unless conditions under Article 3 of 
SECR are fulfilled.  
27 For a detailed definition of administrative costs, see Tools #56 Typology of Costs and Benefits, #57 Standard 
Cost Model and #59 One-in-one-out Calculator of the EU Better Regulation Toolbox, July 2023. 
28 This administrative burden can be decomposed to annual recurring costs of fulfilling due diligence requirements 
estimated to EUR 520 million and annual recurring costs of fulfilling transparency requirements estimated to EUR 
120 million. Further details can be found in Annex III. 
29 Further evidence on this can be found in Annex III. 

20 

 
 
obstacle for issuers and investors and have had a negative impact on the overall growth of the 
market. 

The extent of burden reduction that can be achieved by simplifying or removing certain due 
diligence  and  transparency  requirements  should  not  undermine  the  policy  goals  of  those 
requirements. Namely, there should remain sufficiently high levels of market transparency and 
investor protection to ensure that the EU securitisation market remains safe and supervisors 
should continue to have access to high-quality data. 

2.1.2.1. Certain due diligence requirements are too prescriptive and disproportionate 

Article 5 of the SECR outlines the due diligence requirements for EU institutional investors 
(see Annex V, section 4.1.3). It aims to ensure that EU investors conduct a thorough assessment 
of the risks associated with securitisation. Article 5 harmonises the due diligence requirements 
that were introduced by regulatory bodies in the aftermath of the GFC across various pieces of 
sectoral legislation governing banks, asset managers, etc. to address key lessons learned from 
the  event.  One  critical  takeaway  from  the  crisis  was  the  importance  of  a  thorough  risk 
assessment.  Inadequate  due  diligence,  in  particular  risk  evaluation,  led  investors  to 
unknowingly take on excessive risk, leaving them unprepared to absorb the significant losses 
that ultimately materialised. As a result, due diligence requirements aim to empower investors 
by  ensuring  that  they  are  aware  of  the  potential  risks  associated  with  their  securitisation 
investments and are better equipped to manage those risks.  

While Article 5 has helped to ensure that proper due diligence is carried out prior to investing 
and while holding a securitisation position, the current requirements go beyond what is needed 
to  ensure  investor  protection  and  financial  stability.  The  evaluation  has  shown  that  the 
requirements are overly prescriptive, duplicative and costly.  

For example, in addition to carrying out a thorough assessment of the risks prior to holding a 
securitisation position, EU investors are required to verify that originators have complied with 
Securitisation  Regulation  Article  6  (risk  retention),  Article  7  (disclosure),  Article  9  (credit 
granting criteria), and Articles 19 to 22 and 23 to 26 (STS criteria). These verification activities 
are unique to securitisation and are largely duplicative since EU supervisors are also required 
to check that EU originators comply with these requirements.  

Moreover,  stakeholders  argue  that  the  risk  assessment  required  under  Article  5(3)  is  not 
proportionate  because  it  does  not  differentiate  between  different  types  of  securitisation 
positions. For example, an investor in a AAA tranche has the same due diligence requirements 
as an investor in a first-loss tranche, even though the risk of the position is much lower for the 
senior  tranche  investor  than  the  first-loss  tranche  investor.As  a  result,  due  diligence 
requirements constitute a significant entry barrier for new investors. Investors prefer to invest 
in other comparable products with less burdensome due diligence requirements (see Annex XII 
for a comparison of due diligence requirements for different financial instruments).  

It is important to note that EU investors are subject to the same due diligence rules regardless 
of whether they invest in EU or non-EU securitisations, whereas non-EU investors in EU (or 

21 

 
non-EU) securitisations are not bound by any of these requirements. As a result, due diligence 
requirements impact the level playing field to the detriment of EU investors when investing in 
securitisations vis-a-vis their non-EU peers. 

2.1.2.2. Transparency requirements are not adapted to the needs of investors 

The  introduction  of  Article  7  of  the  SECR  has  improved  market  transparency  in  the  EU 
securitisation market  by  ensuring that all investors and supervisors have equal  access  to  all 
relevant information about the securitisation transaction. However, the evaluation (see Section 
4)  highlights  several  challenges.  Meeting  the  Article  7  transparency  requirements  implies  a 
significant  compliance  burden  on  issuers,  with  costs  exceeding  those  for  other  comparable 
structured finance instruments (see Annex XII). This is confirmed by the feedback provided by 
market participants to the recent targeted consultation.  A key factor driving these excessive 
costs is the broad scope and prescriptive nature of the transparency rules. Despite the extensive 
disclosure rules, the information provided does not always align with investor needs, making 
compliance with the disclosure requirements both costly and inefficient. As a result, the overall 
cost of issuance has increased, discouraging securitisation activity in the EU market. 

Applying a one-size-fits-all approach is challenging given the diversity of securitisation types. 
In particular for private securitisations, the current disclosure framework30 does not sufficiently 
account for the fact that these are typically bilateral and bespoke transactions where investors 
have  specific  information  needs  for  their  due  diligence  assessment.  As  a  result,  the  current 
templates often provide information that is not useful for investors in private transactions. At 
the same time, the fact that investors in private transactions have specific information needs 
means that the prescribed templates sometimes do not meet the specific requirements of some 
investors and credit rating agencies. This means that originators of private securitisations often 
need  to  disclose  additional  information  beyond  Article  7  requirements,  further  increasing 
complexity  and  costs.  As  regards  public  securitisations,  stakeholders  report  that  the  current 
templates provide too much information, include elements that are of limited use to investors. 

2.1.3. Problem 2: Undue prudential barriers for banks to issue securitisations 

The evaluation (Annex V, section 4.1) shows that existing prudential  (capital and liquidity) 
rules act as a disincentive for banks to issue securitisations (or invest in the senior tranches of 
good quality securitisations). Bank capital requirements set out in the CRR are insufficiently 
risk sensitive and overly conservative, resulting in unduly high levels of capital requirements 
that banks need to comply with for their securitisation exposures. Based on ESAs estimates, 
the revised securitisation prudential framework has led to significant increases in banks’ capital 
requirements  for  securitisation  exposures  (+114%  for  bank  originators,  +77%  for  bank 
sponsors and +105% for bank investors across the market, with large variations in the impact 
depending on the composition of the tranches held), compared to the previous regime. Senior 
tranches  of  securitisations  have  experienced  an  increase  of  more  than  100%  in  capital 
requirements, while mezzanine tranches have experienced an even greater increase of capital 
requirement,  with  a  median  increase  of  281%.  On  average,  the  required  capital  for 

30 Private securitisations are exempted from having to report to the public securitisation repositories.  However, 
they need to make the same information available as public securitisation, using the same format. 

22 

 
 
securitisations  is  approximately  double  the  capital  required  for  the  capitalisation  of  the 
underlying pool of non-securitised assets.  

These  significant  increases  fail  to  accurately  recognise  the  important  risk  mitigants 
implemented  in  the  EU  securitisation  regulatory  and  supervisory  frameworks  which  have 
significantly reduced the agency and model risks embedded in securitisation transactions, as 
well as the good credit performance of EU securitisations. The model and agency risks have 
been  reduced  in  recent  years,  notably  with  the  introduction  of  STS  criteria,  the  multi-year 
Targeted Review of Internal Models by the SSM, the multi-year IRB Repair programme by the 
EBA,  the  introduction  of  the  output  floor  in  the  banking  package,  the  risk  retention 
requirement, and the banning of re-securitisations. As regards the credit performance, default 
rates of EU securitisations have been significantly lower than those of US securitisations. Also, 
very few senior tranches of EU securitisations have ever suffered any losses. Data over a 30-
year time period show that the default risk and ratings transitions of European securitisations 
across tranches rated AAA to BB are commensurate with default and ratings transitions data 
for other fixed income asset classes, such as European corporate bonds or global sovereign 
bonds, rated the same level, reflecting the strong credit performance of securitisations.  

The  evaluation  therefore  assesses  the  adequacy  of  the  capital  requirements  from  two 
dimensions. First, the risk mitigation measures that reduce the ‘agency’ and ‘model’ risks of 
securitisation  transactions  should  be  recognised  in  the  requirements,  where  appropriate. 
Second,  as  supported  by  data  on  default  rates,  the  structural  credit  performance  of  EU 
securitisations has been very good over the past 20+ years.  

These two dimensions, reinforced with examples provided in the evaluation, demonstrate that 
the current capital requirements for banks are disproportionate and go beyond what is necessary 
to ensure a proper and prudent capitalisation of the securitisations by banks. While the presence 
of non-neutrality of securitisation capital requirements – as one of the main defining elements 
of  the  securitisation  capital  framework  for  banks  -  is  justified,  the  magnitude  of  the  non-
neutrality  seems  no  longer  31.  In  addition,  there  are  significant  discrepancies  in  the  capital 
requirements  for  securitisations  among  banks  using  different  approaches  applicable  to  their 
calculation (in particular the standardised approaches, used by small-to-medium sized banks, 
are too conservative, resulting in overly conservative capital requirements in absolute terms as 
well as relative to capital requirements under the internal ratings-based approaches, used by 
large banks). 

The  issue  of  insufficient  risk  sensitivity  limits  the  attractiveness  of  securitisation: 
securitisations are seen as too ‘expensive’ which limits their use as a credit risk and balance 
sheet management tool for banks. Consequently, the lack of risk sensitivity acts as a prudential 
impediment  that  disincentivises  EU  banks  from  engaging  in  the  EU  securitisation  market. 
Overall, the securitisation capital requirements currently represent only 1.5% of the EU banks’ 

31 Non-neutrality of bank securitisation capital requirements means that holding all the securitisation tranches in 
a  securitisation is subject to a higher capital charge than a direct holding of all the underlying assets as if not 
securitised.  

23 

 
 
 
 
 
total risk-weighted asset volume (EBA, as of December 2024). Also, small-to-medium sized 
banks are not participating in the securitisation transactions. 

The fact  that banks  cannot  easily issue (originate)  securitisations  in  the EU is  an important 
issue  because  banks  play  a  critical  role  in  the  financing  of  the  EU  economy  and  limiting 
securitisation issuance ultimately limits banks’ ability to lend more to the real economy. Banks 
are  natural  users  of  securitisation  transactions  for  their  funding,  capital,  and  credit  risk 
management practices. As shown in Figure 5 below, EU banks are primarily originators (i.e. 
issuers)  and,  to  a  smaller  extent,  sponsors  of  securitisations,  whereas  in  other  jurisdictions 
banks  are  primarily  investors32.  Therefore,  barriers  to  banks’  origination  (i.e.  issuance)  of 
securitisation  might  have  a  disproportionately  high  impact  in  the  EU  relative  to  other 
jurisdictions. The current prudential set-up does not allow banks to maximise the potential that 
securitisation  can  provide  for  their  funding,  capital  and  credit  management  strategies,  and 
which could be beneficial for the EU economy as a whole.  

Figure 5: Banks’ role in securitisation (exposure measure) 

Source: BCBS Dashboard 

As shown in the evaluation, existing bank capital requirements fail to reflect the robust credit 
performance of the EU securitisation market over the last years and decades. The EU-issued 
securitisation market’s resilience has now been tested through multiple economic and financial 
cycles and periods of stress, including the GFC, the euro area sovereign debt crisis, the COVID-
19 pandemic, the aftermath of the Russian invasion of Ukraine, and during the 2023 banking 
turmoil. This suggests that the good credit performance of the EU-issued securitisation market 
is of a structural, rather than cyclical, nature.  

Besides  the  level  of  capital  conservativeness,  the  evaluation  has  shed  light  on  a  number  of 
additional issues  related  to  the framework for  SRT  embedded in  the CRR  and the  liquidity 
treatment  of  securitisations  embedded  in  the  LCR,  which  pose  barriers  for  the  banks’ 

32 The US market is less bank-centric than the EU market, allowing non-bank entities to play a more significant 
role as originators of securitisation. This is in contrast to the EU, where the bank-centric nature of the market leads 
to banks dominating as originators. Moreover in the US, government agencies such as Fannie Mae and Freddie 
Mac play a prominent role, further reducing the influence of traditional banks as originators. 

24 

 
 
participation in the securitisation market. The rules governing the SRT33 have several structural 
limitations which may impede a transfer of risk in some transactions. In addition, the rules have 
in some instances led to excessively costly and complex supervisory processes and inconsistent 
supervisory assessments of individual securitisation transactions. This has constrained banks 
in  their  capacity  to  issue  securitisation  and  to  use  it  as  a  capital  optimisation  tool  and  risk 
transfer tool.  

In  addition,  the  narrowness  of  the  eligibility  rules  for  securitisation  in  the  banks’  liquidity 
buffers under the LCR has reduced demand by bank treasuries for senior tranches of publicly 
offered  STS  traditional  securitisations  and  lowered  the  level  of  diversification  in  the  LCR 
liquidity buffer. This has reduced banks’ investments in these high quality securitisations and 
has limited banks’ contribution to the securitisation market liquidity.  

All in all, the existing framework reduces the attractiveness of  securitisation as an effective 
instrument to address banks’ funding needs, manage capital and balance sheets, and redistribute 
risks  across  the  wider  financial  system.  The  assessment  calls  for  greater  confidence  in  the 
quality  and  resilience  of  well-regulated  and  supervised  securitisation  transactions  and  puts 
forward the reduction of undue prudential barriers for banks as originators or investors as a 
new objective. 

2.1.4. Problem 3: Undue prudential costs for insurers to invest in the EU securitisation market  

The evaluation (Annex V, section 4.1.2.2., sub-section b) shows that the existing prudential 
rules for insurers result in high prudential costs that act as a disincentive to invest in the EU 
securitisation market. 

Insurance companies are subject to SII which regulates how much capital insurers should set 
aside  to  cater  for  the  risks  arising  from  their  investment  activities.  While  larger  insurers 
generally  use  their  own  modelling  of  risks  (‘internal  model’)  which  is  more  tailored  to  the 
specificities of their risk profile, smaller insurers use the so-called ‘standard formula’ which 
clearly prescribes  capital  requirements on investments.  Insurers using an internal  model are 
relatively free to determine how to assess market and credit risks (subject to prior supervisory 
approval). Market data confirms that internal model insurers invest more than twice as much 
in  securitisation  as  those  using  the  standard  formula.  Insurance  companies  which  use  the 
standard  formula  have  no  discretion  when  it  comes  to  computing  capital  requirements.  In 
general, standard formula capital requirements for securitisation are higher (slightly higher for 
senior STS securitisation, significantly higher for non-STS securitisation) than those applicable 
to other fixed income securities such as corporate bonds. 

SII capital charges for non-STS securitisation investments are generally deemed ‘punitive’ by 
financial  stakeholders.  To  illustrate  the  problem  more  concretely,  investing  in  a  non-STS 
securitisation  would  likely  require  an  insurer  to  fund  more  than  half  of  the  value  of  the 
investment with capital. The evaluation provides several pieces of evidence supporting that the 

33  Banks  are  only  allowed  to  reduce  their  capital  requirements  when  the  supervisor  acknowledges  that  the 
securitisation transfers a significant amount of risk to third party investors  – this is known as Significant Risk 
Transfer’. The  SRT  framework sets out several requirements and tests, based on which the supervisors assess 
whether the significant risk transfer has been achieved. 

25 

 
 
prudential  treatment  for  non-STS  securitisation,  which  dates  back  from  2013,  is  overly 
conservative. For example, under SII, it is more costly to invest in the best rated senior tranches 
of non-STS securitisation (which would  imply an amount of capital exceeding in general 50% 
of the investment amount) than in riskier asset classes like unlisted equities or in equities from 
emerging markets, and this raises issues of coherence. This finding also holds when comparing 
with the capital requirements that are applicable to insurers using their own internal model. 

In addition, the capital charges for securitisation under SII are not sufficiently risk sensitive. 
The framework assigns the same capital charge for all non-STS transactions, regardless of their 
seniority. This means that insurers are required to hold the same amount of capital whether 
they  invest  in  a  risky  first-loss  tranche  or  whether  they  invest  in  the  most  senior  protected 
tranche  in  a  non-STS  transaction.  All  else  equal,  this  lack  of  risk  sensitivity  incentivises 
insurers to invest in the most complex and most junior assets to obtain a higher return since the 
prudential cost of such investments would be the same as the one applicable to more senior and 
less  complex  non-STS  securitisations  with  the  same  rating.  Ultimately,  such  risk  seeking 
behaviour  could  endanger  policyholder  protection  by  lowering  the  risk-bearing  capacity  of 
insurers. 

Such  elements  demonstrate  that  the  current  insurance  capital  requirements  for  non-STS 
securitisation goes beyond what is strictly necessary to ensure financial stability.  

Unlike for banks where STS capital charges are still an issue, for insurers the core problem is 
the non-STS segment of securitisation. The current capital requirements on senior tranches of 
STS  securitisations  are  very  close  to  those  applicable  to  corporate  bonds.  Therefore,  it  is 
difficult  to  claim  that  prudential  rules  play  a  major  role  in  the  limited  level  of  insurers’ 
investments in senior tranches of STS securitisations34. In fact, insurers’ investments in senior 
tranches of STS securitisations represent only 6% of total investments in securitisation. As for 
non-senior  tranches  of  STS  securitisations,  the  evaluation  concludes  that  they  are  usually 
largely oversubscribed by various types of investors (i.e. much more demand than supply) and 
the capital requirements under Solvency II are coherent with those applicable under banking 
rules.  

The evaluation also identified factors other than undue prudential rules which can discourage 
insurers from investing in securitisation. According to EIOPA’s 2022 advice on securitisation35 
insurers typically focus on the ‘financial risk / return profile’ of an investment (and not the 
‘prudential  cost  /  return  profile’).  Their  investment  strategies  prioritise  asset-liability 
management,  particularly  for  insurance  products  with  long-term  liabilities  and  fixed  cash 
flows. This applies not only to life insurers but also to many non-life insurers offering liability 
insurance. To manage risk, insurers may favour long-term, fixed-rate investments that protect 
them from fluctuations in interest rates and irregular cash inflows, both of which could weaken 

34 In particular, a difference of less than two percentage points in capital requirements cannot on its own justify 
why corporate bonds represent more than 15% of insurers’ portfolio whereas senior STS requirements make up 
less than 0.5%. 
35  See: 
framework_en  

https://www.eiopa.europa.eu/publications/joint-committee-advice-review-securitisation-prudential-

26 

 
 
their  capital  position.  The  perceived  complexity  of  securitisation  as  an  asset  class  which 
requires extensive due diligence is another relevant factor.  

There  is  however  evidence  that  these  factors  should  not  be  overstated.  A  Bank  of  America 
paper, drawing on market research, presents long-term data on investment portfolios of EU and 
US insurers and concludes that EU insurers were more active in the securitisation market before 
the  Global  Financial  Crisis,  which  suggests  that  they  saw  value  in  these  investments36. 
Moreover, US insurers are still significantly investing in securitisation, particularly for long-
term annuity products with regular cash outflows - securitisation represents on average 15% of 
their investment portfolio37. In addition, all consultation activities reported in Annex II point 
to both the willingness of insurers to ramp up their participation in the securitisation market 
and the hurdles generated by prudential rules. This contradicts the statement that securitisation 
is not appropriate to match long-term liabilities.   

2.2. What are the consequences? How likely is the problem to persist?   

The problems outlined in Section 2.1 have resulted in a relatively small and unduly constrained 
EU  securitisation  market.  High  operational  costs,  driven  by  complexity,  as  well  as  due 
diligence  and  transparency  costs,  create  a  barrier  for  new  issuers  and  investors  to  enter  the 
market. As a result, only a limited number of issuers and investors that can afford these costs 
continue  to  operate.  This  limited  investor  base  leads  to  fewer  transactions,  resulting  in  low 
market liquidity, which disincentivises issuers from using securitisation. In turn, limited supply 
makes the securitisation market unattractive for new investors to come in. Furthermore, as the 
prudential requirements associated with securitisation continue to be higher than those of other 
asset classes, prudentially regulated financial institutions are disinclined to issue or invest in 
securitisations. 

Together, these high operational and prudential requirements reduce the competitiveness of the 
actors  in  the  EU  securitisation  market.  Financial  institutions,  businesses  and  households 
therefore  do  not  fully  reap  the  benefits  that  securitisation  could  offer  in  terms  of  risk 
diversification, capital market development and additional lending. 

In  the  absence  of  regulatory  action,  it  is  difficult  to  envisage  a  change  in  the  issuance  and 
investment behaviour of financial institutions. In general, issuers and investors will continue 
to  prefer  financial  instruments  with  lower  operational  and  regulatory  requirements.  Banks’ 
current  strong  preference  for  alternative,  lower-cost  instruments,  such  as  covered  bonds,  is 
unlikely to change, and the issuance of traditional securitisation will likely remain subdued.  

The continued operation of the EU securitisation market below its full potential represents a 
missed opportunity for Europe for funding strategic priorities and deepening the EU's capital 
markets.  This,  in  turn,  hinders  the  efficient  financing  of  EU  businesses  and  households.  In 
addition, the securitisation market's potential to expand the universe of investable securities for 

36 See for instance “European SF Weekly: European vs US insurers’ asset mix”, BofA Global Research, 24 June 
2024. As public authorities and supervisors did not collect data on a consistent basis over time (Solvency II only 
applies since 2016), it is not possible to confirm or infirm the validity of this assessment. 
37 See: https://content.naic.org/sites/default/files/capital-markets-special-reports-asset-mix-ye2023.pdf 

27 

 
 
institutional investors is not being fully utilised, ultimately limiting the depth and development 
of EU capital markets.  

Investment needs will continue to grow, driven by digitalisation, decarbonisation, and defence 
spending.  To  meet  these  demands,  the  EU's  investment-to-GDP  ratio  will  need  to  return  to 
levels last seen in the 1960s and 1970s. To meet the objectives set out in the Draghi report: 
“[T]he financing needs required for the EU to meet its objectives are massive, but productive 
investment is weak despite ample private savings. A minimum annual additional investment of 
EUR 750 to 800 billion is needed, based on the latest Commission estimates, corresponding to 
4.4-4.7% of EU GDP in 2023”38. 

The  benefits  of  securitisation,  such  as  increased  funding  and  capital  market  development, 
depend on how financial institutions choose to utilise the benefits brought by the instrument. 
A bank may use the additional balance sheet capacity gained through securitisation to increase 
lending, and deepen the capital market, or it may retain them for other purposes. Ultimately, 
this decision lies with the issuing bank. Regulation should not dictate a specific outcome. That 
being said, lending to the real economy is a core business of banks and a key driver of their 
profits.  Therefore,  it  is  reasonable  to  assume  that,  all  else  being  equal,  a  well-functioning 
securitisation market will incentivise banks to increase their lending to the real economy.  

Quantifying  the  exact  impact  on  the  real  economy  from  releasing  bank  capital  through 
securitisation  is,  however,  a  challenging  task.  One  respondent  to  the  targeted  consultation 
estimated that every EUR 10 bn risk-weighted assets that banks can securitise, rather than keep 
on their balance sheet, allows them to provide additional lending of EUR 15-20 bn. There are 
also  several  studies  that  show  that  there  is  a  positive  relationship  between  banks’  released 
capital and loan supply. For instance, one study39 provides evidence that banks' use of capital 
buffers can benefit both the real economy and banks themselves, without a negative impact on 
the  banks’  resilience.  Capital  buffers  are  extra  capital  that  banks  hold  above  the  minimum 
regulatory  requirements  and  include  buffers  which  are  designed  to  be  released  at  times  of 
economic adversity. Banks’ willingness to use the capital buffers increases lending and GDP 
and  lowers  credit  losses.  The  study  shows  that,  in  stressed  scenarios,  a  broad-based  use  of 
capital buffers could increase lending to the real economy by more than 3%, and GDP by over 
0.5%.  

All  in  all,  the  goal  of  the  regulatory  framework  is  not  to  limit  the  choices  of  issuers  to  a 
particular outcome, but rather to remove obstacles that might hinder the use of securitisation in 
its various applications.  A more accessible securitisation market offers financial institutions 
enhanced opportunities to increase the financing capacity for key EU initiatives. Conversely, a 
failure to address the above shortcomings is likely to perpetuate and perhaps even aggravate 
the problems and barriers outlined in Section 2.  

38  
39  

Draghi report p. 59, Chapter 5: “Financing Investment”. 
See Buffer use and lending impact; Borsuk, Budnik, Volk, 2020  

28 

 
 
3.  WHY SHOULD THE EU ACT? 

3.1. Legal basis 

The  regulatory  requirements  for  the  Securitisation  Framework  are  already  set  at  EU  level. 
Consequently,  the  legal  basis  for  the  review  will  remain  the  same  as  the  legal  basis  of  the 
original legislative acts, namely Article 114 TFEU for SECR, Articles 111(1)(c) and 135(2) of 
the  SII  Directive  empowering  the  Commission  to  adopt  delegated  acts  on  the  prudential 
treatment of investments, including securitisation, Article 114 TFEU for the CRR and Article 
460 of CRR for the LCR Delegated Regulation.  

3.2. Subsidiarity: Necessity of EU action and Added value of EU action 

The purpose of the review is to make the EU Securitisation Framework less burdensome, more 
principles-based,  more  proportionate  and  more  risk-sensitive.  In  particular,  the  review 
examines  certain  provisions  on  due  diligence,  transparency  and  prudential  (capital  and 
liquidity) requirements. Only action at EU level can ensure that going forward, these regulatory 
provisions are applied uniformly and guarantee the existence of the well-established regulatory 
framework regarding the taking up and the pursuit of securitisation-related activity, including 
issuance and investment, across the Single Market.  

The ability of Member States to adopt national measures is limited, given that the existing EU 
Securitisation Framework, already provides for a harmonised set of rules at EU level and that 
changes at national level would conflict with Union law currently in force.  

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1. General objectives          

The general objective of the Securitisation Framework, as expressed in the impact assessment 
of 2015 accompanying the Commission’s proposal was: “to revive a safer securitisation market 
that  will  improve  the  financing  of  the  EU  economy,  weakening  the  link  between  banks’ 
deleveraging needs and credit tightening in the short run, and creating a more balanced and 
stable funding structure of the EU economy in the long run.” The evaluation (Annex V, section 
5)  finds  that  this  general  objective  has  been  only  partially  achieved  because  while  the 
securitisation  market  is  safer,  the  initiative  has  not  been  sufficient  to  revive  the  market  or 
improve  financing  opportunities.  Indeed,  most  of  the  measures  that  were  introduced  in  the 
current  framework  aimed  first  and  foremost  to  mitigate  potential  risks  associated  with 
securitisation, rather than support market development. Going forward, the objective is to strike 
a better balance between safety and market development. For this reason, most of the policy 
options presented below focus on developing further the EU securitisation market by making 
the  framework  more  proportionate  and  risk-sensitive.  This  is  the  main  difference  with  the 
approach taken in the 2015 Impact Assessment where safety was the main focus. 

Addressing  the  unattained  objective  of  reviving  the  securitisation  market  will  contribute  to 
creating a more balanced and stable funding structure to increase the available financing for 
the EU economy. The achievement of this general objective requires the pursuit of several more 
specific  policy  objectives,  such  as  transparency  requirements  for  issuers,  due  diligence 
obligations for investors, and prudential requirements.  

29 

 
This  initiative  does  not  seek  to  achieve  a  specific  target  for  the  size  or  growth  of  the 
securitisation  market,  also  not  in  comparison  taking  as  reference  the  situation  in  other 
jurisdictions. Instead, it focuses on creating an ‘enabling framework’ by removing regulatory 
barriers, allowing the market to develop in a more sustainable and resilient way without the 
risks of rigid issuance targets. Comparing the EU securitisation market to those in other regions 
can be misleading due to key differences in regulatory frameworks, particularities of financial 
markets,  historical  developments  and  structural  characteristics40.  Using  other  markets  as  a 
benchmark  may  overlook  these  important  differences,  leading  to  inaccurate  conclusions  or 
ineffective  policy  decisions.  Each  market  has  its  unique  characteristics  and  challenges 
requiring bespoke analysis and approaches.  

Last but not least, the objective focuses on removing undue barriers, instead of channelling 
funds for a specific purpose (i.e. allowing for bank capital relief only on the condition that they 
provide  additional  lending  for  specific  purposes  or  to  specific  sectors  of  the  economy). 
Prudential  regulation  is  designed  to  ensure  the  stability  of  banks,  insurers  and  the  financial 
system, and to ensure an appropriate reflection of risks through proper capitalisation. Prudential 
regulation is not intended to serve as an instrument to promote the development of specific 
industries or branches of economic activity (for example tax policy – outside the scope of this 
initiative – is better suited for supporting specific sectors, activities, or purposes but tax policy 
is outside the scope of this initiative).  

Introducing a conditions-based system is also technically very complex and challenging and 
would require in depth monitoring and compliance, which could deter banks from engaging in 
the  securitisation  activities  to  prevent  charges  for  potential  non-compliance.  Introducing  a 
conditions-based system is also technically very complex and challenging and would require 
in  depth  monitoring  and  compliance,  which  could  deter  banks  from  engaging  in  the 
securitisation  activities  to  prevent  charges  for  potential  non-compliance.  Setting  up  such  a 
monitoring system would also require additional reporting, which would run against the idea 
of reducing the burden for market participants. 

Overall, introducing such conditionality in the banks’ prudential framework could prove to be 
counterproductive and could negatively impact the effectiveness of the current initiative, in the 
end potentially defeating its primary objective. Considering the above, the current initiative 
does not aim to stimulate or impose constraints on banks’ specific activities but focuses instead 
on economic incentives through removing undue prudential and non-prudential barriers. Also, 
naturally, the more risk sensitive and better calibrated framework will impact different types 
of securitisations differently. For example, a more risk sensitive prudential framework should 
make securitisations of low risk assets more attractive, as these would receive a better capital 
treatment.   

Overall,  it  is  by  means  of  a  more  risk-sensitive,  more  proportionate  and  better  calibrated 
framework, that we aim to create conditions and environment for greater lending to the real 

40 Examples of such differences include the presence of government-sponsored agencies and the role of the central 
bank in securitisation markets, the absence of alternative instruments, like covered bonds,  the particularities of 
the insolvency and corporate tax regimes, etc. 

30 

 
 
economy. A well-functioning securitisation market will incentivise banks to be more active in 
the market ultimately also making them lend more to the economy.   

4.2. Specific objectives  

The following specific objectives aim to address the three problems identified in Section 2: 

•  Reduce  undue  operational  costs  for  issuers  and  investors  balancing  with  robust  and 
proportionate standards of transparency, investor protection and supervision (linked to 
problem 1). 

•  Adjust the prudential framework to better account for actual risks and remove undue 
prudential barriers for banks and insurers when issuing and investing in securitisations 
while at the same time safeguarding financial stability and consumer protection (linked 
to problem 2 and 3). 

Do we know how banks may use additional capital relief from the securitisation review? 

Banks which have used securitisation to pool and transfer certain exposures from their balance 
sheet41 (or for synthetic securitisations, transfer default risks thereof) will be able to use that 
freed-up capacity in their balance sheets (in the form of freed capital)  for new lending. In a 
traditional  securitisation  transaction,  they  will  additionally  obtain  funding  to  do  that. 
Encouraged by the positive experience with cost-efficient and accessible securitisation, banks 
will also consider using this instrument again to “transfer out” of the balance sheet those new 
or other loans (or, as appropriate, default risks thereof) that can then be offered to willing buyers 
in a new securitisation transaction. Even if some banks might decide not to use capital relief 
obtained from securitisation for new lending (but e.g. to pay-out dividends or buy back shares), 
this  will  not  be  a  prevailing  pattern  in  the  sector  for  which  lending  is  the  core  activity. 
Productive  and  prudent  use  of  a  bank’s  balance  sheets  will  be  under  continued  scrutiny  of 
supervisors and shareholders. Thus, the cumulative effect of wider use of securitisation can be 
expected to result in greater lending capacity for EU banking sector as a whole. 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

5.1. What is the baseline from which options are assessed? 

In the baseline scenario, the current EU rules on securitisation would remain unchanged.  

In terms of non-prudential regulation, the SECR would continue to require investors to carry 
out a costly due diligence process. Similarly, it would continue to impose high costs for issuers 
to disclose when issuing a securitisation. As explained in the Evaluation, this translates into 
high operational costs (currently estimated annual recurring administrative costs of about EUR 
780 million) that will continue to act as a deterrent for issuers and investors to be present on 
this market. The scope of the STS standard would remain unchanged in terms of the applicable 
qualifying  criteria  as  well  as  the  types  of  securitisations  that  it  applies  to.  Other  important 

41  Assuming  that  the  bank  originator  manages  to  transfer  a  significant  amount  of  risk  to  third  parties  (i.e.  it 
achieves Significant Risk Transfer - see Section 6.2 for more detailed explanation). 

31 

 
 
requirements (which this initiative does not consider modifying), that require issuers to retain 
a  share  of  the  risk,  to  apply  adequate  credit  granting  criteria  and  that  limit  complexity  by 
banning re-securitisations would continue to apply. We do not expect the number of market 
participants to increase, and it is possible that their number may decrease, with activity shifting 
to other markets with more favourable regulatory treatment. 

In  terms  of  the  prudential  regulation,  there  would  be  no  change  to  the  current  framework 
determining the amount of capital that banks and insurers should set aside for the securitisation 
positions they hold. While the framework would continue to differentiate between the capital 
treatment of STS and non-STS securitisations (allowing lower capital for STS securitisation 
compared  to  non-STS  securitisation),  the  capital  requirements  would  continue  to  be  overly 
conservative and not sufficiently sensitive to reduced risk levels that have been observed in the 
post-crisis period.  

The  rules  governing  the  transfer  of  risk  through  securitisation  (so-called  ‘Significant  Risk 
Transfer’  framework)  would  continue  to  feature  some  structural  deficiencies  and  be 
accompanied with lengthy supervisory processes. In addition, there would be no change to the 
current  strict  rules  on  eligibility  of  securitisations  as  high-quality  liquid  assets  for  the 
calculation of banks’ liquidity coverage ratio, and banks would continue to be disincentivised 
to use the securitisations to diversify their liquidity buffers. As explained in section 2.3 where 
we discuss in detail the consequences of the current framework and its problems, the baseline 
scenario  is  not  expected  to  achieve  the  objectives  of  the  Securitisation  Framework,  will 
discourage  the  use  of  securitisation  and  will  not  allow  securitisation  to  contribute  to  the 
development of the SIU. 

The impact of external factors on the development of the market in the absence of regulatory 
changes is  uncertain  (see section 2  for a more detailed explanation).  In its  monetary policy 
statement on 17 April 2025, the ECB lowered the three key ECB interest  rates by 25 basis 
points, easing financial conditions in the euro area. They explain that while the euro area has 
been  building  resilience  to  global  shocks,  the  outlook  remains  uncertain  due  to  rising  trade 
tensions which can negatively affect confidence among households and firms. This heightened 
level  of  uncertainty  can  suppress  investment  and  consumption,  and  thus  negatively  affect 
securitisation activity. 

5.2. Description of the policy options  

Figure 6: Overview of policy options 

32 

 
 
All  the  options  that  are  presented  require  legislative  changes.  Options  1.1  and  1.2  require 
amending  the  Securitisation  Regulation.  Options  2.1,  and  2.2  require  amending  the  Capital 
Requirements Regulation and the Liquidity Coverage Ratio Delegated Regulation. Options 3.1, 
3.2, and 3.3. require amending the Solvency II Delegated Regulation. 

5.2.1. Measures to reduce high operational costs 

Two options are considered to reduce high operational costs for issuers and investors in the EU 
securitisation market (Problem 1). Even though reducing high operational costs was also an 
objective in the previous impact assessment, the approach taken to achieve this objective in 
this impact assessment is not the same as before. While the previous impact assessment tried 
to  reduce  operational  costs  by  putting  all  requirements  in  one  legal  framework,  this  impact 
assessment  focuses  on  simplifying  burdensome  requirements  as  much  as  possible  while 
respecting the principles behind their introduction.  

Option 1.1 is based on the idea that the current due diligence and transparency framework for 
securitisation is generally sound but can be refined through targeted adjustments. By contrast, 
option 1.2 is based on the premise that existing measures to ensure market transparency and 
investor  scrutiny  are  ill-suited  to  improve  the  situation  in  the  securitisation  market 
meaningfully. It therefore proposes  a more fundamental  change  by eliminating specific due 
diligence requirements for securitisations and making disclosure to investors principles-based. 
These two distinct approaches were reflected in the responses to our targeted consultation, with 
some stakeholders advocating for tweaks to the existing framework and others arguing for more 
significant changes. 

5.2.1.1. Option 1.1. Targeted measures to reduce high operational costs 

Option 1.1 seeks to reduce operational costs for both issuers and investors by simplifying and 
removing certain due diligence and transparency requirements. This option would maintain the 

33 

 
 
same level of market transparency, investor protection, and data quality for supervision, while 
reducing costs. 

For investors, operational costs would be reduced by simplifying those current due diligence 
requirements  that  are  deemed  redundant  or  overly  prescriptive.  This  would  include:  (1) 
removing  all  verification  requirements  in  Article  5(1)  and  5(3)(c)  of  the  Securitisation 
Regulation where the responsible sell-side party is established and supervised in the EU42, (2) 
allowing for a tailored risk assessment depending on the type of securitisation position (i.e. less 
intensive due diligence for low risk tranches and repeat transactions), and (3) give investors in 
secondary market transactions (where a securitised tranche already held by one investor is sold 
to another investor) more time to document their due diligence. As EU competent authorities 
can  enforce  the  Securitisation  Framework  on  EU  issuers,  but  not  on  non-EU  entities, 
verification  requirements  would  continue  to  apply  to  non-EU  securitisations.  For  the  same 
reason, investors would be required to verify transactions issued by unsupervised EU entities. 

For issuers, operational  costs would be reduced  by optimising  the transparency framework. 
The disclosure templates for public transactions would be streamlined to reduce the number of 
obligatory data fields. This means carefully scrutinising the existing disclosure templates and 
removing fields that provide limited benefit to investors. To safeguard market transparency, 
the definition of public securitisations would be widened to capture e.g. transactions that do 
not  involve  issuing  a  prospectus  but  are  admitted  to  trading.  Under  this  option,  private 
transactions  would  be  required  to  report  to  securitisation  repositories,  using  a  simplified 
template. This would improve supervisory monitoring and market transparency. However, to 
maintain the confidentiality of private transactions, data from these transactions would not be 
publicly disclosed. 

This  approach  would  remove  redundant  and  burdensome  requirements,  allowing  for  more 
tailored  due  diligence,  while  maintaining  high  standards  of  risk  assessment  and  market 
transparency.  

5.2.1.2. Option 1.2. Significant measures to reduce high operational costs 

Option  1.2  comprises  a  broader  set  of  measures  to  yield  a  more  significant  reduction  in 
operational  costs.  This  approach  would  introduce  a  more  substantial  change  to  the  current 
framework  that  would  entail  accepting  greater  risks  in  terms  of  investor  protection,  market 
transparency and quality of supervision. 

Under  this  option,  mandatory  securitisation-specific  due  diligence  requirements  would  be 
removed  for  regulated  investors  (banks,  insurers,  UCITS  and  AIFMs),  thus  eliminating 
additional operational requirements and costs for regulated investors imposed by the SECR. 
This would not relieve regulated investors of the need to carry out due diligence, since the due 
diligence requirements under their respective sectoral legislations would still apply. In essence, 
removing  the  specific  due  diligence  regime  for  securitisation  transactions  would  mean  that 

42 Concretely, this would mean that EU investors would no longer have to check that EU sell side parties comply 
with the credit granting criteria, risk retention requirements, disclosure requirements or STS criteria. 

34 

 
 
requirements for securitisations would be the same as for all other asset classes. Investors that 
do  not  have  due  diligence  requirements  under  their  own  sectoral  legislations  would  still  be 
required to apply those requirements set out in the SECR. 

For issuers, under this option transparency requirements would become principles based. The 
SECR would only specify the key information principles that securitisation disclosures should 
abide by. Instead of prescribing Commission-specified disclosure templates applicable to all 
securitisations,  the  method  for  disclosing  information  to  investors  and  potential  investors 
would be left to the discretion of market participants. A simplified reporting template would 
be retained for all transactions (private and public), for supervisory purposes only. As in Option 
1.1, private transactions would also be required to report to securitisation repositories providing 
a safeguard for market transparency.  

5.2.2. Measures to reduce undue prudential barriers for banks 

Two options are considered to address Problem 2. It is important to note that unlike the previous 
impact  assessment  that  proposed  to  increase  capital  requirements  across  the  board  for  all 
securitisations,  the  current  impact  assessment  proposes  to  reduce  these  requirements  for 
securitisations  for  which  risks  have  been  mitigated  in  the  post-crisis  period.  As  such,  the 
approach taken in the previous impact assessment is different from the one taken now. The 
reason being that while the primary focus of the previous impact assessment was on making 
the market safer, the current impact assessment tries to strike a better balance between safety 
and market development. 

5.2.2.1.  Option  2.1  Targeted  changes  to  the  existing  prudential  (capital  and  liquidity) 
framework for banks 

Option  2.1  entails  introduction  of  targeted  changes  to  the  existing  prudential  (capital  and 
liquidity) requirements applied to banks. It contains a set of measures that require amendments 
to both CRR and LCR.  

Targeted changes to the CRR would ensure that: 

•  banks can calculate the minimum capital they need to hold for their securitisation exposures 
in  a  more  risk  sensitive  manner,  meaning  that  the  amount  of  capital  could  be 
adapted/reduced for securitisations where crucial risks driving the capital needs, such as 
agency and model risks, are mitigated, as evidenced in the evaluation; and 
the framework used by supervisors for assessing the transactions and endorsing the capital 
relief  (the  SRT  Framework)  is  clearer,  more  robust  and  results  in  more  efficient  and 
coherent processes.  

• 

Targeted changes to the LCR would address inconsistencies in the existing requirements that 
securitisations need to comply with, to be eligible for inclusion in the banks’ liquidity buffer 
(while maintaining the existing scope of eligible securitisations, limited to senior tranches of 
STS traditional securitisations only).   

The  overall  aim  of  option  2.1  is  to  reduce  the  main  undue  barriers  for  banks’  issuance  of 
securitisations  stemming  from  the  existing  banking  prudential  rules,  without  resorting  to  a 

35 

 
significant restructuring  of the framework as a whole and limiting the scope of divergences 
from  the  international  Basel  standards.  It  focuses  on  those  elements  of  the  prudential 
framework that are assessed to have the most prominent effect on achievement of the above 
goal. 

5.2.2.2. Option 2.2. Radical overhaul of the exiting prudential (capital and liquidity) framework 
for banks 

Option 2.2 entails a set of measures that introduce a fundamental reorganisation of the current 
framework, specifically: 

•  Re-design of the existing capital framework, resulting in introducing entirely new formulas 
and  methods  that  banks  would  need  to  follow  when  calculating  capital  for  their 
securitisation exposures;  

•  Removal  of  the  existing  complex  requirements  for  supervisors  to  check  securitisation 
transactions and to endorse the capital relief (resulting in banks merely self-assessing their 
securitisations, without the need for checks by supervisors);  

•  Significant relaxation of the requirements that securitisations need to comply with to be 
eligible for inclusion in banks’ liquidity buffers, including extension of the scope of eligible 
securitisations for liquidity buffer purposes also to (senior tranches) of non-STS traditional 
securitisations.  

The  overall  aim  of  option  2.2.  is  to  significantly  reduce  the  barriers  for  banks’  issuance  of 
securitisation,  by  means  of  substantial  restructuring  of  the  existing  rules  and  loosening  a 
number of existing requirements. The option 2.2. would result in material divergences from the 
international Basel standards.  

5.2.3. Measures to remove undue prudential costs for insurers to invest in the EU securitisation 
market 

In  order  to  remove  the  existing  disincentives  for  insurers  to  invest  in  the  EU  securitisation 
market, three options are presented, all of which propose to reduce capital requirements for 
insurers. This would be done by amendments to the Solvency II Delegated Regulation43. The 
first and second option focus on non-STS securitisations only, while the third option applies to 
all securitisation transactions. In the context of this review, one may question whether such 
continued focus on reducing capital requirements is justified, considering the moderate effect 
of the previous attempt to reduce capital requirements for STS securitisations (even if we still 
noted  an  increase  of  more  than  50%  in  such  investments  between  2019  and  2023).  Our 
assessment  –  as  outlined  in  the  evaluation  –  leads  us  to  conclude  that  reducing  capital 
requirements (in particular on non-STS securitisations) can help change insurers’ investment 
behaviour for the following reasons:  

•  There is evidence that insurers using an internal model – which results in general in lower 
capital requirements than under the standard formula – invest more than twice as much in 
securitisation than companies using the standard formula. While other factors can explain 

43 Delegated Regulation (EU) 2015/35 

36 

 
 
such a situation – in particular the average size of insurers using an internal model is larger 
than  the  average  size  of  standard  formula  insurers  –  there  are  also  very  large  standard 
formula  insurers  (for  instance,  insurance  subsidiaries  of  large  banking  groups  use  the 
standard  formula)  which  still  invest  negligible  amounts  in  securitisation.  Therefore,  the 
comparison implies that it cannot be precluded that capital requirements do play a role in 
insurers’ investment decisions; 
In  all  consultation  activities  conducted  by  Commission  services  a  majority  view  from 
stakeholders  has  been  that  capital  requirements  under  Solvency  II  are  perceived  as  an 
obstacle to investments in securitisations despite an appetite to increase exposure to this 
asset class; 

• 

•  Capital charges in the previous framework for simple and transparent securitisation were 
high, but not as high as the current capital charges for non-STS securitisations. As a result, 
the  impact  of  reducing  capital  charges  for  non-STS  securitisations  is  likely  to  be  more 
significant than the one already observed for STS after the last initiative. 

•  Non-STS  securitisations  represent  a  bigger  share  of  the  EU  securitisation  market. 
Consequently,  decreasing  capital  charges  for  these  types  of  securitisations  will  have  a 
broader and more substantial impact on the market in absolute amounts. 

5.2.3.1. Option 3.1. Removing prudential barriers to investments in all non-STS securitisations  

Under option 3.1, non-STS capital requirements would be decreased, removing the excessive 
level of prudence embedded in the current framework. The decrease in risk factors could be 
between 25% and 40% depending on the credit rating. By reducing the cost of investing in non-
STS  securitisation,  this  option  would  make  investments  in  non-STS  securitisation  more 
attractive than under current rules. 

5.2.3.2. Option 3.2. Improving risk sensitivity and removing prudential barriers to investments 
in the safest tranches of non-STS securitisation  

Under option 3.2, capital requirements on non-STS securitisation would be made more risk 
sensitive  by  differentiating  between  senior  and  non-senior  tranches,  as  is  the  case  for  STS 
securitisation.  The  calibration  approach  would  aim  at  some  consistency  with  the  banking 
calibrations. 

The level of capital requirements for non-senior tranches would remain broadly in line with the 
current capital charges applicable to non-STS securitisation, whereas the capital requirements 
for senior tranches would be reduced by a factor of up to 5 depending on the credit rating of 
the senior tranche44. Reducing the capital requirements applicable to senior tranches of non-
STS securitisation would remove the existing prudential disincentives to investments in this 
market segment. 

44 The calibration follows a similar approach as for STS calibration in 2017. As the improvement concerns the 
senior tranches only, the corresponding reduction in risk factors is more significant than under Option 3.1. This 
makes the ratio of senior-to-non senior non-STS securitisation capital requirements broadly more coherent with 
banking rules. 

37 

 
 
5.2.3.3. Option 3.3. Overhauling the prudential treatment of securitisation in order to make all 
securitisation investments relatively more ‘attractive’ than under current rules  

Under option 3.3, the framework for securitisation (STS and non-STS) would be overhauled to 
lower  all  capital  requirements  for  securitisations.  Stakeholder  responses  to  the  targeted 
consultation argued that the very low default probability of securitisation justifies lower capital 
requirements  across  the  board.  However,  under  the  current  rules,  capital  requirements  for 
insurers  capture  spread  risk  (i.e.  the  exposure  to  volatility  in  market  price  of  securitisation 
investments), which can be driven by several factors45, only one of which being default risk. 
Option 3.3 would therefore change the current framework to focus only on default risk. Since 
default  risk  is  in  essence  a  subset  of  spread  risk,  this  overhaul  would  imply  a  significant 
reduction in risk factors (by up to 80% depending on the securitisation type and rating46) for 
all (STS and non-STS) securitisation investments. 

5.3. Options discarded at an early stage 

The identified options in the previous section have been defined based on stakeholder feedback 
received through our consultation,  as  well as our own evaluation  of the framework. All  the 
presented options are realistic and comprise elements of changes proposed by stakeholders. We 
did not assess extreme options that would risk compromising market integrity and financial 
stability, like strong deviations from the international Basel agreement.  

Regarding operational costs and banking prudential requirements, the options considered in the 
previous section cover the full spectrum of possible plausible options to address the problems 
identified. For each of the three problems, both ‘targeted’ and ‘more radical’ options are  listed.    

Regarding insurance prudential requirements, it was decided to discard the possibility to 
increase the granularity of the STS category by introducing a dedicated prudential treatment 
for  ‘mezzanine’  tranches.  First,  the  evaluation  shows  that  there  is  limited  evidence  that 
amending  the  prudential  treatment  of  STS  securitisation  is  an  urgent  need  in  view  of  the 
oversubscription  of  non-senior  STS  issuances47.  In  addition,  this  would  add  significant 
complexity  (how  to  define  ‘mezzanine’  in  an  objective  manner,  and  set  out  harmonised 
characteristics in terms of tranche thickness) and inconsistency with banking rules where there 
is no explicit treatment for mezzanine tranches. 

45 Frictions between supply and demand, liquidity risks, unexpected credit risk premium, risk of rating downgrade, 
etc. 
46  We  assume  a  reduction  in  capital  requirements  of  the  same  magnitude  as  in  Option  3.2,  but  applied  to  all 
tranches and types of securitisations. 
47 Although the subscribers are mainly non-insurers. 

38 

 
 
6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS AND HOW DO THEY COMPARE? 

6.1. Measures to reduce high operational costs 

6.1.1. Option 1.1 Targeted measures reduce high operational costs 

6.1.1.1. Benefits 

Simplifying the due diligence requirements, as outlined in option 1.1, would substantially lower 
the  additional  costs  imposed  by  the  SECR  on  investors  by  eliminating  the  verification 
requirements  for  regulated  investors  when  investing  in  securitisations  originated  by  entities 
subject to supervision in the EU. Verification requirements were consistently cited by investors 
as a key driver of the costs imposed by the SECR.  

Removing the requirement for investors to verify that an STS securitisation complies with the 
STS  criteria  would  reduce  the  due  diligence  cost  for  investing  in  such  transactions.  This  is 
expected to increase the price that investors would be willing to pay for an STS securitisation, 
thereby increasing the attractiveness of using the STS label for issuers. Even though investors 
would no longer be checking that a transaction complies with the STS criteria, the integrity of 
the label is not undermined as supervisors would still be checking this as is currently required 
under the Securitisation Regulation. Moreover, originators and sponsors are liable for sanctions 
in case they misleadingly or erroneously label a transaction as STS and they can also rely on 
the services of external third-party verifiers of STS compliance. 

In  addition,  making  the  risk  assessment  principles-based  would  ensure  that  investors  still 
analyse the key structural features and risk characteristics of a securitisation transaction while 
at the same time providing them with sufficient flexibility to look at those structural features 
and risk characteristics that are most relevant for the type of transaction they wish to invest in. 
This  would  be  beneficial  for  investors  that  primarily  invest  in  low-risk  senior  positions, 
allowing them to carry out a lighter and more targeted risk assessment than for investors that 
invest in high-risk first loss tranches48.  

Finally, simplified requirements for repeat securitisations49 would incentivise standardisation, 
as it would be less costly to invest in a series of transactions with similar characteristics issued 
by the same originator. Simplified requirements for secondary market transactions would make 
it easier to invest in the secondary market50, thereby increasing market liquidity.  

At the moment, stakeholder feedback suggests that the additional burden imposed by the due 
diligence requirements in the SECR is the highest for a AAA-rated tranche with a repeat issuer 
in the secondary market. According to market perceptions, the  due diligence costs for these 

48 According to the AFME Securitisation data report for Q4 2023, 96.6% of public securitisation notes rated by 
Moody’s are rated investment grade and 86.7% received the two highest credit ratings of AA or AAA.  
49  Repeat  transactions  are  estimated  to  about  67%  of  public  market  transactions  by  AFME,  see 
https://www.afme.eu/Portals/0/DispatchFeaturedImages/Article%205%20presentation%20for%20Commission
%2015.1.25.pdf 
50 Anecdotal evidence provided in the stakeholder consultation suggests that secondary market transactions make 
about 50% of the transaction volume in public securitisation markets. 

39 

 
 
transactions are up to 75% higher than what would be incurred in the regular course of business 
(without the requirements imposed by the SECR). On the other hand, due diligence for a new 
issuer  is  estimated  to  be  only  approx.  33%  higher  due  to  the  due  diligence  requirements 
imposed by the SECR51. This finding shows a lack of risk sensitivity in the current framework 
that needs to be remedied in order to reduce costs. On average, based on information received 
from stakeholders we estimate a savings potential of about 44%52. 

Due to the duplicative or redundant nature of the provisions that are proposed to be removed, 
no negative impacts can be expected on the ability of investors to analyse the risks of individual 
transactions,  as  well  as  on  the  possible  emergence  of  macro  financial  stability  risks  in  the 
securitisation market.  

In the area of transparency, option 1.1 would improve the current reporting burden by reducing 
the number of obligatory data fields, in particular those that are redundant or that refer to the 
information that is unavailable or irrelevant for the particular type of securitisation. The impact 
of this measure might vary for different types of securitisations, depending on the number of 
fields  that  would  be  removed.  It  might  be  possible  to  achieve  a  higher  reduction  in  certain 
templates in comparison to others, without compromising investor protection. For example, the 
disclosure  costs  for  issuers  of  private  securitisations  would  be  significantly  reduced  by 
introducing a dedicated, simplified disclosure template for this type of deals. Both private and 
public securitisations would benefit from option 1.1 as it would reduce the current reporting 
requirements  and  potentially  allow  to  securitise  assets,  for  which  certain  data  was 
uneconomical to collect.  

Most respondents, however, did not specify by how much option 1.1 would reduce costs, as 
this would depend on the concrete details of the change that were not presented in the high-
level-description in the stakeholder consultation. Of the few replies received to this question, 
most respondents  spoke of  a “minor” or  “moderate” expected  reduction of their total  costs. 
This is due to the fact that established issuers already incurred the bulk of the costs in the past 
during  the  implementation  of  the  required  templates.  A  reduction  in  one-off  costs  will, 
however,  be  very  relevant  for  new  players  that  are  considering  entering  the  securitisation 
market and that currently would not do so due to the very high one-off costs. Respondents also 
estimate a reduction of annual recurring reporting costs between 15%-25% (full range with an 
average  of  22,5%),  which  will  be  partly  offset  by  the  estimated  additional  costs  of 
approximately  7  million  that  would  result  from  the  reporting  of  private  transactions  to 
securitisation repositories.53 

Furthermore, lower one-off costs would benefit all types of new issuers entering the market by 
making it less costly, in comparison to the baseline, to set up the reporting framework. 

51 
https://www.afme.eu/Portals/0/DispatchFeaturedImages/Article%205%20presentation%20for%20Commission
%2015.1.25.pdf. 
52 This savings potential is the result of a more complex analysis that is presented in detail in Annex III. 

AFME, 

53 More details for the cost estimations are in Annex III.  

40 

 
 
In  widening  the  legal  definition  for  public  securitisations,  option  1.1  would  support  overall 
market transparency, as fewer transactions would qualify as private and be eligible to use the 
simplified  reporting  regime.  Moreover,  removing  the  current  exemption  that  allows  private 
securitisations to avoid reporting to securitisation repositories, would facilitate the ability of 
supervisors to monitor the private side of the securitisation market, and thus reduce supervisory 
costs for this part of the market. Therefore, option 1.1 is also expected to benefit supervision 
as supervisors would obtain access to data for the entire securitisation market, both public and 
private, via the securitisation repositories. 

Overall, the changes proposed to the due diligence and transparency requirements are estimated 
to result in EUR 310 million of cost savings per year for the EU securitisation market. 

6.1.1.2. Costs 

While option 1.1 is expected to have a positive impact on investors' recurring due diligence 
costs, there will be  a trade-off in  terms of the  cost  of supervisory efforts. Adopting  a more 
principles-based approach to risk assessment may require supervisors to dedicate more time 
and resources to understanding investors' risk management practices. Moreover, removing the 
verification requirements for investors may require supervisors to dedicate more resources to 
supervise  the  compliance  of  issuers  with  the  sell-side  requirements  (risk  retention, 
transparency,  credit  granting  standards).  Option  1.1  could  also  result  in  more  divergent 
supervisory approaches. For this reason, it may be useful to develop supervisory guidance and 
enhance cooperation to ensure that option 1.1 does not result in an uneven playing field. 

Option 1.1 would imply one-off adjustment costs for all existing issuers due to having to adapt 
to new disclosure templates.  

There was no sufficient evidence in the stakeholder consultation on the one-off implementation 
efforts to adapt to a simplified reporting as proposed in option 1.1 as stakeholders could not 
assess  the  costs  without  detailed  and  concrete  proposal  listing  all  the  required  data  fields. 
However, one securitisation repository provided an estimate of their adjustment costs for the 
described adaptation to be about EUR 50,000-70,000. If we take this reply as a rough estimate 
with  a  conservative  margin,  we  estimate  the  adaptation  costs  to  EUR  100,000  per  issuer 
(assuming that existing data fields are re-used to a maximum extent) and that approx. 330 active 
issuers in the market incur the same cost on average (there will be smaller players operating 
without IT infrastructure and larger players with more complex IT systems and changes), we 
obtain one-off implementation costs of EUR 33 million for the market as a whole. 

On  the  one  hand,  private  issuers  will  benefit  from  the  simplified  reporting  template  and 
therefore will face lower recurring reporting costs compared to  the baseline54. On the other 
hand, private issuers will face additional recurring costs resulting from the obligation to report 
to securitisation repositories. Based on the current fees charged by securitisation repositories, 

54 We refrain from a market cost estimation for private issuers as the number of private issuers currently cannot 
be determined as they are not obliged to report to public repositories. We can assume however that there is an 
overlap of issuers that operate in both segments, public and private. 

41 

 
 
those costs are less than EUR 10,000 per year per transaction55. For an estimated number of 
700 outstanding private transactions, this amounts to about EUR 7 million annually.56 

6.1.1.3. Overall assessment: Effectiveness, efficiency and coherence 

Option 1.1 will lower the recurring costs investors face when complying with the due diligence 
requirements  in  the  SECR.  However,  the  impact  would  not  be  the  same  for  all  types  of 
securitisations. Recurring due diligence costs for EU issued securitisations would be reduced 
to  a  greater  extent  than  for  non-EU  securitisations.  This  would  be  an  acceptable  outcome 
because EU transactions are supervised according to the SECR, whereas this is not the case for 
transactions issued outside of the EU. 

At the same time, option 1.1 would not significantly change the risk assessment that an investor 
needs to carry out in order to invest in a securitisation. Therefore, this option would result in 
the same level of investor protection as the baseline. 

As  regards  issuers,  option  1.1  will  reduce  operational  costs  by  reducing  the  amount  of 
information  that  issuers  are  required  to  disclose.  The  long-term  impact  of  reducing  annual 
recurring costs will be more than sufficient to offset the impact of the one-off costs that need 
to be incurred by issuers to adapt to the revised type of reporting. This option is also expected 
to facilitate market entry as it would entail lower one-off costs for new issuers compared to the 
baseline. 

Option  1.1  will  improve  market  transparency  relative  to  the  baseline  as  a  higher  share  of 
securitisations will be expected to report to securitisation repositories.  

The overall impact on the cost of supervision is expected to be neutral as the need for more 
oversight over compliance with due diligence would be offset by lower need for resources to 
supervise disclosure. 

Option 1.1 would continue to be coherent with the rest of the Securitisation Framework (i.e. 
‘internal coherence’), as well as with other pieces of financial legislation and with international 
standards (i.e. ‘external coherence’).  

6.1.1.4. Stakeholders’ views 

In general, both the industry and the supervisors support option 1.1. Many respondents to the 
targeted  consultation  indicated  that  implementing  option  1.1  could  be  expected  to  result  in 
higher securitisation issuance, thereby contributing to the general objective. 

Option 1.1 was preferred by many respondents under the condition that it would mean keeping 
the structure of the current templates that are already implemented while introducing flexibility 
by  using  the  “no-data-option  –  ND”  more  extensively.  For  very  granular  transactions,  i.e. 

55 The rates are published by the securitisation repositories on their websites. 
56 Details in Annex III. 

42 

 
 
transactions  pooling  thousands  of  underlying  exposures  such  as  credit  card  receivables, 
removing  the  requirement  of  loan-by-loan  reporting  and  instead  allowing  for  aggregate 
reporting  could  also  be  considered.  Flexibility  of  the  required  format57  and  allowing  the 
inclusion of additional data would also be welcomed by certain issuers to better meet the needs 
of  investors.  Some  respondents  pointed  also  to  further  reporting  with  similar  content,  e.g. 
securitisation reporting required by the ECB or national competent authorities. Alignment and 
data sharing between authorities could have beneficial effects for the reporting entities. 

Regarding  the  removal  of  STS  verification,  some  supervisors  argue  that  this  should  be 
contingent  on  introducing  supervision  requirements  for  STS  third-party  verifiers  (TPVs)58, 
whereas  the  industry  seems  to  think  that  TPVs  are  already  supervised  under  the  SECR. 
Removing verification requirements, and in particular STS verification, is the main ask from 
stakeholders in the area of due diligence. 

Regarding  transparency,  issuers  warn  that  requiring  private  securitisations  to  report  to  the 
securitisation repositories would increase compliance costs for those transactions, which runs 
contrary to the policy goal of burden reduction. Moreover, stakeholders warn that disclosure 
requirements for private securitisations should take into account confidentiality and data breach 
risks. 

Option 1.1 would not negatively affect financial stability. In terms of disclosure, option 1.1 still 
requires  enough  information  about  the  characteristics  and  performance  of  the  underlying 
exposure and the structural features of the transaction to be disclosed to investors so they can 
carry out a proper risk assessment. Regarding due diligence, option 1.1 still requires investors 
to meaningfully assess the risks associated with securitisation. Supervisors are still expected to 
pay close attention to the activities of the securitisation parties. 

6.1.2. Option 1.2: Significant measures to reduce high operational costs 

6.1.2.1 Benefits 

Option 1.2 would remove all operational costs (recurring plus one-off) associated with the due 
diligence requirements in the SECR for EU regulated investors that go beyond the usual course 
of business and what would be required by their respective sectoral regulations in the absence 
of Art. 5 SECR. According to stakeholder feedback, the one-off costs to set up an investment 
business that would invest in securitisations, associated with the implementation of  existing 
due  diligence  requirements  only,  are  about  EUR  130,000  per  entity.  If  the  existing  due 

57 E.g. xlsx instead of xml only 

58 The  SECR establishes a  system of third-party verification entities to assist both issuers and investors, on a 
voluntary basis, in assessing the compliance of a transaction with the STS criteria. However, the involvement of 
such verifiers does not remove the legal responsibility from institutional investors to perform due diligence on the 
investment and investors remain liable for their obligations under the regulation. These third-party verification 
entities  are  authorised  by  the  respective  national  competent  authority  of  the  Member  State  in  which  they  are 
incorporated. Two third-party verifiers have been authorised so far. To date, most STS transactions have used the 
services of one of the two third-party verifiers. 

43 

 
 
diligence requirements no longer apply, those costs and time-investment would no longer have 
to be incurred by new market entrants, which would facilitate market entry. 

This  would  not  exempt  EU  investors  from  conducting  due  diligence  when  investing  in 
securitisations,  but  it  would  eliminate  the  need  for  investors  to  comply  with  due  diligence 
requirements stipulated in the SECR on top of the due diligence requirements outlined in their 
respective  sectoral  legislations.  In  practice,  investors  would  still  need  to  adhere  to  the  due 
diligence standards specific to their sector, just as they are required to do so when investing in 
other financial instruments.  Investors  that do not  have due diligence provisions within their 
own sectoral legislations would still have to apply the due diligence requirements in the SECR. 

The main beneficiaries from such an approach would be those investors for which the existing 
due diligence requirements result in an additional effort on top of their regular due diligence 
process.  According  to  the  result  from  the  targeted  consultation,  the  costs  added  by  the  due 
diligence requirements in the SECR vary significantly depending on the type of respondent. 
Some large and experienced asset managers report additional costs as low as 0%. This is the 
case because they already carried out similar due diligence procedures as those required under 
the SECR before its entry into force. For other small, regulated institutional investors that carry 
out different due diligence procedures than those stipulated under the SECR or for other new 
market  entrants  option  1.2  could,  however,  potentially  save  a  significant  amount  of 
administrative costs.   

In  addition  to  reducing  costs,  option  1.2  would  also  lead  to  a  level  playing  field  between 
securitisations and other financial instruments that are not subject to additional specific due 
diligence  requirements.  In  turn,  this  would  incentivise  EU  investors  to  invest  more  in 
securitisations.  One  may  reasonably  expect  that  greater  investor  interest  in  securitisations 
would be followed by the emergence of a wider and more diverse securitisation offer (greater 
issuance),  thus  supporting  the  role  of  securitisation  in  funding  the  EU’s  economy  (see 
introduction section for a more detailed explanation of what securitisation is and how it can 
support the EU economy). This option would also benefit new EU regulated investors as it will 
not be necessary for them set up dedicated processes to comply with the existing due diligence 
requirements in the SECR.  

Option 1.2 would reduce operational costs for all issuers relative to the baseline scenario. The 
reduction  will  impact  start-up  costs  in  particular,  as  this  approach  would  give  issuers  the 
flexibility to customize their disclosures for each specific deal rather than having to abide by a 
prescribed disclosure template and format. This is expected to be less costly than the current 
one-size-fits-all approach, which is often reported to fail to meet the specific characteristics of 
securitisation transactions and unique investor needs.  

Option 1.2 would not require issuers to disclose information that investors find superfluous and 
that they do not  use  when making investment  decisions. Overall, this streamlined approach 
should  make  the  disclosure  process  more  straightforward  and  useful  to  certain  market 
participants,  while  not  adversely  impacting  the  reporting  of  information  necessary  for 
supervisory purposes. 

44 

 
At the same time, by requiring all securitisations (public and private) to report to securitisation 
repositories  with  a  single  supervisory  template,  market  transparency  would  be  enhanced  in 
comparison  to  the  baseline  scenario  where  only  public  transactions  are  obliged  to  report  to 
repositories. This would allow investors, supervisors and market analysts to get a better view 
of the market, lowering information asymmetry, enhancing price formation and supporting the 
further development of the EU securitisation market.  

6.1.2.2. Costs 

With regard to due diligence, no significant adjustment costs are expected under option 1.2. As 
for supervisory costs, the impact is likely to be neutral as regards securitisations issued by EU 
entities as  supervisors  are already  responsible for overseeing  due diligence rules in  sectoral 
legislation.  

In the area of transparency, option 1.2 would imply some adjustment costs for existing issuers 
as  they  would  have  to  adapt  their  reporting  systems.  These  costs  should  be  comparable  to 
option 1.1 as the new template would build on the existing reporting requirements only with 
significantly fewer mandatory data fields than the current set of templates.  

As  regards  supervisors,  the  reduced  reliance  on  standardised  reporting  for  investors  would 
make  it  more  costly  to  ensure  that  issuers  disclose  sufficient  information  to  investors. 
Moreover,  due  diligence  costs  might  increase  as  a  result  of  option  1.2  for  transparency,  as 
investors would have less readily available information on other deals, besides the one they are 
directly investing in.  

6.1.2.3. Overall assessment: Effectiveness, efficiency and coherence 

Option  1.2  would  be  the  most  effective  in  reducing  operational  costs  for  all  issuers  and 
investors relative to the baseline scenario.  

With regard to due diligence, however, there is a risk that this option would be incoherent with 
international  standards,  in  particular  with  respect  to  the  recommendation  by  the  Financial 
Stability Forum (later succeeded by Financial Stability Board), to ensure stronger requirements 
for  investors’  processes  for  investment  in  structured  products59.  In  addition,  reducing  due 
diligence standards too much might also facilitate investments by inexperienced investors who 
might not be capable of assessing comprehensively the relevant risks of the transaction, which 
could put financial stability at risk.   

Regarding transparency, the reduction in recurring costs is expected to be comparable with that 
achieved by option 1.1. Disclosure will still be required, but the regulation will rely on the best 
efforts of issuers subject to market control (if investors are not happy with the disclosure, they 
will not invest). The primary beneficiaries would be new issuers, who would not be burdened 
with high one-off costs to set up the reporting framework required in the baseline scenario.   

59 Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience, April 2008 

45 

 
 
Supervisory control is improved from the baseline as private securitisations would also report 
to the securitisation repositories, but not to the same level as in option 1.1, as the disclosure 
templates will provide less information (at least for “public” securitisations). 

Overall market transparency should be sufficient but may decrease from the baseline because: 
i) disclosure from issuers to investors may not always be visible to the entire market, ii) data 
would no longer be available for public transactions in a uniform and standardised format, and 
iii) the information disclosed via repositories will be limited. 

Although Option 1.2 is more ambitious than Option 1.1, it would not lower requirements to 
such an extent that financial stability could be at risk. In terms of disclosure, Option 1.2 still 
requires  enough  information  about  the  characteristics  and  performance  of  the  underlying 
exposure and the structural features of the transaction to be disclosed to investors so they can 
carry out a proper risk assessment. Moreover, even if securitisation specific due diligence rules 
are eliminated under Option 1.2, investors will still be required to meaningfully assess the risks 
associated with  securitisation in  line with their own sectoral  legislation.6.1.2.4. Stakeholder 
views 

Regarding transparency,  there is  no support from supervisors for  option 1.2. Some industry 
participants are supportive of this option, but most prefer option 1.1 (45 respondents preferred 
option 1.1, 12 respondents preferred option 1.2, 3 respondents did not want any changes to the 
current regime and 43 respondents did not answer). Many industry stakeholders warned that it 
is  difficult  to  estimate  the  potential  savings  that  Option  1.2  might  bring.  One  large  market 
player pointed out that “if the overall volume of data does not change or if data is difficult to 
obtain and/or highly complex …, the cost reduction could be lower than expected”. 

Regarding due diligence, option 1.2 was not explicitly discussed with either market participants 
or  supervisors.  However,  from  the  consultation  responses,  it  appears  that  some  industry 
participants think that due diligence requirements in sectoral legislation are sufficient and that 
specific  due  diligence  requirements  for  securitisation  in  addition  to  sectoral  due  diligence 
requirements  are  not  needed.  Although  option  1.2  was  not  explicitly  discussed  with 
supervisors, based on previous discussions on this topic, we expect that they would not favour 
this  option  since  most  of  them  seem  to  support  the  idea  of  having  additional  due  diligence 
requirements for securitisations. 

6.1.2.5. Summary 

Comparative presentation of the impacts of Option 1.1 and Option 1.2. 

Option 1.1 

Option 1.2 

Effectiveness and efficiency 
Reduction in recurring due diligence costs 
Ensuring that adequate due diligence is performed 
Reduction in one-off disclosure costs 
Reduction in recurrent disclosure costs 
Ensuring high market transparency 
Market oversight by supervisors 

46 

+ 
0 
0 
++ 
++ 
++ 

++ 
- 
+ 
++ 
0 
+ 

 
 
Coherence 
Legend: +++ = Very positive      ++ = Positive     + = Slightly positive       +/- = Mixed effect           0 = 
no effect            - = Slightly negative       -- = Negative            --- = very negative 

0 

- 

47 

 
 
Impacts on stakeholder groups 

Issuers of 
public 
securitisations 

++ (Simplified 
templates) 

Option 1.1. 

Issuers of private 
securitisations 

Investors 

Supervisory 
authorities 

++ (removal of 
redundant due 
diligence 
requirements) 

Summary: ++ 

 +++ (much 
simpler 
reporting) 

- (reporting to 
securitisation 
repositories) 

Summary: ++ 

+ (better overview 
of private 
securitisations) 

+ (less supervisory 
resources needed to 
supervise private 
securitisations) 

+ (wider oversight 
over the public 
market thanks to a 
broader definition) 

- (more resources 
needed to supervise 
due diligence) 

Option 1.2. 

Summary: ++ 

Summary: + 

Summary: + 

Summary: 0 

+++ (no one-
size-fits-all 
reporting to 
investors) 

- (new 
reporting 
template needs 
to be 
introduced for 
supervisory 
purposes) 

++ (simpler 
reporting) 

Same as for 
public 
securitisations. 
Under this 
option, there will 
be no distinction 
between public 
and private 
securitisations. 

- (reporting to 
securitisation 
repositories) 

+++ (Eliminate 
the need to 
comply with 
SECR due 
diligence 
requirements for 
EU regulated 
investors) 

- (less 
comparable data 
available for 
analysing the 
securitisation 
market) 

- (risk of 
diverging due 
diligence 
practices by 
different types of 
investors) 

Legend: 

 +++ = Very positive  
0 = no effect  

 ++ = Positive   + = Slightly positive 

- = Slightly negative 

-- = Negative 

48 

+ (better overview 
of private 
securitisations) 

+ (less supervisory 
resources needed to 
supervise private 
securitisations) 

- (less supervisory 
data for public 
securitisations) 

- (less transparency 
regarding the 
disclosures that 
investors receive) 

+/-  =  Mixed  effect
 --- = very negative 

 
  
 
 
 
 
 
 
Note: the summary provided in the table on ‘impacts on stakeholder groups’ is a net result of the pluses 
and minuses in each cell. 

6.2. Measures to reduce undue prudential barriers for banks 

6.2.1.  Option  2.1:  Targeted  changes  to  the  existing  prudential  (capital  and  liquidity) 
framework for banks 

High level description of the securitisation capital framework in the CRR 

The  current  prudential  securitisation  framework  for  banks  (set  out  in  the  CRR,  which 
implements  the  Basel  III  securitisation  framework),  has  significantly  increased  capital 
requirements  for  banks’  securitisation  exposures  compared  to  the  previous  regime:  as  a 
measure  of  prudence  a  considerable  level  of  overcapitalisation  (or  the  so-called  ‘non-
neutrality’) was introduced, to address the agency and model risks inherent to securitisation 
transactions.  ‘Non-neutrality’  of  capital  requirements  means  that  holding  all  the 
securitisation  tranches  in  a  securitisation  is  subject  to  a  higher  capital  charge  than  in  a 
counterfactual  where  the  bank  has  a  direct  holding  of  all  the  underlying  non-securitised 
assets.60  

More  specifically,  there  are  two  correction  factors  in  the  CRR  capital  framework  that 
safeguard and ensure the capital ‘non-neutrality’, of the framework: (i) a risk weight floor 
for exposures to the senior tranche – which defines an absolute minimum risk weight for 
banks’ exposures to the senior tranche of securitisation – i.e. even if the calculation of capital 
requirements for that tranche results in lower risk weights, the risk weight floor needs to be 
applied  to  prevent  excessively  low  resulting  risk  weights;  and  (ii)  a  (p)  factor  (‘penalty 
factor’)  which  defines  the  relative  capital  surcharge  for  all  securitisation  exposures, 
compared to the capital requirement for the underlying pool of exposures. In terms of impact 
on  individual  tranches,  the  risk  weight  floor  to  senior  tranches  influences  the  capital 
requirement for senior tranches only, while the (p) factor influences the capital requirements 
for all tranches, not just the senior one. Each bank needs to reflect the risk weight floor and 
the  (p)  factor  in  the  calculation  of  the  minimum  capital  requirement  that  applies  to  their 
securitisation exposures. 

Another important  element of the securitisation capital framework is the Significant Risk 
Transfer (SRT)  framework, which set  out  tests  and rules that supervisors need to  follow, 
when  assessing  whether  the  bank  has  transferred  a  sufficient  amount  of  risk  through  a 
specific securitisation to external investors, and whether as a consequence, it achieves the 
capital relief (i.e. it is allowed to reduce the capital it has to hold, after securitisation). 

Option 2.1 entails targeted amendments towards a more risk-sensitive design of banks’ capital 
and  liquidity  requirements,  in  the  CRR  and  in  the  LCR  Delegated  Act,  where  undue 
requirements would be limited. 

60 Only by transferring a sufficient amount of risk (by selling tranches to an external investor or obtaining a credit 
protection for certain tranches) can an originator bank achieve capital requirements which are the same or lower 
than those previously held against the underlying assets. 

49 

 
 
The targeted changes to the CRR aim to achieve the following objectives: (i) introduce more 
risk sensitivity into the framework, while supporting financial stability; (ii) reduce unjustified 
levels of conservatism and capital non-neutrality; (iii) mitigate undue discrepancies between 
the  standardised  and  internal  rating-based  approaches  for  the  calculation  of  capital 
requirements for securitisation, which should also encourage greater participation of medium-
sized  banks;  (iv)  differentiate 
treatment  for  originators/sponsors  of 
securitisations and investors; and (v) make the significant risk transfer framework more robust 
and  predictable.  This  is  achieved  through  targeted  changes  to  the  securitisation  capital 
framework, and to  the significant  risk framework, in  the CRR.  The targeted changes  to  the 
securitisation capital framework are focused on the above mentioned two elements that have 
the most significant and direct impact on the capital requirements: the risk weight floor for the 
senior tranches and the (p) factor.  

the  prudential 

The proposed changes (and capital reductions in percentage changes) are targeted on (i) the 
senior tranches,  where the exposures of banks  are concentrated  and where there is  space to 
reduce the excessive conservativeness (the focus is less on the riskier junior and mezzanine 
tranches); (ii) on originator positions where agency and model risks are reduced (rather than 
investor positions); (iii) on STS securitisations where the STS requirements largely mitigated 
the  agency  and  model  risks  (rather  than  non-STS  securitisations).  This  focus  behind  the 
changes  (i.e.  away  from  banks  investing  in  non-STS  or  away  from  relaxing  the  prudential 
treatment for the more risky tranches) is also consistent and in line with the objective to transfer 
the risk outside of the banking system towards those that may be better placed to bear those 
risks.  

With respect to the risk weight floors for senior tranches, the current framework is not risk-
sensitive, as it allows only for two risk weight floors for senior tranches (a 10% risk weight 
floor for STS transactions, and a 15% risk weight floor for non-STS transactions). Under this 
option,  the  risk  weight  floors  are  made  risk  sensitive:  they  are  made  proportional  to  the 
riskiness  of  the  underlying  securitised  portfolio.  A  lower  risk  weight  floor  is  calculated  for 
securitisations of assets that are deemed less risky (i.e. that have relatively low risk weights), 
such as residential mortgages or SME and corporate exposures, in comparison to securitisations 
of riskier assets. To prevent excessive reductions, the risk weight floors calculated under this 
risk-sensitive formula will be subject to pre-defined minimum levels. 
Moreover,  building  on  the  proposals  in  the  2022  Joint  Committee  Report,  the  concept  of 
‘resilient securitisations’ is introduced: securitisations which feature reduced agency and model 
risk, and which comply with a set of safeguards61 that ensure the resilience of the transactions 
and the protection of the senior tranche. These transactions would benefit from a lower risk 
weight floor and lower (p) factor for the senior tranche, compared to non-resilient transactions. 
The resilient transactions safeguards are adjusted compared to the 2022 Report, to capture a 
larger part of the securitisation market, while still ensuring prudent results.  

61 The safeguards are: (i) minimum thickness of first loss/mezzanine tranche that protects the 
senior tranche from losses, (ii) minimum granularity of asset pool, (iii) sequential amortisation, 
and (iv) funded credit protection (in case of synthetic securitisations only). With the exception 
of  the  first  one,  the  safeguards  are  existing  criteria  for  STS  purposes  (i.e.  defined  in  the 
Securitisation Regulation or in the Article 243 of the CRR). 

50 

 
 
With respect to the (p) factor, under the standardised approach (SEC-SA), targeted changes are 
introduced to  the  (p) factor to  address  an excessively  punitive capital  treatment,  for senior 
tranches.  Under  the  internal  rating-based  approach  (SEC-IRBA),  formula-outcome  scaling 
factors and floors to the (p) factor are lowered and caps are introduced, in particular for senior 
tranches.  

As regards the significant risk framework, the proposed changes aim to make the framework 
more  robust  by  replacing  the  current  prescriptive  tests  for  assessing  the  amount  of  risk 
transferred in securitisation, which is a precondition for the bank to benefit from the capital 
relief through securitisation, by the Principle Based Approach (PBA) test, as proposed by EBA 
in 2020. The PBA test addresses the limitations of the current tests which fail to ensure the 
transfer  of  risk  to  third  parties  in  some  cases,  and  specifically  aims  at  the  transfer  of  the 
unexpected  losses  of  the  securitised  portfolio.  Supervisors  would  maintain  the  flexibility  to 
adapt supervisory assessments of transactions with complex features. The main elements of the 
SRT assessment and the broad design of the test would be defined in the CRR. EBA would be 
mandated to deliver technical standards which would operationalise the technical details of the 
test and would set high level principles for the supervisory process, including for a fast-track 
process for simpler transactions.  

Before  proceeding  to  analysis  of  impacts,  it  should  also  be  clarified  that  the  impact  of  the 
proposed changes to the capital and liquidity for securitisation for banks on their issuance and 
investment  behaviour  differs  based  on  the  type  of  securitisation  transaction  (i.e.  whether  it 
concerns traditional or synthetic securitisation) and the role of the bank in the securitisation 
transaction  (i.e.  whether  the  bank  originates  the  transaction  or  invests  in  it).  These 
particularities have been taken into account when designing the measures under each option 
and when assessing their impact on the securitisation market.   

The main objective of synthetic securitisation is capital and credit risk management, as banks 
sell  and  transfer  out  risk  and  achieve  SRT  to  achieve  capital  relief.  The  originator  bank 
normally retains the senior tranche and sells the mezzanine tranche which contains higher risk, 
to achieve SRT. Banks are not investing in synthetic securitisations. Securitisation prudential 
rules have therefore direct impact on synthetic securitisations.   

On the other hand, traditional securitisations are issued mostly for funding purposes i.e. to get 
access to cash/funds. This is achieved by selling senior tranches (hence, contrary to synthetic 
transactions, here the senior tranche is sold and is no longer capitalised).62 Banks are important 
investors in the senior tranches of traditional securitisations, as the latter are eligible for their 
LCR  liquidity  buffers.  Overall,  in  the  case  of  traditional  securitisations,  the  securitisation 
prudential rules mostly impact banks that invest in the senior tranches. The treatment of these 

62 A specific type of traditional securitisations (currently representing a majority of traditional securitisations in 
the market) are transactions where the bank does not sell but retains the senior tranche and uses is as collateral to 
access central bank funding (these transactions do not meet SRT rules and the securitisation prudential framework 
is not relevant because the originator bank has to continue to apply the credit risk framework for calculating capital 
for the whole underlying portfolio). 

51 

 
 
securitisations  under  the  LCR  is  considered  to  be  the  more  important  driver  for  banks’ 
investments in these securitisations. 

The securitisation rules in the CRR apply to bank originators (i.e. to the exposures they retain 
in the securitisation they have originated – subject to the condition that significant risk transfer 
is achieved), bank sponsors (i.e. to tranches they sponsor) as well as to bank investors (i.e. to 
the tranches they have bought).  

6.2.1.1. Benefits 

Option 2.1 would make the capital requirements for banks’ securitisation exposures more risk-
sensitive by reducing the amount of capital that banks are required to hold for  securitisations 
where key risks driving the securitisation capital needs, such as agency and model risks, have 
been mitigated. These risks are lower, for example, from the perspective of an originator (who 
has more detailed knowledge and control over the underlying exposures and the securitisation 
origination  process  than  an  investor),  or  in  case  of  STS  transactions  (because  STS  criteria 
largely mitigate the agency and model risks).  

Revising  the  capital  framework  in  a  risk-sensitive  manner  is  expected  to  reduce  excessive 
overcapitalisation by better aligning the capital treatment with the underlying risks. Targeted 
revisions    would  also  mitigate  undue  discrepancies  in  the  capital  requirements  for  different 
banks using different approaches for the calculation of their securitisation capital requirements 
(concretely,  more  coherence  would  be  introduced  between  more  sophisticated  internal 
approaches and less sophisticated standardised approaches). 

The proposed  revisions  are  expected to  have  a positive impact  on market  developments,  as 
follows:  
•  They should lead to an increase in issuance by banks of securitisations which achieve SRT, 
as  a  more  favourable  prudential  treatment  is  expected  to  increase  the  attractiveness  of 
securitisation as a tool for risk sharing purposes. The changes should affect mostly synthetic 
securitisations  (which  are  primarily  structured  for  SRT  purposes),  but  it  should  also 
encourage  issuance  of  traditional  securitisations  which  are  done  for  SRT  purposes  and 
where senior tranches are sold to the market. 

•  More banks could decide to issue, notably less sophisticated banks using the standardised 
approach might have better incentives to enter the market as issuers. In 2024, over 70 banks 
issued securitisation that achieved SRT; this number is expected to increase.  

•  The measures should also positively impact banks’ investments in senior tranches of STS 
traditional  securitisations  (acknowledging 
these 
securitisations in the LCR has a more pronounced effect on the attractiveness of the banks 
to  invest  in  these  securitisation).  Currently,  in  the  primary  market,  according  to  market 
estimates, the oversubscription for senior tranches has been on average 1.5/1.7 of investor 
per senior tranche on average in 2024; this number is expected to increase.  

treatment  of 

liquidity 

that 

the 

While  the  reduction  of  the  capital  requirements  for  individual  securitisation  transactions  is 
expected to be potentially significant, the overall impact on the capital of banks would be quite 
limited, because of the very small weight of securitisation exposures in their total exposures. 
Indeed,  the  risk-weighted  assets  corresponding  to  banks’  securitisation  positions  currently 

52 

 
represents  only  1.5%  of  the  banks’  total  risk-weighted  assets  (according  to  EBA,  as  of 
December 2024).  

As  regards  the  use  of  traditional  securitisation  for  funding  purposes,  the  total  outstanding 
securitisation funding represented 0.4% of EU banks’ total balance sheet as of December 2023 
(compared to 63.1% of funding coming from deposits and 5.4% coming from covered bonds, 
for example). This means that on aggregate traditional securitisation is very scarcely used as a 
source of banks’ funding, although it could be an important funding instrument for some banks. 
It is expected that the measures under option 2.1 will increase this share but the overall impact 
on banks’ funding mix would likely not be substantial. 

On  the  impact  of  the  proposed  measures,  based  on  informal  checks  with  supervisors  and 
indicative figures covering a sample of anonymised existing SRT securitisations, the reductions 
of  the  risk  weight  floors  and  (p)  factors  are  expected  to  result  in  reductions  of  capital 
requirements  for  senior  tranches  by  approximately  one  third,  on  average.    These  estimates 
should be interpreted with  caution as they are subject  to  a number of caveats  (as explained 
below).  

The measures are expected to reduce the levels of capital required for securitisation, but still in 
a prudent way. The overall amount of capital for securitisation would always be approximately 
at least 20% higher compared to the capital of the underlying exposures, based on the principle 
of non-neutrality and prudence (as the (p) factor would never be lower than 0.2, even for the 
least risky transactions).   

Respondents to the consultation provided unverifiable estimates of the impact of changes to 
the securitisation framework on additional lending. One respondent wrote that every EUR 10 
bn of risk-weighted assets that banks can securitise, rather than keep on their balance sheet, 
allows banks to provide additional lending of EUR 15-20 bn63. Another respondent suggests 
that 71% of the capital released or funding generated by SRT securitisations is currently used 
for further lending to the EU economy; and that this percentage would likely increase with the 
proposed measures.  

All these quantitative estimates should however be interpreted with caution. There is significant 
uncertainty in  all the estimates  and in  modelling  the outcomes  of the proposed measures in 
general, as estimates rely on several assumptions and they have the following main limitations:   

•  First and foremost, static and mechanistic comparisons are limited as they do not allow to 
take  into  account  the  behavioural  changes  or  the  modification  in  the  structuring  of  the 
products  themselves,  which  makes  comparability  and  achieving  reliable  and  accurate 
estimates difficult. This is especially relevant for securitisations, where banks structure the 
securitisation transactions according to the applicable regulation (and hence banks would 
structure securitisation transactions differently under two different regulatory regimes).     
•  Second, it is difficult to  quantify the  amount of  capital  that  would be relieved from the 
banking system altogether, as there are various external variables that come into play, such 
as the overall number of issuer banks, the number of investors and the overall volume of 

63 These estimates might be inflated. 

53 

 
 
issued securitisation transactions, which are difficult to predict as they also depend on wider 
macro-economic and interest rate environments etc.   

•  Third, the quantification is complicated by the fact that it assesses the impact of a series of 
measures including several parameters, rather than a single measure and a single parameter 
(i.e.  even  if  one  could  provide  an  estimate  of  the  impact  of  the  changes  to  the  floor 
parameters – and this is already subject to a number of limitations as mentioned above – it 
is impossible to provide a reasonable quantitative estimation of the combined effect of the 
measures);   

•  Fourth, the impact also depends on response to the incentives set by the prudential treatment 
for originators and investors, which are more difficult to quantify. The overall amount of 
released capital depends also on the impact of the SRT framework and the SRT rules on 
the overall issuance, which are also expected to change, under the Option 2.1. A decisive 
factor in this respect is also the complexity of the securitisation structures that banks might 
decide  to  use:  if  banks  have  simple  standardised  structures,  this  might  ease  the  life  of 
investors and supervisors and provide more relief overall thanks to the increased number 
of issuances, compared to individual more complex issuances which might provide more 
benefits only if seen in isolation.  

Taking  all  the  above  into  account,  the  most  important  impact  of  option  2.1  is  therefore 
qualitative, and that is that it would make the use of securitisation more attractive as a tool for 
risk  transfer  and  capital  relief,  with  smaller  transaction  costs  (related  to  due  diligence  and 
transparency) and a broader investor base.  

The measures under option 2.1 will help banks achieving capital relief in a more efficient way 
– i.e. they will allow banks to achieve the same amount of capital relief by selling less risk, or 
they will allow banks to increase the capital relief for the same amount of risk transferred – 
while still ensuring prudent levels of capital.  

The estimates are even more complicated in the context of the introduction of the output floor, 
which will progressively change the incentives for banks to  move  out  exposures from  their 
balance sheet (and in a way that differs individually from bank to bank).  

With  respect  to  significant  risk  transfer,  the  proposed  changes  would  address  the  structural 
flaws  of  the  current  SRT  framework.  For  example,  a  number  of  transactions  can  pass  the 
existing  tests  even  though  they  may  not  necessarily  transfer  a  sufficient  amount  of  risk  in 
economic  terms  in  all  cases.  This  structural  flaw  may  result  in  a  weakening  of  the  capital 
position of the bank since the capital relief that is obtained is not justified from an economic 
perspective.  The  replacement  of  the  existing  tests  with  a  new  test  would  allow  to  address 
identified flaws and would ensure that a significant risk transfer effectively occurs, so that the 
capital relief achieved by the originator through that securitisation transaction is justified. This 
is not expected to result in increased number of supervisory objections to the SRT for specific 
transactions; rather, the aim is to ensure that the rules that supervisors follow when assessing 
the transactions before the SRT validations are clearer and more solid where possible.  

In  addition,  the  efficiency  of  the  process  of  the  SRT  supervisory  assessments  would  be 
enhanced  by  providing  some  harmonised  high-level  principles,  allowing  for  a  simpler  and 
quicker supervisory assessment process for simple transactions.  

54 

 
The proposed changes to the SRT framework would increase the reliability and predictability 
of the SRT assessments, while ensuring the efficiency of the process, as well as the supervisory 
discretion  to  decide  on  the  prudent  treatment  of  transactions.  The  proposed  changes  are 
expected to result in increased market volumes and efficiencies when transferring risks from 
banks’ balance sheets to existing and new investors, freeing up banks’ lending capacities. All 
in  all,  an  enhanced  SRT  framework  would  be  beneficial  for  all  stakeholders  (originators, 
investors and supervisors) and for both traditional and synthetic transactions.  

With respect  to  the liquidity  treatment,  targeted revisions to  the liquidity  framework would 
address  some  inconsistencies  in  the  current  eligibility  conditions.  These  targeted  changes 
would  strengthen  the  incentives  for  banks  to  invest  in  publicly  traded  STS  traditional 
securitisations, which would have a positive impact on the market liquidity and volume of these 
securitisations. It would thus deepen this segment of the securitisation market and diversify 
banks’ liquidity buffers and risk profiles.  

6.2.1.2. Costs  

By design, making the capital requirements for securitisation more risk-sensitive will reduce 
the amount of capital that banks hold against their securitisation exposures in some cases, but 
the  overall  level  of  capitalisation  is  expected  to  remain  prudent  and  proportionate  to  the 
associated risks. Banks may incur some minor implementation costs from implementing the 
proposed changes, as they would need to implement limited targeted changes to their existing 
methods  for  capital  requirements  calculation.  However,  these  implementation  costs  are 
expected  to  be  lower  in  comparison  to  the  benefits  (i.e.  estimated  funding  cost  savings 
stemming  from  reduced  capital  requirements).  Overall,  as  the  measures  do  not  propose  a 
fundamental overhaul of the methods that banks use for the calculation of capital, they rather 
involve an adaptation of existing parameters and make the framework more risk sensitive - the 
costs will be limited and are not considered as a topic of concern by the banking industry. 

Changing the SRT framework may result in implementation costs for supervisors to adapt their 
supervisory  methodologies  to  the  existing  framework.  However,  the  SSM,  the  major  EU 
supervisor which assesses almost all SRT transactions in the EU, already incorporates a number 
of  the  proposed  requirements  in  their  supervisory  assessments  and  processes,  which  should 
significantly mitigate the implementation costs of the proposed changes. Implementation costs 
may  be  higher  for  other  supervisors  which  do  not  incorporate  such  requirements  in  their 
practice  (non-SSM  or  non-Euro  area).  On  the  other  hand,  improving  efficiency  of  SRT 
supervisory processes should lead to reduction of the ongoing supervisory costs.  

Making the Framework more robust would necessarily mean that some of the new SRT tests 
may  be  stricter  for  some  transactions.  Increasing  the  robustness  and  solidity  of  the  SRT 
framework  is,  however,  a  necessary  condition  to  accompany  the  proposed  changes  in  the 
capital treatment and ensure trust in the securitisation market. The proposed changes should 
simplify  the  processes  associated  with  these  supervisory  assessments,  reducing  the  overall 
administrative burden for both banks and supervisors.  

55 

 
6.2.1.3. Overall assessment: Effectiveness, efficiency and coherence  

Option 2.1 is expected to be effective in reducing undue prudential barriers for banks to issue  
securitisation. It is also expected to increase the risk sensitivity of the framework and economic 
viability of securitisation as a risk transfer tool. By mitigating some of the key barriers to entry 
for new EU banks, option 2.1 would make securitisation more accessible to a larger number of 
banks across the EU.  

Overall, it is expected to give rise to a relatively moderate increase in securitisation issuance 
and  investments  by  banks  active  in  the  market,  in  particular  of  simple  and  resilient 
securitisations.  It  is  also  expected  to  result  in  the  entrance  of  new  banks  in  the  market,  in 
particular medium-sized banks or banks in Member States with no active issuance to date.  

The measures are expected to mainly increase the issuance of synthetic securitisations, but to 
a lesser extent  also  of traditional securitisations that are placed in  the market  (as these  will 
become  less  capital  and  cost  intensive),  thus  providing  the  bank  originators  with  increased 
liquidity for lending and increased lending capacity.64 They are also expected to increase the 
role of banks as investors in the senior tranches of these placed securitisations. This would help 
strengthen the EU banking system’s ability to provide credit to the economy and to refinance 
new businesses.  

The measures are also expected to increase the share of securitisations in the banks’ liquidity 
buffers and increase the diversification of banks’ liquidity buffers.  

However, the intervention itself cannot ensure significant market growth, and the active role 
of market participants will be crucial as well (as noted above).    

Overall, measures under option 2.1 would support the development of the securitisation market 
and  increase  the  competitiveness  of  the  banking  sector.  However,  they  are  not  expected  to 
result in an undercapitalisation of securitisation related risks or to jeopardise financial stability, 
and  hence  should  maintain  prudence  and  soundness  as  regards  banks’  exposures  to 
securitisation.  The  guiding  principle  is  that  prudential  requirements  are  made  more  risk-
sensitive, which in  turn  is  actually  expected to  support  financial  stability (a risk-insensitive 
one-size-fits-all approach would imply that requirements are either too high or too low, relative 
to  the  actual  underlying  risk).  This  means  that  capital  requirements  will  be  reduced  for 
transactions which are deemed less risky (i.e. with less risky securitised portfolios which have 
relatively low risk weights), while capital requirements will be increased for transactions which 
are deemed more risky (i.e. with more risky securitised portfolios). In addition, the SRT rules 
for assessing the amounts of risk transferred would be made more  thorough and robust and 
liquidity buffers would be more diversified.  

64 Therefore, the effect on the banks’ lending channel from increased securitisation should not be dampened by 
the fact that a large share of traditional securitisation transactions are retained on the banks’ balance sheet.  

56 

 
 
The proposed targeted changes do not represent a trade-off between the banks’ competitiveness 
and financial stability, as the changes aim to maintain capital requirements at a prudent level 
and  concern  a  specific  and  narrow  area  of  prudential  regulation  only  (risk-weighted  assets 
corresponding to  EU banks’ securitisations currently represent  only  1.5% of the EU banks’ 
total  risk-weighted  assets).  The  proposed  changes  reduce  the  capital  surcharge  for 
securitisations,  taking  into  account  that  securitisations  have  suffered  very  low  losses  and 
defaults in the last decades, and that a number of important risk mitigants have been introduced 
in the EU regulatory and supervisory framework. The EBA’s advice has been taken on board 
in designing the measures, and the concerns as regards potential undercapitalisation have been 
taken into account in the design and calibration of the individual measures proposed.  

It should be acknowledged that financial stability risks cannot be reliably quantified, and that 
there is no precise level of capital requirements below which financial stability is jeopardised 
and  above  which  financial  stability  is  safeguarded.  At  the  same  time,  all  in  all,  making 
prudential requirements more risk-sensitive should promote financial stability. 

With respect to the risk weight floor, specifically, increasing the risk sensitivity of the existing 
capital  framework  through  targeted  reductions  to  the  risk  weight  floors  has  been  a  central 
recommendation by the EBA. In their analysis, the EBA fully acknowledged the reduced model 
and  agency  risk  associated  with  some  types  of  transactions  (i.e.  tranches  retained  by 
originators) and proposed that the reduced risks should be recognised through lower risk weigh 
floors for these types of transactions, when accompanied by a set of safeguards ensuring their 
resilience.  Option  2.1  goes  further  and  introduces  a  new  risk-sensitive  formula  for  the 
calculation of the risk weight floor, extends the scope of the reduction of the risk weight floors 
to other specific types of securitisations, which also have reduced model and agency risks (such 
as STS securitisations) and adjusts the safeguards to make them more workable for the existing 
securitisation market.  

With respect to the (p) factor, the EBA has not recommended to reduce the (p) factor, as this 
could lead to cliff effects (i.e. situation where small changes in the (p) factor result in large 
changes  in  the  capital  requirements  and  steep  differences  between  capital  requirements  for 
different tranches) - due to the intrinsic nature and limitations of the existing formulas for the 
calculation  of  capital;  and  as  this  could  result  in undercapitalisation  of  banks’  exposures  to 
mezzanine securitisation tranches in particular. To take these concerns into account, Option 2.1 
limits the changes to the (p) factor to specific types of transactions only, where agency and 
model risks have been reduced by means of a series of regulatory and supervisory measures, 
also considering the solid credit performance of the EU originated securitisation market. Also, 
as the reductions of the (p) factor would be minimal, it would limit the cliff effects (i.e. it would 
limit the risk of excessive differences between the capital requirements for various tranches) 
and the resulting amount of capital would still be kept at sufficiently prudent levels, including 
for the mezzanine tranches. 

Option 2.1 is coherent with the recent political statements, including by the European Council, 
which have highlighted the need to take measures to remove issuance and investment barriers 
in the EU securitisation market and which have called to look at the prudential treatment of 
securitisation for banks in particular.  

57 

 
With respect to the aspect of consistency with international standards, it should be noted that 
all potential changes to the prudential framework would result in a certain level of deviation 
from the international standards. The measures under option 1 aim to limit these deviations and 
maintain a high level of international consistency.  Given that the materiality of the deviations 
from the Basel standards would be limited, we believe the proposal under option 2.1. remains 
largely consistent and coherent. The proposals have a targeted scope, aim to ensure a positive 
impact  on  the  EU  securitisation  market  going  forward,  and  to  support  the  international 
competitiveness of EU banks. 

The  proposed  targeted  changes,  when  compared  to  the  current  provisions,  are  expected  to 
reduce the capital requirements in particular for less risky, robust and resilient securitisation, 
but  are  not  expected  to  give  rise  to  prudential  concerns.  They  aim  to  correct  the  current 
overcapitalisation  stemming  from  the  current  framework,  which  is  based  on  best-effort 
calibrations rather than empirical evidence.  

6.2.1.4. Stakeholders’ views  

The targeted amendments towards a more risk-sensitive design of banks’ capital and liquidity 
requirements (option 2.1) will be welcomed by banks acting as issuers and investors as this 
proposal will reduce excessive conservatism in the Framework and address some of the main 
undesired effects. Its targeted nature may be criticised as not being ambitious enough to make 
the  EU  securitisation  market  sufficiently  attractive.  Banks  have  been  calling  for  more 
substantial long-term amendments to revive securitisation activity.  

In the consultation, a significant majority of financial industry representatives considered that 
the  current  capital  framework  gives  rise  to  an  undue  overcapitalisation  of  securitisation 
exposures (33 respondents agree, 0 disagree, 9 have no opinion and 65 provided no answer) 
and they generally called for comprehensive reductions of the capital parameters. As regards 
the liquidity framework, a large majority of stakeholders (44 out of 131, 78 did not respond 
and 9 had no opinion) called for amendments to the eligibility criteria applied to securitisations 
eligible to the buffer for high quality liquid assets under the LCR. 

With respect to the SRT rules, the respondents generally support regulatory harmonisation of 
rules  and  supervisory  convergence  at  the  EU  level.  With  respect  to  the  tests  applied  to 
securitisations, industry generally agrees with the conditions of the tests and do not see a need 
to make them more robust, although they are not opposed to targeted changes (23 agree, 19 
disagree, 11 have no opinion and 78 do not answer). Supervisors on the other hand believe it 
is necessary to increase the robustness of the framework, in line with the EBA reports, and 
support the measures proposed.   

As the proposed amendments increase the risk-sensitivity of the Framework, are targeted, take 
into account the main prudential concerns raised by supervisors as regards the risk from banks’ 
exposures  to  securitisation,  and  do  not  constitute  a  major  adjustment  to the  Basel  standard, 
option 2.1 should constitute a pragmatic and balanced proposal.  

58 

 
6.2.2. Option 2.2: Radical overhaul of the existing prudential (capital and liquidity) framework 
for banks 

Option  2.2  entails  a  radical  overhaul  of  the  existing  prudential  (capital  and  liquidity) 
framework, that results in material changes to the way capital requirements are calculated and 
assessed by supervisors and to the eligibility of securitisations under the liquidity framework. 
It  contains  a  set  of  far-reaching  yet  conceivable  policy  measures  that  have  been  debated 
between  different  kinds  of  stakeholders.  It  aims  to  correct  an  undue  bias  towards 
conservativeness and overcapitalisation introduced in the previous framework, which has been 
detrimental to the banks’ involvement in the securitisation market.  

Option 2.2 considers radical changes to three aspects of the framework: the capital framework, 
the SRT framework and the liquidity framework.  

First,  this  option  entails  a  fundamental  re-design  of  the  existing  capital  framework  (i.e.  the 
formulas used for the calculation of capital requirements), which would result in completely 
new methods for the calculation  of capital  requirements across securitisation tranches.  Two 
alternatives that could be considered are the replacement of the current risk weight design with 
an ’inverted S-curve’  function,  and the introduction  of  a  scaling parameter to  scale the  KA 
downwards, as also analysed by the EBA.65  

Second, option 2.2 also removes the existing core legal requirements for the significant risk 
transfer, notably the existing quantitative criteria/tests for achievement of capital relief, and the 
requirements for supervisory checks and approvals. Option 2.2 effectively results in banks self-
assessing  their securitisation transactions,  based  on high-level  requirements  specified in the 
legal text, without the need for checks by the supervisors.  

Finally, option 2.2 introduces comprehensive changes to the current liquidity requirements for 
banks in the LCR Delegated Act, resulting in a significant relaxation of the existing eligibility 
requirements  for  securitisations  to  be  included  in  the  LCR  liquidity  buffers,  which  would 
substantially  extend  the  scope  of  eligible  securitisations  in  HQLA  beyond  STS  traditional 
securitisations (such as, the extension of the eligibility to non-STS securitisations). 

6.2.2.1. Benefits 

As noted by the ESAs, the securitisation capital framework should ideally aim to achieve three 
goals -limit cliff effects, avoid an unreasonable level of capital non-neutrality, and ensure a 
maximum capitalisation of the junior (most risky) tranches. The structural limitations of the 
existing securitisation capital framework however only allow to achieve two out of these three 
goals and generally fails to achieve sufficient risk sensitivity. Therefore, option 2.2 provides 

65 The current risk weight function is a combination of two elements: first, the requirement for a full one-to-one 
capitalisation (1250% RW) for the most risky tranches until a certain ‘cliff‘ point, and then a steep decrease of 
the risk weights as a function of the (p) factor, for mezzanine and senior tranches. The inverted S-curve function 
could allow to eliminate the cliff point and mitigate the cliff effects in the risk weights across all the tranches in 
securitisation. Scaling KA downwards would be possible within the current halfpipe design, while it would still 
create a cliff effect at the cliff point KA. Both options could possibly achieve the targets of a moderate capital 
non-neutrality and still achieve high risk weights for lower tranches.  

59 

 
 
an  opportunity  to  reassess  the  importance  and  prioritisation  of  the  goals  of  the  existing 
framework, including the prominence of the role of the (p) factor. The redesign of the current 
securitisation capital framework thus has a potential to achieve more proportionate levels of 
capital  non-neutrality,  mitigate  the  cliff  effects  (and  therefore  mitigate  the  risks  of  the 
undercapitalisation  of  mezzanine  tranches)  and  introduce  more  risk  sensitivity  in  the 
calculation of capital for securitisation.  

With respect to the changes to the SRT framework, option 2.2 would introduce a new approach 
to the way how transactions are assessed for the purpose of capital relief and would introduce 
a significantly higher level of flexibility in the existing framework. Significant simplification 
of  the  existing  framework  would  help  stimulate  the  issuance  of  securitisation,  as  it  would 
reduce  the  burden  on  both  banks  and  supervisors.  The  current  SRT  framework  is  highly 
comprehensive, setting out a number of specific quantitative and qualitative criteria, extending 
beyond  the  international  Basel  requirements.  This  option  would  allow  to  make  the  SRT 
framework more comparable with those of some other jurisdictions, where SRT requirements 
are much more lenient.  

With respect to the LCR changes, relaxing the eligibility conditions to the liquidity buffer to 
non-STS securitisations would contribute to an increased demand for non-STS securitisations 
by banks to be included in their liquidity buffers, and as such could help address one of the 
main  issues  of  the  current  securitisation  market  which  is  the  lack  of  investors  in  the  senior 
tranches. It would improve market liquidity and volumes and contribute to the diversification 
of banks’ liquidity buffers. A number of respondents to the targeted consultation have called 
for the extension of the scope of the LCR to non-STS securitisations, as considered under this 
option.  

6.2.2.2. Costs 

This option would lower the external coherence of the Securitisation Framework since it would 
entail significant deviations from the existing Basel standards. The ESAs acknowledged that 
one could in principle look for an alternative design of the existing framework, but that this 
should be done and agreed  preferably  at  the  Basel table. All  in  all, a potential fundamental 
redesign of the capital framework is more of a medium-term to long-term project.  

Loosening the SRT framework as proposed in option 2.2 could result in further divergence and 
incoherence in the application of the SRT rules across banks, or even for similar transactions 
of the same bank. It could lead to higher heterogeneity of SRT outcomes and could increase 
uncertainty  in  the  market.  It  could  overall  reduce  the  safety  and  soundness  of  the  capital 
positions of the banks, and hence negatively impact financial stability.  

Similarly, the changes to the LCR rules could impact the quality of the banks’ liquidity buffers, 
as it would also include securitisation transactions not meeting the quality criteria of the STS 
label. A liquidity buffer of lower quality may lead banks to face more difficulties to sell or 
exchange their liquid assets. This may also oblige banks to accept significant haircuts on their 
liquid  assets  in  stressed  environments. This  would mitigate their  capacity to  refinance their 
needs on capital markets.   

60 

 
6.2.2.3. Overall assessment: Effectiveness, efficiency and coherence 

Fundamentally redesigning the risk weight formulas that underpin the capital framework for 
securitisation  would  allow  to  address  the  limitations  of  the  existing  securitisation  capital 
framework. There is therefore a merit in considering these proposals, which have been analysed 
by the ESAs and also debated by the stakeholders. However, the reformed framework would 
diverge  significantly  from  the  Basel  standards.  These  considerations  could  therefore  be 
developed in medium term and brought to the Basel table in due time, as also pointed out by 
the ESAs.  

Some elements of option 2.2 (concretely changes to the SRT framework and LCR framework) 
would however make the framework less robust and could lead to non-prudent outcomes. They 
could therefore jeopardise the sound capital and liquidity positions of banks and could pose 
risks for the financial stability.  

In  sum,  the  overall  combined  impact  of  measures  under  the  option  2.2  on  the  reduction  of 
prudential barriers, increase in securitisation issuance and increase in banks’ competitiveness 
is expected to be potentially more significant than under option 2.1. However, the potential 
impact on financial stability is also expected to be more significant. Option 2.2. is also expected 
to lead to major deviations from international Basel requirements.  

6.2.2.4. Stakeholders’ views 

A number of respondents in the consultation (20 out of 131 agree, 4 disagree, 23 had no opinion 
and 84 did not answer) considered that a fundamental redesign of the capital framework merits 
further consideration, as it has a potential to achieve more proportionate levels of capitalisation 
and increase the risk sensitivity. However, they generally consider that such proposals require 
further  analysis  and  should  be  considered  in  a  longer-term  perspective,  preferably  at 
international level. Banks would also support the possibility to further diversify their liquidity 
buffer and appreciate the burden reduction linked to the removal of supervisory checks in terms 
of risk transfer. 

Supervisors support investigating alternative designs of the risk weight formulas, albeit they 
prefer to do it at international level. Supervisors would also disagree with the removal of core 
supervisory checks for SRTs and with measures that would negatively impact the quality of 
the banks’ liquidity buffers and the capital position of banks. 

6.2.2.5. Summary 

Comparative presentation of the impacts of option 2.1 and option 2.2 

Option 2.1 
Targeted 
prudential 
changes 

Option 2.2 
Overhaul of 
existing 
Framework 

Effectiveness: 

61 

 
 
Reduction of undue prudential barriers  

Increased risk sensitivity of the capital framework   

Impact on the securitisation issuance and 
investments in securitisation by banks  

Increased share of securitisations in the banks’ 
liquidity buffers, increased diversification in the 
liquidity buffers  

Prudential risks, in terms of safety and soundness of 
the capital positions of banks and the quality of the 
banks’ liquidity buffers  

Potential negative impacts on financial stability  

Efficiency: 

Coherence (Deviations from international Basel 
requirements): 

+  

+  

+  

+  

0/-  

0  

+ 

0/-  

++  

++  

++  

++  

--  

--  

- 

-- 

Legend: +++ = Very positive      ++ = Positive     + = Slightly positive       +/- = Mixed effect           
0 = no effect            - = Slightly negative       -- = Negative            --- = very negative 

Impacts on stakeholders’ groups 

Option 
2.1.  

Option 
2.2.  

Banks as issuers  
Summary: +  

Banks as investors  
Summary: +   

Supervisory authorities  
Summary: +  

+ (removal of main 
prudential barriers 
and increased risk 
sensitivity is 
expected to boost 
issuance of both 
synthetic and 
traditional 
securitisations)  
Summary: ++  

++ (boost to issuance 
as a result of 
increased risk 
sensitivity of the 
framework and 
significant 
simplification of 
SRT framework) 

+ (removal of main 
barriers in prudential and 
liquidity framework is 
expected to increase 
banks investments in 
senior tranches of STS 
securitisations)   

Summary: ++ 

++ (significant relaxation 
of liquidity requirements 
is expected to boost 
banks’ investments in  
STS and non-STS 
securitisations) 

+ (support for increased 
robustness of the SRT 
framework) 
+ (support for increased 
efficiency of SRT processes) 
- (overall a balanced 
proposal, while some 
supervisors may disapprove 
some specific elements)  
Summary: -- 

- (supervisory concerns with 
removal of core supervisory 
checks and significant 
relaxation of criteria in the 
liquidity framework) 
- (concerns over significant 
deviations from Basel 
standards) 

62 

 
 
   
  
  
  
   
   
  
 
Legend: +++ = Very positive      ++ = Positive     + = Slightly positive       +/- = Mixed effect           
0 = no effect            - = Slightly negative       -- = Negative            --- = very negative 

Note: the summary provided in the table on ‘impacts on stakeholders’ groups’ is the net result of the 
pluses and minuses in each cell 

6.3. Measures to remove undue prudential costs for insurers 

The three options (Options 3.1, 3.2, and 3.3) considered share similarities, as they all involve 
revising existing risk factors to calculate capital requirements. As a result, it can be challenging 
for an external reader to grasp the differences and nuances between the options by examining 
each one in  isolation. Therefore,  we have chosen to  present  a simultaneous assessment and 
comparison of the options. This approach allows us to highlight how each option contributes 
to specific costs and benefits while clearly distinguishing and quantifying the extent of these 
effects. We also avoid extensive repetitions and redundant content. Although the structure is 
distinct, the dimensions assessed remain consistent with the previous sections. 

6.3.1. Comparative impacts of Options 1, 2 and 3 

Option 3.1: Removing prudential barriers to investments in all non-STS securitisations;  

Option 3.2: Improving risk sensitivity and removing prudential barriers to investments in the 
safest tranches of non-STS securitisations;  

Option  3.3:  Overhauling  the  prudential  treatment  of  securitisations  in  order  to  make  all 
securitisation investments relatively more ‘attractive’ than under current rules. 

All  three  options  considered  imply  a  reduction  in  the  amount  of  capital  that  insurers  are 
required to hold when investing in a securitisation. This would make it less costly (capital cost) 
for  insurers  to  invest  in  securitisation,  thus  removing  the  existing  undue  prudential 
disincentives for insurers to invest in the EU securitisation market. The options mainly differ 
in terms of (1) the type of securitisations that would benefit from lowering of capital charges, 
(2) the extent of capital relief provided and (3) whether this implies a fundamental change to 
the way of assessing risks of securitisation positions. The net overall effect of these options 
varies  mainly  by  degree.  Still,  one  needs  to  also  consider  the  robustness  of  the  underlying 
technical rationale for changing the rules when assessing each option. The comparative features 
of the three options are described in the below table. 

Eligible 
securitisations 

Extent of capital 
relief 

Option 1 
All non-STS 
securitisations 
Simple (moderate) 
lowering of capital 
requirements 

Fundamental 
change to the way 
of assessing risks 

No - capital 
requirements 
would continue to 

Option 2 
Only senior non-STS 
securitisations 
More significant 
lowering of capital 
requirements 
No - capital 
requirements would 
continue to reflect 
market volatility risk 
63 

Option 3 
All securitisations (both 
STS and non-STS) 

Highest lowering of 
capital requirements 

Yes – capital 
requirements would 
only reflect 
counterparty default 

 
 
of securitisation 
positions? 

reflect market 
volatility risk 

risk, and no longer 
market volatility 

The impact on stakeholders depends on how insurers will use the capital relief. This section 
includes a summary table, but the topic is further discussed in Annex XI, Section A. Impacts 
on stakeholder groups following the implementation of the respective policy options.  

Issuers 
securitisations 

of 

Insurers 

Policyholders 

Summary: ++ 

Summary: 0 

Option 
3.1. 

Option 
3.2. 

Option 
3.3. 

+ 
use 

(If 
Summary: 
insurers 
the 
capital relief to invest 
more 
in 
this 
securitisations, 
would 
the 
demand 
for  more 
issuances) 

increase 

+ 
use 

(If 
Summary: 
the 
insurers 
capital relief to invest 
more 
in 
this 
securitisations, 
the 
would 
demand 
for  more 
issuances) 

increase 

+ 
use 

(If 
Summary: 
insurers 
the 
capital relief to invest 
more 
in 
this 
securitisations, 
the 
would 
demand 
for  more 
issuances) 

increase 

(Several 
++ 
billion  euro  of 
capital relief) 

 + 
higher 
return  on 
savings) 

(potential 
expected 
their 

-  more  risk  taking 
means 
higher 
likelihood that the 
insurer fails 
Summary: +/- 

(Potential 
 + 
higher 
expected 
return on savings) 

++  (Removal  of 
incentives 
for 
undue  risk  taking 
riskiest 
in 
tranches) 

-  (lower  level  of 
prudence 
of 
Solvency II) 
Summary: - 

++ 
(Potential 
Higher  expected 
their 
return  on 
savings) 

--- 
(significant 
of 
deterioration 
level prudence can 
pose material risks 
to 
policyholder 
protection) 

Summary: ++ 

++ 
(Several 
billion  euro  of 
capital relief). 

Would  be  all 
more 
the 
beneficial 
if 
insurers  invest 
in  the  senior 
tranches 
of 
non-STS 
Summary: 
+++ 

(most 

+++ 
significant 
capital relief) 

64 

Supervisory 
authorities 

Summary: -- 

--  (lower  level  of 
the 
prudence  of 
and 
Framework 
lower 
to 
intervene  timely  to 
avoid insolvencies) 

ability 

Summary: - 

-  (lower  level  of 
the 
prudence  of 
and 
Framework 
to 
ability 
less 
intervene  timely  to 
avoid insolvencies) 

Summary: --- 

(inconsistent 

 --- 
prudential 
framework, making 
supervisors’  ability 
their 
to  exercise 
prerogative  much 
more complex) 

 
  
  
Legend: +++ = Very positive      ++ = Positive     + = Slightly positive       +/- =Mixed effect           
0 = no effect            - = Slightly negative       -- = Negative            --- = very negative 

NB:  the  summary  aims  at  ‘netting’  the  pluses  and  minuses  of  the  different  sub-aspects 
considered.  

6.3.2. Comparative benefits and costs of the three options 

6.3.2.1. Benefits  

As explained above, all options have in common a reduction of capital requirements so that it 
is  less  costly  for  insurers  to  invest  in  securitisations  –  hence  removing  undue  prudential 
obstacles to investments in securitisations in line with the second specific objective.  For this 
reason, they would all contribute to the general objective of this impact assessment (reviving a 
safer securitisation market).  

The  below  table  provides  a  very  rough  estimate  of  the  potential  total  capital  relief  (before 
assuming  any  change  in  their  investment  behaviours).  This  would  represent  the  additional 
capital available for insurers to make new investments (possibly in securitisation). Please note 
that these Commission calculations are based on a number of simplifying assumptions66, which 
are necessary as the reporting data submitted by insurers to their supervisors (and centralised 
by EIOPA) is not sufficiently granular.  

Comparison of scope of 
eligible investments 
Total impact in terms of 
capital relief 

Option 3.1 
Intermediate 
(all non-STS) 

Option 3.2 
Narrowest 
(only senior non-STS) 

Option 3.3 
Largest 
(all securitisations) 

EUR 4.1 bn 

EUR 5.9 bn 

EUR 7.1 bn 

However, each of the three options have a differentiated additional benefit:  

-  Option 3.1: simplicity  
-  Option 3.2: removal of undue incentives for excessive risk taking  
-  Option  3.3:  preservation  of  Solvency  II’s  ability  to  be  conducive  of  standardisation 

around the STS label. 

Option 3.1 has the merits of being the simplest to implement. It merely requires changing the 
actual  risk  factors  applicable  to  non-STS  securitisation.  Its  implementation  boils  down  to 
changing seven numbers (factors) set out in Article 178(8) of the SII DA. Although options 3.2 
and 3.3 are not overly complex either, they require some additional adjustments to information 
systems. 

66 For instance, same allocation of ratings and durations between STS and non-STS securitisations, similar relative 
shares of senior and non-senior tranches for non-STS as in STS, assumption that ratings BBB and lower are non-
senior, etc. 

65 

 
 
 
 
Option  3.2 brings the  additional benefit of making  SII more ‘risk  sensitive’ while  avoiding 
undue incentives for excessive risk taking. As the capital requirements on non-senior non-STS 
would remain much higher than those applicable to senior non-STS tranches, the enhanced risk 
sensitivity  would also  remove undue incentives  for risk taking by insurance  companies.  As 
such, option 3.2 is the most successful in achieving the second specific objective of this impact 
assessment, namely “enhancing the prudential framework to better account for actual risks and 
remove unnecessary prudential costs (…) for insurers when (…) investing in securitisations.” 
While  EIOPA  did  not  express  specific  comments  on  Option  3.2,  it  is  our  assumption  that 
EIOPA would not challenge the technical rationale underlying such Option, as EIOPA does 
not deny that senior tranches bear less risks than non-senior ones. 

Option 3.3 is the only option which would result in capital relief for both STS and non-STS 
securitisations.  It  would  therefore  ensure  that  Solvency  II  remains  conducive  to  greater 
standardisation around the STS label. By contrast, options 3.1 and 3.2 only focus on improving 
incentives for non-STS securitisation, which might reduce the relative attractiveness of STS 
ones.  

6.3.2.2. Costs 

All  three  options  would  generate  limited  administrative  and  compliance  costs  which  would 
therefore not be the main guiding factor when deciding on the preferred option. The reader can 
find more detailed information in Annex III and Annex XI, Section B. We can expect the costs 
to be even lower than under banking rules, as changes to Solvency II under all three options 
would concern a limited number of values for one single parameter (whereas in the banking 
rules,  several  provisions  and  parameters  are  affected),  and  we  do  not  envisage  e.g.  any 
meaningful change in IT systems.  

None  of  the  three  options  would  differentiate  between  different  types  of  non-STS 
securitisations  and  would  apply  the  same  capital  requirements  regardless  of  the  underlying 
asset. This may result in underestimating or overestimating the risks underlying certain forms 
of non-STS securitisations. In particular, the non-STS category can prove to be very diverse, 
comprising some very stable and very liquid categories, as well as some other, more complex 
types of securitisations.  Against this background, a general lowering of capital requirements 
for all non-STS securitisations would result in a deterioration of policyholder protection where 
a  specific  insurer  would  materially  increase  its  investments  in  the  more  complex/opaque 
segments of non-STS securitisations.  

The risk is however more contained in option 3.2, which only reduces capital requirements on 
the most senior tranches (i.e. those less risky and with higher credit rating). The risk of any of 
the  three  options  is  also  dependent  on  insurers’  behaviours  and  the  level  of  additional 
investment risk taken by insurers. If behaviours do not change significantly (i.e. the overall 
share of investments in insurers’ investment portfolio increases in a moderate manner), the risk 
discussed would remain moderate (though still higher under option 3.3 than under the two other 
options). However, options 3.1 and 3.3 have specific downsides which are not applicable to 
option 3.2: 

66 

 
-  Specific downside of options 3.1 and 3.3: remaining incentives for ‘excessive’ risk taking 
-  Specific  downside  of  options  3.1  and  3.2:  reducing  the  relative  attractiveness  of  STS 

securitisation 

-  Specific downside of option 3.3: lack of robust technical basis and significant incoherence 
introduced  within  Solvency  II  which  can  harm  policyholder  protection  and  financial 
stability. 

Neither  option  3.1  nor  option  3.3  would  differentiate  senior  from  non-senior  capital 
requirements (no improvement to risk sensitivity). This means that all else equal, insurers could 
still be unduly incentivised to invest in the most junior tranches of securitisations as they would 
be subject to the same requirements as the more senior tranches while offering prospects of 
higher returns (but also higher risks). This lack of risk sensitivity would be incoherent with 
banking rules. 

Options 3.1 and 3.2, by only focusing on non-STS securitisation, would reduce the ‘prudential 
attractiveness’ of STS securitisation. However, Option 3.2 implies improving risk sensitivity. 
As such, it is not expected to ‘dilute’ the STS label, but simply to ensure that the level of capital 
requirements  on  non-STS  securitisation  is  more  commensurate  to  its  risk,  including  by 
comparison with the risks of STS securitisation.  

Option 3.3, which is not backed by any advice or assessment made by EIOPA, would be an 
overhaul to the current approach of calculating capital requirements: 

-  Under  current  rules,  securitisation  investments  are  treated  in  the  same  manner  as 
government  bonds,  corporate  bonds,  loans  and  covered  bonds.  More  concretely,  SII 
requires insurers to set aside capital to cover the risk of loss in value of their investments 
(‘spread risk’).  

-  With option 3.3, securitisation investments would no longer be treated like other bonds and 
loans. Their risk would be assessed by looking exclusively at the risk of default67. Such a 
significant change requires either robust technical basis or sufficient evidence.  

From a technical standpoint, the choice to focus on default risk can only be justified if insurers 
stick to their investments until their maturity (if this is the case, then insurers are not exposed 
to the risk of losses stemming from the early sale of their investments at a depreciated price). 
However, while insurers have a long-term business – in particular in life insurance – a general 
assumption  of  holding  to  maturity  conditions  is  highly  challengeable.  In  fact,  only  a  very 
limited  share  of  insurers’  assets  is  intended  to  be  held  to  maturity,  as  evidenced  in  their 
accounting and financial disclosures68.  

In addition, a preferential capital treatment cannot only be justified by a mere ‘intention’ to 
hold an asset to maturity. In terms of policyholder protection, what matters is whether insurers 
can  avoid  forced  selling  of  their  assets  when  they  are  facing  stressed  market  conditions. 
However, the cuts in capital requirements stemming from option 3.3 would not be conditional 

67 One can argue that this implies reducing the scope of the assessment, as the risk of default is only one of the 
drivers of ‘spread risk’ (i.e. risk of volatility in the value of the investment). 
68 Assets that are held to maturity are reflected in insurers’ disclosures as assets ‘valued at amortised cost’. 

67 

 
 
to such demonstration. Therefore, option 3.3 does not comply with the current level of prudence 
of the SII framework69. 

Thirdly, option 3.3 would affect policyholder protection the most, by introducing significant 
internal inconsistency within SII, as securitisation would no longer be treated like other similar 
fixed income securities (government bonds, corporate bonds, covered bonds)70. It would also 
create significant incoherence with banking rules71. option 3.3 would therefore bring additional 
risks to policyholder protection in comparison with options 3.1 and 3.2, by misrepresenting the 
actual level of risks to which insurers are exposed on their investments.  

6.3.3. Overall assessment: Effectiveness, efficiency and coherence 

6.3.3.1. Effectiveness 

Option 3.1 is effective in reducing undue prudential disincentives to investments in non-STS 
securitisations.  

Option 3.2 is effective in reducing undue prudential disincentives to investments in senior non-
STS  securitisations.  It  also  avoids  providing  ‘wrong’  incentives  of  risk  taking  due  to  the 
enhanced risk sensitivity. The capital relief insurers obtain through option 3.2 is higher than 
under option 3.1, which implies more effectiveness in unleashing their investment capacity.  

Option  3.3  is  effective  in  reducing  undue  prudential  disincentives  to  investments  in 
securitisations  –  both  STS  and  non-STS.  Because  it  also  concerns  STS  securitisation,  the 
effectiveness is higher than under options 3.1 and 3.2. 

For all three options, it is unclear whether the released capital would result in more investment 
in  securitisations.  The  capital  relief  could  instead  be  used  in  an  opportunistic  manner  by 
insurers for higher dividend distributions or share buybacks. The risk is higher for option 3.3. 
in view of the higher extent of capital relief. 

69 On the other hand, introducing safeguards in the context of Option 3 would remove one of the main ‘benefits’ 
of such option, namely its simplicity. 
70 In fact, this inconsistency would result in capital charges for securitisations that are even lower than those of 
the underlying assets. This would breach the ‘non-neutrality’ principle as capital requirements on securitisation 
would no longer reflect the additional risks that such investments entail, namely agency and model risks. 
71 One has to acknowledge that banking rules also apply default risk to some securitised assets – those which are 
part of the so-called ‘banking book’, i.e. assets held to maturity. Against this background, Option 3.3 could be 
seen as improving coherence with banking rules (to the extent that insurers’ investments are held to maturity, 
which is not substantiated as discussed above). However, Option 3.3 would not reflect the many sophisticated 
parameters and methods underlying these banking capital requirements. Attempting such level of sophistication 
would require extensive work, all the more that the risk metrics and applicable ‘confidence levels’ underlying 
capital  requirements  in  the  two  frameworks  is  different.  Such  sophistication  would  also  generate  extensive 
complexity that is not commensurate to the importance of this asset class in insurers’ portfolios.  Therefore, while 
under  Option  3.3  insurers  and  banks  would  be  expected  to  measure  the  very  same  risks  when  investing  in 
securitisation,  the risk  measurement  would  in  practice  materially  differ (due  to  the  much  simpler  approach  of 
Option  3.3  when  comparing  with  banking  rules).  In  other  words,  Option  3.3  does  not  effectively  improve 
coherence with banking rules 

68 

 
 
6.3.3.2. Efficiency 

Option 3.1 would entail very limited compliance costs for insurers due to the simplicity of the 
amendments.  Such  costs  are  negligible  in  view  of  the  level  of  reduction  in  capital  costs. 
However,  it  would  not  improve  the  risk  sensitivity  of  the  Framework  nor  policyholder 
protection.  In  addition,  it  could  generate  financial  stability  risks  if  the  lowering  of  capital 
requirements results in a significant increase in investments in the most junior tranches of non-
STS  securitisation.  By  improving  the  ‘prudential  attractiveness’  of  non-STS  securitisation 
investments and reducing the discrepancy between non-STS and STS capital requirements, the 
review  might  the  reduce  relative  attractiveness  of  STS  securitisations  and  would  not  be 
conducive to greater standardisation around that label. Option 3.1 could actually result in less 
investments  in  STS  securitisation  by  insurance  companies  (which  are  already  quite  low  as 
shown in the Evaluation).  

Option 3.2 would entail some limited compliance and administrative costs that are negligible 
in view of the  reduced capital costs, though slightly higher than in  option 3.1.  In addition, 
option  3.2  avoids  the  ‘wrong’  incentives  for  excessive  risk-taking  identified  in  option  3.1. 
Option 3.2 can also be framed so that it does not hinder the objective of the initial initiative of 
enhanced standardisation, for instance by ensuring that capital requirements on any non-STS 
securitisation  remain  higher  than  those  on  STS  securitisations  (including  for  non-senior 
tranches). In other words, under option 3.2, all tranches of STS securitisations would remain 
prudentially more attractive than non-STS securitisations72. For all these reasons, option 3.2 
would overall be more efficient than option 3.1.  

Option 3.3 would entail some limited compliance and administrative costs that are negligible 
in view of the reduced capital costs (cost levels being between those in options 3.1 and 3.2). 
Option 3.3 does not hinder the objective of the initial initiative of enhanced standardisation as 
capital  requirements  on  STS  securitisations  would  also  be  reduced.  However,  the  technical 
justifications supporting this approach are limited and not backed by any EIOPA assessment 
or  advice.  The  lack  of  safeguards  (requirements  or  criteria)  allowing  for  such  preferential 
treatments poses risks to policyholder protection that are materially higher than under options 
3.1 and 3.2 (though the extent of such higher risks would depend on whether insurers materially 
increase  their  investments  in  securitisations  following  the  implementation  of  this  option). 
Indeed, the SII framework would no longer measure the risk posed by securitisation in a similar 
manner as for other fixed income securities with similar features. For all these reasons, option 
3.3 would be less efficient than options 3.1 and 3.2 in achieving the second specific objective 
in view of the associated risks. This is due to the limited technical justifications and the absence 
of  qualitative  safeguards.  Additionally,  it  presents  significantly  higher  risks  to  policyholder 

72 Indeed, capital requirements on non-STS securitisations would be calibrated such that they remain higher those 
on STS securitisations. With Option 3.2, the ‘ranking’ of capital requirements from the lowest to the highest would 
be as follows: 

•  Lowest capital requirements: senior STS 
•  Second lowest capital requirements: non-senior STS 
•  Third lowest capital requirement: senior non-STS 
•  Highest capital requirements: non-senior non-STS 
69 

 
 
protection, as the SII framework would no longer assess the risks associated with corporate 
bonds and securitisation in a comparable way, despite their similar features73.  

6.3.3.3. Coherence 

Option 3.1 neither improves nor deteriorates the internal coherence of SII. 

Option 3.2 improves the internal coherence of SII by treating in a ‘comparable’ manner STS 
and non-STS securitisations (both of them having differentiated capital requirements for senior 
and non-senior tranches). 

Option 3.3 would result in an incoherent SII framework by considering different risks for asset 
classes with similar characteristics (spread risk for bonds, default risk for securitisation).  

6.3.4. Stakeholders’ views 

There  is  a  general  support  from  industry  stakeholders  to  decrease  capital  requirements  for 
securitisation. Stakeholders do not address concerns regarding the potential complexity of non-
STS  products  and  argue  that  historical  risks  of  default  remain  low.  However,  as  explained 
previously,  options  3.1  and  3.2  would  still  include  securitisation  in  the  scope  of  market 
volatility risk (volatility in credit spreads), not default risk.  

Historical  risks  of  default  do  not  necessarily  imply  low  volatility  over  a  one-year  horizon. 
Market volatility not only depends on the probability of default but also the cost of a potential 
increase  in  risk  of  the  investment  (e.g.  cost  of  a  rating  downgrade).  It  also  depends  on  the 
specific context of securitisation, including the type and quality of the assets in the securitised 
pool, as well as the transparency of the asset (lower transparency can result in more significant 
‘irrational’ market movements).   

In fact, it is the understanding of the Commission services that irrespective of the technical or 
conceptual rationale supporting changes to insurance rules, the industry would be supportive 
of the most significant decrease in capital charges applied to the widest scope of securitisations 
(i.e. both STS and non-STS) hence favouring option 3.3. However, the main objective of these 
respondents is not to align insurance rules with banking rules (which would imply adopting a 
very sophisticated set of parameters), but to achieve significant cuts in capital requirements. 
Preferences  between  option  3.1  and  3.2  would  depend  on  the  investment  strategy  of  each 
individual  insurer:  companies  investing  heavily  in  non-senior  tranches  would  likely  favour 
option 3.1 rather than option 3.2 (since the latter does not bring any changes to non-senior non-
STS investments) whereas others would favour option 3.2 (which results in a more significant 
cut in risk factors than option 3.1. 

73 One has to acknowledge that securitisation brings significant diversification benefits in comparison with an 
exposure to a single bond or loan. Conversely, it may also bring specific agency and modelling risks. In any case, 
such  features  do  not  justify  why  the  measurement  of  risk  (spread  risk  vs.  default  risk)  should  differ  between 
corporate or covered bonds and securitisations. 

70 

 
 
By contrast,  the insurance supervisory community, in  particular EIOPA, generally does not 
support  a  decrease  in  capital  requirements  for  securitisation.  EIOPA  claims  that  its  current 
calibration (which remains the basis for currently applicable rules) remains appropriate. EIOPA 
does  not  challenge  the  principle  of  improving  risk  sensitivity  by  differentiating  capital 
requirements between senior and non-senior tranches of non-STS securitisations (as in option 
3.2).  The  supervisory  community,  in  particular  EIOPA,  would  strongly  oppose  option  3.3 
(reclassification of securitisation in the scope of default risk) in view of the lack of technical 
robustness of this option, the absence of strict criteria for demonstrating a ‘hold-to-maturity’ 
investment  behaviour,  including  under  stressed  conditions,  and  the  internal  incoherence  of 
prudential rules which this option would entail. Finally, EIOPA doubts that targeted lowering 
of  capital  requirements  would  have  any  impacts  on  investment  behaviours,  arguing  that 
securitised assets do not have the features that fit the insurance business model, which often 
requires strict matching of assets and liabilities. The complexity of the product also makes it 
less attractive compared to other products which necessitate less intensive due diligence. This 
line of thought applies to all three options. 

As part of the consultation processes, stakeholders were invited to  provide feedback on the 
impact  of  any  decrease  in  capital  requirements  on  levels  of  investments.  However,  no 
meaningful  feedback  was  received,  highlighting  the  difficulty  for  stakeholders  to  provide 
clarity or ‘commit’ to potential changes in investment behaviours stemming from changes in 
prudential rules. 

Summary – impact on financial stability:  Option 3.2 lowers capital requirements for the 
highest  quality  tranches  of  non-STS  securitisations.  Out  of  all  the  options  considered  for 
insurance, this is the most beneficial for financial stability since it incentivises insurers to 
invest  in  the  safest  part  of  the  non-STS  market.  The  other  options  can  be  considered  to 
provide a relatively lower level of protection of financial stability. Option 3.1 (moderately 
reducing  all  non-STS  capital  requirements)  brings  comparatively  more  risks  to  financial 
stability, as it benefits also the lower quality tranches.  Among the options considered, Option 
3.3 is the least conducive to tackling financial stability risks adequately, as risks would not 
be  assessed  consistently  with  other  asset  classes,  and  the  envisaged  revised  capital 
requirement  would  underestimate  the  actual  risks  of  securitisation.  Finally,  in  view  of 
currently  low  levels,  even  if  investments  in  securitisation  were  to  multiply  by  five, 
securitisation would still represent a niche asset class within insurers’ portfolio.  Financial 
stability risks are therefore contained. 

6.3.5. Summary comparison and choice of preferred option 

Removal of prudential disincentives 

Option 3.1 
+ 

Option 3.2 
+ 

Option 3.3 
++ 

Capital 
EUR 4.1 billion 

relief: 

Capital  relief: 
EUR 5.9 bn 

Capital  relief: 
EUR 7.1 bn 

Removal  of  incentives  for  excessive 
risk taking 
Associated implementation costs 

- 

low 

++ 

low 

-- 

low 

71 

 
 
Improvements to internal coherence of 
Solvency II 
Legend: 

+ 

++ 

-- 

 +++ = Very positive  ++ = Positive  + = Slightly positive 
0 = no effect 

 - = Slightly negative   -- = Negative   

 +/-  =Mixed  effect
--- = very negative 

6.4 Social, environmental and fundamental rights impact 

The  assessment  of  the  various  policy  options  primarily  focuses  on  their  economic  and 
regulatory impacts, with no direct impacts on social, environmental, and fundamental rights 
issues. For a more detailed analysis, please see Section 7.2. 

7.  COMPARISON AND PREFERRED COMBINATION OF POLICY OPTIONS 

In the Table below we present a comprehensive comparison of the policy options, as they relate 
to the three problems identified in the Impact Assessment. This analysis assesses each policy 
option across three key criteria: effectiveness, efficiency, and coherence. Based on the analysis 
presented, we conclude that the following combination of policy options is the most effective, 
efficient and coherent: option 1.1, option 2.1 and option 3.2. 

Summary comparison of all policy options   

Effectiveness  

Efficiency  

Coherence  

Measures to reduce high operational costs 
Positive 
Option 1.1. Targeted measures 
to  reduce  high  operational 
costs 

Option 
measures 
operational costs 

1.2. 
to 

Significant 
reduce  high 

Slightly positive 

Limited 
adjustment  costs 
issuers  and 
for 
investors 
Limited 
adjustments  costs 
for 
issuers  and 
investors 

Limited impact 

Slightly 
negative 

Slightly positive 

Measures to reduce undue prudential barriers for banks  
Option  2.1.  Targeted  changes 
to  existing  prudential  (capital 
and  liquidity)  framework  for 
banks 
Option  2.2.  Radical  overhaul 
the  existing  prudential 
of 
(capital 
liquidity) 
framework for banks 
Measures to remove undue prudential costs for insurers 
Removing 
Option 
to 
prudential 
investments  in  all  non-STS 
securitisations 

Slightly positive 

Limited impact 

barriers 

3.1. 

and 

Slightly positive 

Limited impact 

Slightly negative  Negative 

Limited impact 

Limited 
implementation 
costs, 
some 
additional risks to 
policyholder 
protection 

72 

 
 
 
 
barriers 
the 
in 
of 

Option  3.2.    Improving  risk 
removing 
sensitivity 
and 
prudential 
to 
safest 
investments 
tranches 
non-STS 
securitisation 
Option  3.3.  Overhauling  the 
of 
prudential 
securitisation in order to make 
all  securitisation  investments 
relatively  more 
‘attractive’ 
than under current rules 

treatment 

Slightly positive 

Limited costs 

Positive 

Positive 

Negative 

costs, 

Limited 
material 
additional risks to 
policyholder 
protection 
and 
financial stability 

To address Problem 1 (high operational costs for issuers and investors), option 1.1 presents the 
most balanced outcome between reducing undue operational due diligence and disclosure costs 
while  maintaining  high  levels  of  market  transparency,  investor  protection  and  supervisory 
oversight. Option 1.2 has the potential to achieve higher burden reduction, but it also brings 
higher risks for market integrity. Addressing the risks associated with option 1.2 would make 
the application of that option much more challenging  from  a technical  perspective  and to  a 
large extent nullify the potential benefit it could bring. For example, ensuring that option 1.2 
does not sacrifice market transparency, and thereby the ability of investors to conduct proper 
risk analysis, would require supervisors to conduct thorough checks on the amount and quality 
of information that each originator discloses upon issuance – these checks are automated by 
the securitisation repositories under option 1.1. 

When it comes to Problem 2 (undue prudential barriers for banks), option 2.1 is the preferred 
option, as it addresses miscalibrations in the capital requirements for banks in a more efficient 
and targeted way, only for robust and resilient transactions for which risks have been reduced. 
The expected impact and outcome of the policy proposals under option 2.1 is more predictable, 
and the calibration of the proposal is relatively more straightforward and less complex. It would 
allow  to  stimulate  banks’  participation  in  the  securitisation  market  without  resulting  in 
significant  regulatory  deviations  from  international  standards  and  without  jeopardising 
financial stability. On the other hand, option 2.2 would likely reduce the safety and soundness 
of the capital positions of banks and negatively impact the quality of banks’ liquidity buffers.  

Under  Problem  3  (undue  prudential  costs  for  insurers),  option  3.2  is  the  most  effective  in 
removing undue prudential disincentives while avoiding undue deterioration of policyholder 
protection.  It  would  remove  undue  prudential  obstacles  to  investments  in  non-STS 
securitisations  by  addressing  the  current  very  conservative  prudential  treatment,  while 
removing undue incentives for insurers to invest in the riskiest tranches.  

All  three preferred options are  complementary, target  different  aspects  of the Securitisation 
Framework  and  different  players  on  the  securitisation  market,  hence  altogether  provide  a 
comprehensive solution to the core problems identified. The three preferred options are also 
mutually reinforcing; for example, changes in the prudential treatment of securitisation would 
have a much less pronounced effect on securitisation issuance if implemented on a standalone 

73 

 
basis  and  if  not  accompanied  with  the  adjustments  to  the  disclosure  and  due  diligence 
framework. 

Solving Problem 1 reinforces the impacts of the measures to address Problems 2 and 3. Solving 
Problem 3 reinforces the response to Problem 2, to the extent that lack of issuance is driven by 
insufficient investor demand. The reverse is also true – having more supply would reinforce 
the impact of solving Problem 3 to the extent that insufficient supply affects investor demand. 
Despite their complementarity, the effectiveness of the options to address one problem does 
not  depend  on  which  option  is  chosen  to  address  another  problem.  For  example,  the 
effectiveness of the measures to lower operational costs does not depend on which option is 
chosen to address the undue prudential barriers/costs for banks and insurers. 

Against this background, the assessment concludes that there is no better combination of policy 
options  to  meet  the  stated  objectives.  Moreover,  as  explained  above,  none  of  the  preferred 
policy options are expected to put financial stability at risk. Therefore, their combination also 
does not.  

7.1. Impact of the preferred policy options on the general objective 

Options  1.1,  2.1,  and  3.2  present  a  compelling  opportunity  for  the  EU  to  revitalise  its 
securitisation market, to allow securitisation to play a role in the development of the SIU and 
to  reduce  burden  and  compliance  costs  for  issuers  and  investors.  By  addressing  the  high 
operational costs and undue prudential disincentives that have deterred banks and insurers from 
participating in the EU securitisation market, these options will contribute to the Commission's 
effort  to  reduce  the  regulatory  burden  on  market  participants  and  stimulate    the  use  of 
securitisation.  The  pace  of  growth  of  the  market  would,  however,  depend  also  on  factors 
outside the regulatory securitisation framework. At the same time, the presented options will 
continue to safeguard financial stability and provide an adequate level of investor and consumer 
protection. 

Together, this package of options will directly contribute to the broader effort to establish a 
Savings  and  Investment  Union.  A  safe  and  vibrant  securitisation  market  will  provide  EU 
households and businesses with access to the necessary funds to grow and be more competitive, 
creating  new  opportunities  and  driving  economic  prosperity.  Moreover,  by  increasing  the 
availability of financing, securitisation can contribute to funding the EU's strategic priorities, 
and its fungible nature means that it can be adapted to fund a wide range of priorities, making 
it an important tool for financing EU's future growth and development. 

While the proposed options are expected to drive market development, it is equally important 
to recognise that market participants also have a role to play in fostering a more robust and 
dynamic securitisation market. Various external factors, such as the state of monetary policy 
and the availability of alternative funding sources, will also have an important impact on how 
the securitisation market develops going forward.  

74 

 
7.2. Social, environmental and fundamental rights impact 

The  assessment  of  the  various  policy  options  primarily  focuses  on  their  economic  and 
regulatory impacts, with no direct impacts on social, environmental, and fundamental rights 
issues. However, for all the options assessed indirect effects can be considered in each of these 
areas: 

Social Impacts 

By  enhancing  credit  availability  and  facilitating  more  efficient  risk  transfer,  the  proposed 
measures  can  indirectly  boost  economic  activity.  This  can  lead  to  increased  lending  to 
businesses, including SMEs, thereby potentially supporting job creation and economic growth. 
Improved  efficiency  in  the  banking  sector  may  lower  borrowing  costs  and  enable  banks  to 
extend credit to a broader segment of the population. This could enhance access to financial 
services, promoting social inclusion and helping individuals who are typically underserved by 
traditional financial systems.  

Environmental Impacts 

While the proposed measures do not explicitly target environmental outcomes, a more efficient 
securitisation  market  could  support  green  investment  initiatives  by  making  capital  more 
accessible  for  environmentally  friendly  projects.  This  could,  in  turn,  help  banks  to  finance 
sustainable  projects,  contributing  indirectly  to  positive  environmental  outcomes.  If  banks 
decide to  prioritise investments  in sustainable assets or projects,  the improved liquidity and 
credit capacity enabled by measures envisaged under this initiative could facilitate increased 
funding for sustainability. It should be noted that the current framework already provides for 
voluntary disclosure on the principal adverse impacts of the assets financed by the underlying 
exposures on sustainability factors for STS securitisation. Moreover, as outlined in detail in the 
evaluation  (see  Annex  V),  the  EUGBS  Regulation  provides  for  a  dedicated  framework  for 
green  securitisation.  The  review  is  not  foreseeing  any  changes  in  this  respect.  No  negative 
environmental implications have been identified for any of the policy options. The initiative 
aligns  with  the  UN  Sustainability  Development  Goal  8.2,  which  involves  achieving  higher 
levels  of  economic  productivity  through  diversification,  technological  upgrading,  and 
innovation. 

Fundamental Rights 

There are no direct impacts on fundamental rights. The simplification and efficiency measures 
do  not  directly  address  issues  relating  to  personal  data  or  privacy.  Nonetheless,  changes  to 
disclosure and reporting standards must comply with existing data protection laws to ensure 
the security and privacy of any personal data involved in the securitisation process. 

The  preferred  combination  of  options  is  highlighted  as  the  preferred  option  due  to  its 
effectiveness in reducing high operational costs and removing undue prudential barriers, while 
avoiding undue deterioration of protection and avoiding incentives for excessive risk-taking. 
This option aims to balance the need for economic stimulus with maintaining robust standards, 
thus minimising negative societal impacts. Overall, while the proposed measures mainly focus 
75 

 
on  financial  regulation,  there  are  potential  indirect  benefits  that  can  arise,  impacting  social, 
environmental, and fundamental rights in supportive and sustainable ways. Ensuring a stable 
securitisation market contributes indirectly to the protection of fundamental economic rights 
by promoting financial stability through risk diversification.  

7.3. REFIT (simplification and improved efficiency) 

The  presented  policy  options  propose  series  of  simplifications  and  refinements  to  enhance 
efficiency  within  the  securitisation  market.  Through  targeted  adjustments  and  strategic 
simplification, these measures are positioned to bolster the market's capacity, attract a broader 
base  of  investors,  and  encourage  economic  growth—while  maintaining  a  resilient  and 
transparent financial ecosystem. The changes are expected to boost the competitiveness and 
sustainability  of  the  EU  Securitisation  Framework,  driving  growth  for  all  stakeholders 
involved. 

By  reducing  compliance  overhead  for  issuers  and  aligning  regulatory  measures  with  actual 
market practices, the reform seeks to invigorate market participation, transparency, and risk 
management. Ultimately, these changes address unnecessary prudential and operational costs, 
strengthening the market structure and its resilience for future growth.  

The preferred option embeds a significant simplification of due diligence duties for businesses 
and  a  more  efficient  transparency  framework.  This  would  involve  a  streamlining  of  the 
processes  companies  need  to  follow  to  ensure  compliance.  By  reducing  these  obligations, 
businesses will face lower compliance costs, enabling more resources to be allocated to core 
business activities.  

Implementation costs are expected to be offset by long-term operational savings. While issuers 
may encounter some one-off costs to adapt to the revised reporting type under Article 7 SECR, 
the recurrent reduction in administrative burdens should outweigh these initial expenditures. 
By mandating that both public and private securitisation transactions report to repositories, the 
preferred option enhances market transparency. 

7.4. Application of the ‘one in, one out’ approach 

The operational costs linked to the due diligence and transparency obligations under the SECR 
can be categorised as administrative costs relevant for the “one in, one out” offsetting:  

•  The preferred option would lead to an estimated saving of total recurring administrative 

costs in the approximate magnitude of EUR 310 million per year.  

•  Meanwhile,  it  is  expected  that  the  preferred  option  will  entail  moderate  one-off 
administrative costs for the implementation of amended reporting templates estimated to 
EUR 33 million subject to one in, one out considerations as the preferred approach intends 
lightening the existing due diligence and transparency requirements.  

Further detail is available in Annex III.  

76 

 
7.5. Impact on SMEs  

The preferred options would have mostly indirect, but positive, impacts on SMEs. Although 
SMEs are generally not directly involved in the EU securitisation market as issuers or investors, 
the initiative would increase banks' lending capacity and improve SMEs' access to cheaper and 
more diversified funding sources. Measures to simplify regulations and lower operational costs 
could  encourage  broader  securitisation,  including  of  SME  loans,  and  promote  competition 
through the entry of new lenders. The increased risk sensitivity of the banks’ capital framework 
would allow to achieve a more favourable capital treatment of SME loans (for example, the 
introduction of the risk sensitive risk weight floor for the senior tranches would allow to reflect 
the SME supporting factor in the securitisation capital treatment, which is not possible under 
the current framework). This could encourage the securitisations of the SME loans. While a 
limited  number  of  stakeholders  cited  concerns  regarding  SME  over-reliance  on  bank-based 
funding, the initiative is generally seen as supportive of SME financing, with no significant 
negative impacts identified. 

Further detail is available in Annex VIII. 

7.6. Impact on EU Competitiveness 

The preferred option would strengthen EU competitiveness by reducing capital and compliance 
costs for securitisation market participants, thereby improving cost efficiency and aligning the 
EU framework more closely with international standards. This will help level the playing field 
for EU issuers and investors, who currently face higher operational burdens compared to non-
EU  counterparts.  By  simplifying  due  diligence  and  transparency,  and  making  prudential 
requirements more risk-sensitive, the initiative enhances the attractiveness of EU securitisation 
products  both  domestically  and  globally.  Increased  securitisation  activity  can  also  free  up 
lending capacity for banks and credit institutions, supporting greater access to finance for EU 
businesses, including SMEs. This is particularly relevant for advancing the EU’s strategic goals 
in green and digital innovation, where improved financing channels are critical to maintaining 
global competitiveness. 

Further detail is available in Annex VII.  

8.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

The Commission shall carry out an evaluation of this package of proposed amendments, four 
years after its entry into application and present a report on the main findings to the European 
Parliament, the Council and the European Economic and Social Committee. The evaluation 
shall  be  conducted  according  to  the  Commission's  Better  Regulation  Guidelines.  The 
evaluation will be based on a list of specific and measurable indicators that are relevant to the 
objective of the reform, as presented in the following table. To prepare the evaluation report, 
the Commission will mandate Member States, the ESAs and the ECB/SSM to collect data to 
calculate the indicators included in the table and report on them to the Commission.  

Objective 
Reducing 
undue 

Indicator 
The  Commission  shall  assess  the  overall  situation 
and dynamics of the EU securitisation market and 

Source of information 
ESMA, 
EBA, 
ECB/SSM 

77 

 
prudential 
barriers 
banks 

for 

Reducing 
operational 
costs  to  issue 
and  invest  in 
securitisation 
in the EU 

Reducing 
undue 
prudential 
costs 
insurers 

for 

the  appropriateness  and  effectiveness  of  the  EU 
prudential securitisation framework (differentiating 
between different types of securitisations, including 
synthetic  and  traditional  securitisations,  between 
originators  and  investors,  and  between  STS  and 
non-STS  transactions).  It  will  also  assess  the 
increase  in  the  number  of  banks  involved  in 
securitisation,  the  increase  in  the  volume  of 
traditional  securitisations  placed  with  external 
investors (i.e. not retained) and the increase of the 
volume  of  securitisation  positions  in  the  banks’ 
liquidity buffers. 

As  part  of  the  review,  the  Commission  shall  also 
assess  the  impact  of  the  amendments  on  financial 
stability.  It  shall  also  consider  whether  a  more 
fundamental change to the risk-weight formulas and 
functions  would  allow  to  achieve  more  risk 
sensitivity and address structural limitations of the 
current framework. 
Monitoring the cost of conducting due diligence to 
invest in securitisation transactions. 

Monitoring  issuance  cost  stemming  from  the 
disclosure requirements.  

in 

the 

Tracking  the  number  of  securitisation  issuers  and 
investors  
reported  amounts  of 
Increase 
investments  in  securitisations  by  insurers  would 
demonstrate  the  positive  effect  of  the  reforms  on 
insurers’ decisions to ramp up their investments in 
securitisation. 

total 

Surveys 
market practitioners 

among 

EIOPA 

78 

 
 
 
 
ANNEX I: PROCEDURAL INFORMATION (STILL UNDER DEVELOPMENT) 

1 - Lead DG, Decide Planning/CWP references 

This  Impact  Assessment  Report  was  prepared  by  Directorate  A  “General  Affairs”,  and 
Directorate  D  “Banking,  Insurance  &  Financial  Crime”,  of  the  Directorate-General  for 
Financial Stability, Financial Services and Capital Markets Union (DG FISMA).  

The Decide Planning references are: PLAN/2024/1808; PLAN/2024/1929; PLAN/2024/2001. 

The initiative was included in the Commission Work Programme 2025.  

2 - Organisation and timing 

The first ISSG took place on 23 January 2025 with the attendance of the following Directorates-
General (DGs) of the European Commission: Economic and Financial Affairs, Internal Market, 
Industry, Entrepreneurship and SMEs; Budget; Education, Youth, Sport and Culture; Reform 
and Investment Task Force; Regional and Urban Policy; Research and Innovation; Justice and 
Consumers;  Trade;  Competition;  Employment,  Social  Affairs  and  Inclusion;  Taxation  and 
Customs Union; Trade and Economic Security; Environment; Taxation and Customs Union; 
Eurostat; Joint Research Centre; Secretariat General; Energy; and Financial Stability, Financial 
Services  and  Capital  Markets  Union.  The  second  ISSG  meeting  took  place  on  21  February 
2025.  

DG  FISMA  has  considered  the  comments  made  by  DGs  in  the  final  version  of  the  impact 
assessment. In particular, DG FISMA has provided more clarity about the seriousness of the 
problems, the impacts of the various options, as well as further evidencing the various claims 
and statements made throughout the text. DG FISMA provided bilateral feedback on certain 
comments  to  provide  additional  background,  explanation  and  reassurance  to  colleagues, 
particularly on comments and issues that fell outside the remit of the current initiative.  The 
analysis of impacts and the preferred option takes account of the views and input of different 
DGs.  

3 - Consultation of the RSB  

An upstream meeting was held with the Regulatory Scrutiny Board (RSB) on 25 November 
2024.  

The draft report was sent to the RSB on 12 March 2025 and the hearing took place on 9 April 
2025. The RSB issued a positive opinion with reservations on 11 April 202574. The principal 
reservations (which have been addressed in this final version of the report) were the following:  

(1) The report does not sufficiently substantiate the problem and its drivers. It does not 
clearly identify the evidence driving the conclusion that over-restrictive prudential, due 

74 That Opinion has been published and is available at [OP PLEASE INSERT LINK TO THE RSB OPINION]. 
In addition to the principal reservations cited here, numerous detailed changes were requested which have also 
been implemented in this final version.  

79 

 
 
diligence  and  transparency  requirements  act  as  a  barrier  to  the  development  of  the 
market. 

(2) The report does  not  adequately define the  key elements  for  each of  the assessed 
options. It is unclear what is supposed to change in the prudential framework and due 
diligence and transparency rules. The report does not therefore clearly bring out the 
choices and trade-offs made when developing the options. 

(3) The report does not adequately assess and compare the combined impacts of the 
options in terms of how they could affect the stability of the financial system. The report 
is also not sufficiently clear on whether the different options presented imply different 
risk levels for the financial system. 

•  Reports were introduced in Annex 2 of two further consultation events held subsequent 
to the submission of the draft report to the RSB – the closure of the Call for Evidence 
(stakeholders), and the Commission Expert Group on Banking Payments and Insurance 
(Member States).  

Issue identified by the Board  
The report does not  sufficiently substantiate the 
problem  and  its  drivers.  It  does  not  clearly 
identify the evidence driving the conclusion that 
over-restrictive  prudential,  due  diligence  and 
transparency requirements act as a barrier to the 
development of the market. 

The  report  does  not  adequately  define  the  key 
elements  for  each  of  the  assessed  options.  It  is 
unclear  what  is  supposed  to  change  in  the 
prudential  framework  and  due  diligence  and 
transparency rules. The report does not therefore 
clearly bring out the choices and trade-offs made 
when developing the options. 

80 

thus 

Action taken  
Additional  evidence  with  regard  to  the 
role of external factors has been added in 
section  2.1.  Explanation  was  added  in 
section  2.1.2.  to  demonstrate  why  the 
current  disclosure  and  due  diligence 
requirements  go  beyond  what 
is 
hindering  market 
necessary, 
development.  In  addition,  explanation 
has been added to further substantiate the 
problem 
prudential 
treatment  of  banks.  In  addition,  key 
findings  from 
the  Evaluation  were 
highlighted  in  the  text  of  the  Impact 
Assessment  to  better  illustrate  all  three 
identified problems and their drivers (see 
sections  2.1.2,  2.1.3.,  and  2.1.4.). 
Stakeholders’ 
been 
feedback 
amended to  more systematically outline 
the views of different stakeholder groups. 

regarding 

has 

the 

Further detail has been added to explain 
the  changes  that  the  different  options 
entail for transparency, due diligence and 
prudential  requirements  (see  sections 
5.2.1, 
Such 
and 
clarifications aim to clearly bring out the 

5.2.3). 

5.2.2, 

 
 
 
 
The  report  does  not  adequately  assess  and 
compare the combined impacts of the options in 
terms of how they could affect the stability of the 
financial  system.  The 
is  also  not 
sufficiently clear on whether the different options 
presented  imply  different  risk  levels  for  the 
financial system. 

report 

choices  and 
developing the options. 

trade-offs  made  when 

In  general,  additional  detail  has  been 
added  to  explain  that  none  of  the 
to 
presented  options  are  expected 
endanger 
and 
financial 
therefore neither does their combination 
(see section 6). 

stability, 

The  section  on  the  prudential  treatment 
of  banks  has  been  amended  to  provide 
further  details  on  the  content  of  the 
proposed  measures,  on  the  expected 
impact  of  the  stability  of  the  financial 
system and on the costs related with the 
implementation of the proposals.  

4 - Evidence, sources and quality 

The impact assessment drew on a broad range of information sources such as the results of 
consultations with stakeholders, reports from the ESAs, and additional desk research by the 
Commission  services.  Some  of  the  specific  sources  of  data  used  in  the  preparation  of  this 
impact assessment include the following:  

•  Evidence  supplied  in  the  context  of  various  consultations  by  the  Commission  as 

described in Annex II;  

•  EIOPA data extracted from quantitative reporting templates submitted by insurance and 

reinsurance undertakings; 

•  ECB Governing Council Statement of 7 March 2024;75 
•  Eurogroup Statement of 11 March 2024;76 
•  European Council conclusions of April77, June 2024;78 
•  “Much more than a market”, report by Enrico Letta, 17 April 2024;79 
•  “The  future  of  European  competitiveness,”  report  by  Mario  Draghi,  9  September 

2024;80 

•  EBA working papers and staff working documents; 
•  Publicly available studies, reports, position papers and other relevant documents drawn 

up by private and public stakeholders. 

75 https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.pr240307~76c2ab2747.en.html 
76 Eurogroup statement of 11 March 2024, 
77 https://www.consilium.europa.eu/media/m5jlwe0p/euco-conclusions-20240417-18-en.pdf 
78 European Council conclusions of June 2024 
79 https://www.consilium.europa.eu/media/ny3j24sm/much-more-than-a-market-report-by-enrico-letta.pdf 
80 https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en 

81 

 
 
 
82 

 
 
 
 
ANNEX II: STAKEHOLDERS’ CONSULTATION (SYNOPSIS REPORT) 

In order to ensure that the Commission’s proposal adequately takes into account the views of 
all interested stakeholders, the consultation strategy supporting this initiative was built on the 
following components:  

•  A targeted (but nevertheless public and open) consultation, with detailed questions 
aimed specifically towards market participants with expertise in the European 
securitisation market, open from 9 October 2024 to 4 December 2024;81 

•  Numerous ad hoc bilateral contacts with various stakeholders, either on their initiative 

or that of the Commission.  

•  Consultation of stakeholders in a dedicated day-long in-person Securitisation 

• 

workshop, held on Commission premises in Brussels on 3 July 2024; 
Input from the European Supervisory Authorities within the framework of the Joint 
Committee Securitisation Committee and of the European Systemic Risk Board;  
•  Consultation of Member States’ experts through (the Financial Services Committee 

and Eurogroup Working Group +) 

•  Call for Evidence published on 19 February 2025 and running until 26 March 2025. 

1 - Targeted CONSULTATION 

Given the technical nature of the initiative, a decision was taken to conduct a targeted public 
consultation to obtain stakeholder views on the functioning of the EU securitisation framework. 
The 8-week feedback period ran from 9 October 2024 to 4 December 2024. The consultation, 
which was conducted online via the EUSurvey platform, received 133 responses from a variety 
of stakeholders. 131 replies were submitted via the online form, and 2 were sent by email to a 
dedicated functional email inbox, managed by DG FISMA. Please note that unless specifically 
mentioned  in  the  summary  of  the  online  consultation,  the  two  email  respondents  were  not 
considered in the statistical analysis of answers.  

Most respondents were stakeholders from the European Economic Area (107), in addition to 
the US (13), UK (10) and Switzerland (2), Australia (1). Please note that unless specifically 
specified in the summary of the online consultation, those who did not provide a view were not 
considered in the analysis of answers. Responses received were from a variety of stakeholders 
representing  individual  companies,  business  associations,  public  authorities,  consumer 
organisations, EU citizens, NGOs, trade unions and academic/research institutions.  

Below  is  a  summary  of  the  views  expressed  in  the  targeted  consultation  with  regard  to  the 
experience  with  the  framework  so  far  and  to  further  action  to  improve  the  framework  and 
develop the EU securitisation market. The summary is presented thematically by issue area. 
Any opinions expressed reflect the views of the respondents and do not reflect the position of 
the European Commission.  

1.1. Non-prudential issues  

81  https://finance.ec.europa.eu/regulation-and-supervision/consultations-0/targeted-consultation-functioning-eu-
securitisation-framework-2024_en  

83 

 
 
1.1.2. Effectiveness of the securitisation framework 

The following chart presents the replies to the question: “Do you agree that the securitisation 
framework  (...)  has  been  successful  in,  or  has  contributed  to,  achieving  the  following 
objectives. For clearer presentation, respondents that did not answer the question have been 
omitted from the graph. 

1.1.3. Impact on SMEs 

The majority of respondents identified SMEs as having only limited access to securitisation. 
More  than  one  third  of  the  respondents  (51  out  of  131,  72  gave  no  answer  or  provided  no 
opinion) reported having come across impediments to securitise SME loans or invest in SME 
securitisation  (8  had  not,  72  gave  no  answer  or  didn’t  know).  They  highlighted  regulatory 
complexity,  high  costs,  and  lack  of  data  quality  as  major  impediments  to  securitising  SME 
loans.  Insufficient  reliable  financial  data  hinders  risk  evaluation  and  investor  interest  – 
relatedly, stringent due diligence requirements are burdensome and complicated, particularly 
with  limited  SME  information.  Unfavourable  prudential  treatment  of  securitised  loans, 
including  higher  capital  requirements  under  the  Basel  III  framework,  are  highlighted  as 
discouraging investments in SME securitisation. As such, the existing regulatory framework 
struggles to offer attractive access to financing options for SMEs via securitisation. 

Some  respondents  from  the  industry  see  the  potential  for  securitisation  to  facilitate  SMEs' 
access  to  capital  markets  by  providing  them  with  a  wider  range  of  financing  options  and 
increasing  their  access  to  credit.  In  order  for  securitisation  to  support  access  to  finance  for 
SMEs, many respondent banks and banking associations stated that the regulatory framework 
for securitisation should be simplified and made more proportionate to make it more effective.  
In  particular,  transparency  and  investor  due  diligence  requirements  should  be  more 
proportionate  and  therefore  less  burdensome,  and  transparency  and  disclosure  requirements 
should be improved. 

On  the  other  hand,  consumer  organisations  point  out  that  it  is  unrealistic  that  securitisation 
would  contribute  to  SME  financing.  Consumer  organisations  also  caution  that  promoting 
securitisation could entrench the dependence on bank financing and potentially disrupt covered 
bond markets. They suggest that instead of simplifying the securitisation framework, the EU 
should expand existing programs, such as those offered by the EIF and EIB.  

1.1.4. Scope of application of the Securitisation Regulation (SECR) 

Opinions  were  mixed  amongst  respondents  on  whether  clarification  was  needed  on  the 
jurisdictional  scope  of  the  SECR,  to  establish  a  clearer  and  more  consistent  framework  for 
supervising and regulating securitisations that involve non-EU entities. On the question of the 
need to clarify the SECR’s jurisdictional scope, 28 out of 131 respondents agreed, 32 disagreed, 
24 had no opinion and 47 did not respond. Many recommend the recent UK reforms, as striking 
the right balance between ensuring regulatory consistency and avoiding unnecessary burdens, 
by allowing investors to collect the information and data they need without being forced to 
comply with prescriptive requirements. 

In  contrast,  other  banks  and  trade  associations  argue  that  the  scope  of  application  is  well 
understood and settled satisfactorily. They suggest that any changes should focus on revising 
84 

 
the ESMA template for third-country securitisation to ensure that institutional investors can 
obtain appropriate disclosure. Some also suggest that the EU should clarify the allocation of 
supervisory competence between national authorities.  

On  changing  the  definition  of  securitisation,  opponents  cited  uncertainty  and  regulatory 
complexity that might stem from such a move, and that the existing market definition was well-
understood. A few suggest harmonising it with the US definition of "asset-backed security”, 
which  many  EU  market  participants  are  also  familiar  with.  Broadening  the  scope  is 
recommended by some who believe the current definition does not capture transactions that 
are structured so as to fall outside the SECR’s technical scope but fulfil the same economic 
purpose.  Conversely,  respondents  in  favour  of  narrowing  the  definition  claim  its  current 
breadth and vagueness have made market participants reluctant to participate in transactions 
that fall within a regulatory "grey area”. 

Approximately half of those responding to this section advocated for the definition of a sponsor 
to be expanded to include alternative investment  fund managers (AIFMs) established in the 
EU. The other half opposed considered that AIFMs are not set up to retain a 5% share in a 
securitisation transaction and such risk retention practices could give rise to possible conflicts 
of interest.  

1.1.5. Due diligence requirements  

Most respondents (84 out of 131) believe that the due diligence requirements set forth in the 
SECR  should  be  reformed  to  be  more  principle-based,  proportionate,  and  less  burdensome. 
This sentiment stems from the notion that the current requirements are disproportionate to the 
risks  associated  with  securitisations.  They  suggest  that  less  stringent  due  diligence 
requirements should be applied to well-rated senior tranches. Should the Commission consider 
making due diligence requirements more risk-sensitive, respondents emphasize that such an 
approach should not result in overly prescriptive requirements, as relevant factors will vary on 
a case-by-case basis. 

Most market participants propose the removal of verification requirements for investors that 
are already checked by supervisors, including compliance with the STS (Simple, Transparent, 
and  Standardised)  criteria.  However,  supervisors  are  hesitant  to  abolish  these  requirements, 
particularly  the  need  for  investors  to  verify  that  the  originator  adheres  to  the  disclosure 
requirements under SECR. 

Some respondents even advocate for the complete elimination of due diligence requirements 
for securitisations, opting to rely solely on sector-specific legislations as is the case for other 
investments. The consensus among respondents is that the current due diligence requirements 
discourage  investment  in  the  secondary  market  and  repeat  securitisations.  Regarding 
delegation  of  due  diligence,  stakeholders  have  different  interpretations  about  the  applicable 
sanctions for non-compliance with Article 5. 

1.1.6. Transparency requirements  

The majority of respondents (56 out of 131, 57 did not respond and 4 had no opinion) find that 
disclosure when issuing a securitisation is significantly more costly than disclosure for other 

85 

 
instruments with similar risk characteristics due to the complexity, level of detail and vast scope 
of the disclosure requirements. 

To lower compliance costs while still ensuring a high level of transparency, the majority of 
respondents opted for streamlining the current disclosure templates for public securitisations 
and  introducing  a  simplified  template  for  private  securitisations.  However,  many  industry 
respondents  advise  against  requiring  private  securitisations  to  report  to  securitisation 
repositories due to the associated increase in compliance costs. To further reduce compliance 
costs, stakeholders are in favour of cautiously moving away from the current requirement for 
loan-level disclosure for all securitisations. 

1.1.7. Supervision 

The responses (56 out of 131, 67 did not respond and 8 had no opinion) highlight widespread 
challenges in the EU's securitisation supervision framework. Key issues include inconsistent 
supervisory  practices  among  National  Competent Authorities  (NCAs),  leading  to  divergent 
interpretations  of  rules,  overlapping  reporting  requirements,  and  application  of  criteria  for 
Significant Risk Transfer (SRT) and STS securitisations. Concerns also stem from the treatment 
of non-binding recommendations, such as the EBA's 2020 SRT report, being applied as de facto 
mandatory  requirements,  exacerbating  regulatory  uncertainty.  Harmonisation  is  further 
hindered by differences in collateral eligibility assessments.  

Stakeholders propose enhanced coordination between European and national supervisors. The 
majority of the respondents that replied to the supervision related questions suggest setting up 
supervisory hubs, to a lesser extent they support the idea of having one national authority as 
lead  coordinator  in  the  case  of  one  issuance  involving  multiple  supervisors  or  a  single 
supervisor. 

On the added value of Third-party verifiers (TPVs) in the STS market, the vast majority of 
respondents  (55  out  of  131,  67  did  not  respond  and  9  had  no  opinion)  highlight  their 
importance.  Only  43  of  the  131  survey  participants  responded  on  whether TPVs  should  be 
supervised: the majority of these (28 replies), including some public authorities, a suggest that 
supervision of TPVs is necessary to ensure the integrity of the STS standard and to promote 
investor confidence. However, to provide more meaningful input, most respondents highlight 
that  more  information  is  needed  to  accurately  estimate  the  potential  costs  and  benefits  of 
supervision. 

1.1.8. STS standard 

Most respondents (65 out of 131, 46 did not respond and 7 had no opinion) think that the current 
STS label does not have the potential to significantly scale up the market. This sentiment is 
shared by many stakeholders, who argue that to achieve success with STS, the criteria must be 
simplified, and the prudential framework should be reformed. 

Critics of the current STS criteria point to two main issues: i) homogeneity criteria, which they 
believe  are  a  significant  obstacle  for  certain  transactions,  such  as  infrastructure  financing 
transactions  and  SME  portfolios,  and  ii)  the  list  of  eligible  collateral  arrangements  for  on-
balance-sheet  STS  securitisations.  Furthermore,  smaller  banks  face  additional  challenges  in 
meeting these criteria due to their limited portfolios, making it even more difficult for them to 

86 

 
participate in the market. Many respondents highlighted the complexity of the STS regime in 
general. 

In  addition  to  addressing  the  STS  criteria,  many  respondents  also  emphasize  the  need  for 
reforms  in  the  non-STS  market. They  argue  that  relying  on  a  targeted  approach  to  specific 
segments of the market will not be sufficient to attract the necessary investment. This is because 
such  an  approach  will  not  provide  investors  with  the  critical  mass  required  to  invest  in  the 
market.  

1.1.9. Securitisation Platform 

41 out of 131 respondents agree that a securitisation platform or platforms could increase the 
use and attractiveness of securitisation in the EU (18 disagreed, 51 did not respond and 21 had 
no  opinion).  Those  in  agreement  viewed  the  objective  of  the  securitisation  platform  as  to 
facilitate standardisation, lower issuance cost and funding cost for the economy, promote better 
integration of cross border securitisation, and enhance transparency and due diligence.  

22 respondents agreed that a securitisation platform should target a specific asset class, like 
green loans (6 respondents), mortgages (6 respondents), or SME loans (6 respondents). 12 did 
not agree that a future platform should target a specific asset class, (74 did not respond, 23 had 
no  opinion).    21  respondents  disagree  that  guarantees  are  necessary  for  such  platform  to 
function, while 18 agreed to the necessity of guarantees (67 did not answer, 25 had no opinion). 
The  majority  of  respondents  favourable  to  a  guarantee  would  opt  for  a  public  guarantee 
provided by the EU or dedicated EU agency (like EIB or EIF). Due to potential systemic risks 
respondents  do  not  believe  that  a  private  guarantee  to  a  pan-European  platform  would  be 
appropriate.  

Respondents identified several challenges associated with the introduction of such a platform, 
like  fragmented  legal  framework  (differences  in  insolvency  laws,  contract  law,  and 
securitisation practices across EU Member States), lack of standardisation in loan contracts, 
securitisation structures, and eligibility criteria across jurisdictions complicates asset pooling 
and investor confidence. Competition with existing instruments like covered bonds could also 
potentially limit the platform's utility. The high development and upkeep costs, as well as costs 
related  to  pricing  and  valuation  disparities  for  assets  from  different  jurisdictions,  were  also 
cited as a challenge. Lastly, concerns about the political will to implement a unified system and 
debates about risk-sharing among Member States would also have to be addressed. 

At the same time, nearly all the respondents agree that creation of securitisation platform is not 
the  main  issue  in  the  market,  and  it  should  be  addressed  at  a  later  stage,  following 
comprehensive  feasibility  studies  and  consultations.  Quite  a  few  suggested  to  focus  on 
improving existing schemes, such as EIB/EIF securitisation programmes. 

87 

 
1.2. Prudential and liquidity risk treatment of securitisation for banks  

1.2.1. General comments 

A  substantial  majority  of  financial  industry  representatives  consider  that  the  current  capital 
framework based on non-neutrality of capital requirements82 leads to undue overcapitalisation 
of the securitisation exposures (33 respondents agree, 0 disagree, 9 have no opinion and 65 
provided no answer), and consider that reducing such non-neutrality would stimulate banks’ 
involvement in the securitisation market, while at the same time keeping the capitalisation of 
securitisations at a sufficiently prudent level (36 agree, 0 disagree, 8 no opinion, 63 did not 
answer).  

The level of capital non-neutrality is considered disproportionately high relative to the current 
lower  levels  of  agency  and  model  risks  embedded  in  securitisations,  which  have  been 
significantly  reduced  following  the  financial  crisis,  by  means  of  several  supervisory  and 
regulatory initiatives.   

To reduce the non-neutrality, the respondents call for comprehensive reductions of two main 
capital  parameters  (the  (p)  factor  being  the  main  parameter  driving  the  non-neutrality  of 
securitisation capital, and the risk weight floors setting out the minimum capital levels for the 
senior  tranches)  -  arguing  the  capital  reductions  should  be  applied  on  a  non-discriminatory 
basis to all types of banks i.e. originators, sponsors and investors, all capital approaches and all 
types of securitisations (STS and non-STS). With respect to the public authorities, they raised 
concerns  with  the  reductions  of  the  (p)  factor  in  particular  against  the  high  risk  of 
undercapitalisation of some (in particular mezzanine) tranches. 

A number of respondents (20 out of 131 agree, 4 disagree, 23 had no opinion and 84 did not 
answer) consider that  an alternative  design,  involving  a fundamental  redesign  of the capital 
framework  merits  further  consideration  as  it  has  a  potential  to  achieve  more  proportionate 
levels of capitalisation. However, they generally consider that such proposals require further 
analysis and should be considered in the long-term, preferably at international (Basel) level.  

1.2.2 (P) factor 

Supervisors have been cautious as regard the reduction of the (p) factor (out of 9 supervisors, 
2  supervisors  consider  that  the  current  levels  of  the  (p)  factor  adequately  address  structural 
risks of securitisation, 1 is against, 1 has no opinion and 5 did not answers). In their qualitative 
responses, they argue that reducing the (p) factor risks undercapitalisation of mezzanine (and 
potentially  senior)  tranches  and  will  not  have  any  relevant  effect  on  freeing  capital  and  on 
securitisation issuance. Supervisors acknowledge the limitations of any unilateral reductions 
of the (p) factor and agree with the existence of limitations embedded in the current regulatory 
framework. They support investigating the alternative designs of the risk weight functions, at 
an international level.   

82  Capital  non-neutrality  is  a  core  pillar  of  the  Securitisation  Framework,  requiring  that  the  capital  for 
securitisation has to be higher than capital for loans before securitisation.  

88 

 
 
1.2.3 Risk weight floors 

A significant majority of active respondents (yes 42, no 7, no opinion 7, no answer 75) call for 
a comprehensive reduction of the risk weight (RW) floors, beyond those proposed by the EBA. 
Most  respondents  favour  reduction  of  the  risk  weight  floor  for  banks  in  all  roles  in 
securitisation, while a minority advocate for a more restrictive treatment of investors due to 
their having less information on the transaction. Similarly, a number of respondents view that 
a reduction of the risk weight floor only for STS transactions would be insufficient to revive 
the European securitisation market. Respondents however generally agree with distinct STS 
and non-STS risk weight floors.  

A large majority of active respondents do not consider that safeguards proposed by EBA to 
accompany  the  reduction  of  the  risk  weight  floors  and  to  ensure  the  resilience  of  the 
transactions are proportionate or adequate (36 do not agree, 4 agree, 11 have no opinion, 80 
did not answer).  

A  large  group  of  respondents  argue  for  a  risk  sensitive  approach  to  setting  the  risk  weight 
floors, so that it is proportional to the risk of the underlying portfolio. Supervisors are more 
reluctant to change the floors without sufficient analysis and do not support a deviation from 
Basel.  

1.2.4. Framework for significant risk transfer (SRT) 

With  respect  to  the  Significant  Risk  Transfer  rules,  the  respondents  generally  support 
regulatory harmonisation of rules and supervisory convergence at the EU level. With respect 
to the tests applied to securitisations, industry generally agree with the conditions of the tests 
and do not see a need to make them more robust, although they are not opposed to it (23 agree, 
19 disagree, 11 have no opinion and 78 do not answer). Public authorities on the other hand 
see necessity to increase the robustness of the framework, in line with the EBA reports.  

With  respect  to  the  process  of  the  SRT  supervisory  assessments,  the  financial  industry  and 
several  public  authorities  noted  that  the  SRT  process  suffers  from  a  lack  of  supervisory 
convergence and regulatory clarity, which makes both its timings and outcomes unpredictable.  

1.2.5. Liquidity treatment in the LCR 

On liquidity risk requirements for banks, a large majority of stakeholders (44 out of 131, 78 
didn’t respond and 9 had no opinion) call for amendments to the eligibility criteria and haircut 
levels applied to securitisations eligible to the buffer for high quality liquid assets under the 
LCR. Some of these changes are aligned with the recommendations received from the ESAs 
and  compatible  with  the  Basel  framework.  A  couple  of  respondents  consider  there  is  not 
enough track  record and data on the liquidity  of  securitisations under stress  to  significantly 
relax their eligibility to the liquidity buffer. 

89 

 
 
1.3. The prudential treatment of securitisation for insurers  

1.3.1. Interest in and obstacles for securitisation investment 

The majority of financial institutions and trade associations (47 respondents – among whom 
16 insurers – out of 131, 67 stakeholders did not reply and 14 had no opinion) agreed that there 
exists  a  strong  interest  from  (re)insurance  undertakings  to  increase  their  investments  in 
securitisation.  However,  respondents  stressed  the  necessity  of  suitable  risk-return  profiles, 
appropriate  risk-based  capital  requirements  in  Solvency  II  and  reduced  due  diligence 
requirements. Some stakeholders expressed concern that improvements may not lead to a short-
term increase in securitisation for (re)insurers (7 respondents). In contrast, public authorities (3 
respondents) generally have no interest in such increase in securitisation investment.  

Financial  institutions  expressed  divergent  views  on  which  securitisation  segments  are  of 
interest for (re)insurers: CRE debt, CLO, RMBS, CMBS, true sale and synthetic structures. 
Notably, some financial institutions showed a preference for senior tranches. In contrast, others 
indicated that the seniority of the tranche and the distinction between true sale and synthetic 
are not decisive factors, provided the associated risks and returns align with their investment 
objectives.  Some trade associations added that (re)insurers typically exhibit a broad appetite 
for  investments  across  various  securitisation  segments,  provided  the  investment  delivers  an 
appropriate risk-return profile. Their investment decisions are predominantly influenced by key 
factors  such  as  yield,  credit  risk,  and  liquidity,  rather  than  the  specific  structure  of  the 
securitisation vehicle (whether a true sale or synthetic structure). Consequently, the seniority 
of  the  tranche—whether  senior,  mezzanine,  or  junior—does  not  pose  a  constraint  for 
(re)insurers,  as  long  as  the  associated  risks  and  returns  are  in  line  with  their  investment 
objectives.  

The majority of the financial institutions, trade associations and public authorities, including 
insurers identified significant obstacles to increase securitisation investments (53 respondents 
– among whom 19 insurers – out of 131, 14 had no opinion and 64 did not reply). These include, 
but  are  not  limited  to,  ‘disproportionate’  capital  requirements  imposed  on  securitisations 
compared to other financial instruments with similar credit risk and asset quality, and that the 
European securitisation market is too small and illiquid. 

Stakeholders were split on whether internal models disincentivise securitisation investments 
under Solvency II (29 yes, 9 no, 20 ‘don’t know’, 73 did not reply). A minority of respondents, 
amongst  whom  all  public  authorities,  and  a  minority  of  financial  institutions,  believed  that 
internal models do not have a disincentivising effect. Conversely, the majority of respondents 
(financial  institutions  and  trade  associations)  concluded  that  internal  models  do  indeed 
disincentivise securitisation investments under Solvency II. They pointed out that such models 
are subject to the same non-prudential impediments as (re)insurers using the standard formula. 
Stakeholders  noted  that  supervisory  attitudes  can  vary  amongst  jurisdictions  and  costs  to 
maintain an internal model are high. They also add that (re)insurers using internal models may 
struggle to accurately capture the complexities of underlying securitisation, which can lead to 
overly conservative assumptions and, subsequently, higher capital charges. In addition, they 
identify possible model-building miscalibration on the asset side due to the use of historical 
post financial crisis data.  

90 

 
 
 
  
1.3.2. Senior STS securitisations 

–The majority of stakeholders (40 respondents out of 131, 70 either did not reply or had no 
opinion), mainly financial institutions and trade associations, including insurers, indicated that 
the Solvency II standard formula capital requirements for spread risk is disproportionate and 
not commensurate with the risk of senior STS securitisation. One respondent suggests that the 
enhanced transparency of STS securitisation, combined with the presence of credit mechanisms 
such  as  guarantees  or  credit  reserves,  enables  more  accurate  risk  assessment,  which  should 
result  in  lower  capital  requirements.  Whilst  one  public  authority  supports  the  view  that  the 
capital requirements are punitive, a majority of public authorities expressed a differing opinion, 
stating  that  there  is  no  evidence  to  suggest  that  the  calibration  method  for  senior  STS 
securitisations is inappropriate.  

Stakeholders present two main views on the ‘appropriate’ calibration of capital requirements 
for senior STS. First, respondents argued that Solvency II’s emphasis on market risk volatility 
creates  a  burden  that  discourages  investments  in  securitisations.  According  to  these 
stakeholders, as (re) insurers typically adopt a hold-to-maturity approach, they suggested that 
capital calculations should be based on default risk, including recovery levels, and not spread 
risk. Second, respondents argued that risk charges for senior STS are disproportionally high, 
both  in  absolute  terms  and  relative  to  equally  rated  bonds.  To  address  this,  a  minority  of 
respondents  proposed  aligning  STS  bonds  with  capital  charges  for  other  collateralised 
instruments  (such as  covered bonds) following  Perraudin  and Qiu (2022)83 (6 respondents). 
These authors suggest a 1.3 ratio for senior STS ratio to covered bonds.  

Only  two  financial  institutions  commented  on  the  assessment  of  internal  models  and  their 
impact on securitisation investments. Both argued that (re)insurers using internal models can 
adjust  capital  requirements  in  accordance  with  their  own  risk  assessment,  enabling  more 
flexible management of both capital and due diligence requirements. This flexibility highlights 
the disparity between (re)insurers using the standard formula and those using internal models. 
Notably,  these  financial  stakeholders  pointed  out  that  the  standard  formula’s  capital 
requirements are less adaptable and fail to fully capture the risk reduction benefits associated 
with STS securitisations. 

1.3.3. Non-senior STS securitisations 

Again, the majority of stakeholders (39 out of 63 respondents – among whom 12 insurers – out 
of  131,  68  either  did  not  reply),  including  all  financial  institutions  and  trade  associations, 
indicated  that  the  Solvency  II  standard  formula  capital  requirements  for  spread  risk  is 
disproportionate  and  not  commensurate  with  the  risk  of  non-senior  STS  securitisation.  The 
same  public  authority  as  in  section  1.3.2.  supports  the  view  that  capital  requirements  are 
punitive, whilst a majority of public authorities stated that there is no evidence to suggest that 
the calibration method for non-senior STS securitisations is inappropriate.  

Respondents acknowledged that non-senior tranches do have a higher risk of default than senior 
tranches. Nevertheless, these securitisations are often covered by credit mechanisms, such as 

83  

ABS and Covered Bond Risk and Solvency II Capital Charges, Perraudin and Qui (2022) 

91 

 
  
  
 
first loss tranches or credit reserves. Furthermore, stakeholders highlighted that investors in 
STS securitisations often have better visibility on the underlying assets, enabling more accurate 
risk assessments. As a result, stakeholders argued that capital requirements should be reduced 
to better reflect actual risk.  

Similar to the calibration approach put forward in section 1.3.2., financial institutions and trade 
associations  suggested  that  prudential  requirements  for  non-senior  STS  securitisations  in 
Solvency II should be more consistent with those for bonds and loans with the same rating (18 
respondents). In support of this, respondents refer to the paper of Perraudin and Qiu (2022), 
which  suggests  a  1.5  ratio  for  non-senior  STS  to  senior  STS  capital  requirements  (5 
respondents).  

With regards to differentiating the Solvency II standard formula capital requirements for spread 
risks between mezzanine and junior tranches, views within the stakeholder groups were split 
(17 respondents – among whom 2 insurers – supported differentiation, 19 respondents – among 
whom 9 insurers – did not express interest or opposed, and 22 had no opinion out of a total of 
131; 73 stakeholders did not reply). Half of the financial institutions, trade associations and 
public authorities opposed such differentiation.   They claim it adds unnecessary complexity 
(such as defining tranche thickness) and the focus should rather be on reducing overall capital 
calibrations for STS securitisations (9 respondents). Additionally, some respondents reiterated 
their previous suggestion in section 1.3.2, namely that risk should be determined by credit risk 
rather than a temporary risk spread (8 respondents). They believe a more balanced approach 
would  enable  insurers  to  evaluate  securitisation  holistically,  integrating  it  into  their  ALM 
framework without being hindered by excessive capital requirements.  

In contrast, the other half of financial institutions, trade associations and public authorities who 
supported differentiation between mezzanine and junior tranches, argue that the capital charge 
should reflect the risks taken. Uniform capital charges for mezzanine and junior tranches could 
disincentivize investment, despite mezzanine tranches offering a balanced risk-reward profile 
between senior and junior tranches. One respondent added that differentiation would enable 
(re)insurers  using  internal  models  to  better  understand  and  manage  risks,  making  more 
informed investment decisions, particularly in STS securitisations where transparency is key. 

Although supportive of differentiation, stakeholders put forward limited responses on how to 
subsequently  define  this  mezzanine  tranche,  which  calibration  methods  they  deem  as 
appropriate and why such mezzanine calibration would be justified in Solvency II (even if no 
dedicated treatment for mezzanine tranches is introduced in CRR).  One public authority shared 
that mezzanine tranches should be determined through a prudent risk assessment, considering 
the attachment point value to avoid underestimating risk. A low attachment point can increase 
risk by creating a thin first-loss tranche. A trade association and public authority add that CRR 
does take into amount attachment and detachment points as inputs to compute the associated 
capital requirement (SEC-IRBA and SEC-SA methods).  

1.3.4. Non-STS securitisations 

Consistent with the findings in section 1.3.2 and 1.3.3, all financial institutions (except one) 
and trade associations, amongst whom a significant group insurers and insurers’ associations 
92 

 
 
 
  
 
 
consider the Solvency II standard formula capital requirements for spread risk disproportionate 
and not commensurate with the- risk of non-STS securitisation. Respondents (40 respondents 
out  of  131,  19  had  no  opinion  and  70  did  not  provide  an  answer)  emphasized  the  need  to 
stimulate the securitisation market by eliminating the disparity in risk charges between non-
STS and STS securitisations, which in their view disproportionately penalizes non-STS deals.  
Again, the study of Perraudin and Qiu (2022) is cited as evidence of a substantial miscalibration 
of capital charges relative to historic volatility data (6 respondents).  

In contrast, 2 respondents (one financial institution and one public authority) argue that there 
is no evidence to suggest that the calibration method for non-STS securitisations is flawed. The 
same public authority as in section 1.3.2 and 1.3.3.)  posits that the non-STS class, with fewer 
safeguards  and  including  non-EU  based  originators,  sponsors,  and  SSPEs,  justifies  the 
inclusion of post-financial  crisis  data in  the calibration. The authority argues this implicitly 
accounts for additional risks such as agency and model risk, through the capital charges.  

When  asked  to  identify  specific  sub-segment  of  non-STS  securitisation  for  which  evidence 
would justify lower capital requirements, financial institutions and trade associations suggested 
no  industry  wide  segment  or  specific  class  which  fits  a  ‘uniform’  insurance  model.  The 
following segments for recalibration are put forward: granular pools (3 respondents), CLO (3 
respondents), CRE debt (3 respondents) and RMBS (1 respondent). 

A majority of respondents (39 respondents among who 14 insurers, out of 131, 17 respondents 
had no opinion and 71 did not provide an answer), in particular financial institutions and trade 
associations support differentiating the Solvency II standard formula capital requirements for 
spread risks between senior and non-senior tranches of non-STS securitisations. They argue 
that the current framework is insufficiently risk-based and that more granular approach, with 
‘tranche thicknesses’ is needed. However, apart from references to Perraudin and Qiu (2022), 
no other concrete suggestions for calibration were provided through the public consultation 
responses.  

In contrast, respondents opposing such differentiation, amongst whom one financial insurance 
institution and a majority of public authorities, argue that the focus should be on the type of 
securitisation rather than just the seniority. They also caution that introducing differentiation 
would add unnecessary complexity, in addition to uncertainty about the effectiveness of this 
measure.   

1.4. Prudential framework for institutions for occupational retirement provision 
(IORPs) and other pension funds  

Note:  Respondents  to  this  section  represented  a  diverse  range  of  stakeholders,  with  only  2 
identifying themselves as IORPs. The remaining limited number of respondents comprised a 
mix of banks, associations for financial markets, NCAs, etc representing the interests of (non)-
IORPs.  

93 

 
 
1.4.1. Interest for investments in securitisation 

A  total  of  12  respondents  out  of  131  expressed  a  view  with  regards  to  their  interest  in 
securitisation investments (94 out of 131 didn’t respond and 25 had no opinion). Of these 12 
respondents, a majority (11 out of 131, amongst whom 2 IORPs), expressed a general interest 
to  increase  IORPs’  investments  in  securitisation  to  diversify  their  portfolio.  However,  they 
emphasized  the  need  for  a  more  liquid  market,  with  high  quality  securitisations  to  make 
investment more appealing. A limited number of respondents (2 replies out of 131, amongst 
whom no IORPS) identify the segments of interest to these pensions’ institutions, including 
synthetic on-the-balance-sheet securitisations and senior and mezzanine tranches. No further 
details  were  provided  by  stakeholders.  Notably,  only  one  respondent,  a  public  authority, 
reported  no  interest  from  both  IORPs  and  non-IORPs  in  increasing  their  investment  in 
securitisation.  

1.4.2. Obstacles for investments in securitisation  

A total of 8 respondents expressed a view with regards to obstacles to securitisation (98 didn’t 
respond and 25 had no opinion). Out of these 8 respondents, a majority (6 out of 131, amongst 
whom no IORPs), indicated that the IORP II Directive does not contain provisions that restrict 
IORPs’ ability to invest in securitisations. Out of these 8 respondents, a majority (6 out of 131, 
amongst whom no IORPs), indicated that the IORP II Directive does not contain provisions 
that restrict IORPs’ ability to invest in securitisations. They argued that the Directive is based 
on minimum harmonization, allowing for sufficient flexibility in investment decisions as long 
as the fiduciary duty and the prudent person principle are respected. Out of the 8 respondents, 
a  minority  of  disagreed  (2  out  of  131,  amongst  whom  1  IORP)  and,  argued  respondents 
disagreed  with  the  majority  view,  arguing  that  the  Directive  contains  indirect  restricting 
provisions. They presented two key concerns. First, they noted that securitisation structures can 
exhibit  a  wide  range  of  risk  profiles,  which  may  not  be  compatible  with  the  conservative 
investment strategies often employed by IORPs. As a result, even in the absence of explicit 
restrictions, the regulatory framework and internal policies governing IORPs' investments can 
create significant barriers to investing in securitisations. Second, they highlighted the potential 
existence of indirect barriers in Article 19 of the Directive setting out the ‘prudent person rule’.  

Generally, stakeholders agreed that national legislations or supervisory practices do not unduly 
restrict  IORPs’  and  non-IORPs’  ability  to  invest  in  securitisation  (8  out  of  131,  97  didn’t 
respond and 24 had no opinion). Furthermore, respondents refrained from answering whether 
there  are  any  wider  structural  barriers  preventing  pension  funds  from  participating  in  the 
market. Nevertheless, two respondents out of 131 challenged this latter view, suggesting that 
overly restrictive and prescriptive due diligence and disclosure requirements act as an obstacle 
for investor participation. They argued that these requirements increase complexity and costs 
associated  with  securitisations,  compared  to  other  asset  classes.  To  address  this  issue,  they 
recommend  reviewing  the  due  diligence  requirements,  to  introduce  proportionality  and 
simplifications, while maintaining overall prudence. 

94 

 
1.5. Additional questions 

Section  12  of  the  Consultation  covered  general  and  wide-ranging  questions  covering 
respondents’  views  for  the  future  direction  of  European  securitisation,  the  international 
competitiveness  of  the  EU  securitisation  market,  the  relative  potential  for  different  market 
segments to contribute to the Capital Markets Union, which regulatory measures could best 
stimulate issuance and investment, how to address the concentration of the EU securitisation 
market, and so forth.  

Nearly half of the respondents (55 out of 131, 74 didn’t respond or had no opinion) agree that 
the  EU  Securitisation  Framework  impacts  the  international  competitiveness  of  EU  issuers, 
sponsors and investors, whereas only two respondents answered that there is no impact on the 
competitiveness. 

Several respondents (25 out of 131, 76 did not respond) identified the different national legal 
and regulatory regimes, and the resulting higher costs as the main obstacles for cross-border 
securitisation. 17 respondents point to the STS homogeneity requirements as an obstacle for 
cross-border  securitisations.  Other  obstacles  to  cross-border  securitisation  were  listed  as  IT 
requirements or an uncertain regulatory approach. Several respondents (28 out of 131, 83 did 
not respond) agree that the EU's  regulatory framework for cross-border securitisation needs 
improvement, and suggest measures such as replacing complex templates, establishing a pan-
European securitisation vehicle, and streamlining STS criteria.  

Several  respondents  (32  out  of  131,  80  did  not  respond)  identified  regulatory,  market  and 
liquidity  factors  as  the  main  obstacles  to  increasing  securitisation  activity  in  EU  Member 
States. To address these issues, a few respondents (19 out of 131, 80 did not respond) suggested 
simplifying  and  harmonising  regulatory  frameworks,  enhancing  transparency  and  reporting 
standards,  and  promoting  securitisation  in  smaller  countries.  Stakeholders’  views  are  split 
regarding  the  effectiveness  of  regulatory  changes  in  stimulating  securitisation  activity,  with 
some arguing that changes are necessary and others being sceptical.  

Several  respondents  (23  out  of  131,  79  did  not  respond)  think  that  the  EU's  securitisation 
framework  for  green  transition  financing  can  be  improved  by  simplifying  the  regulatory 
framework, creating tax and financial incentives.  

Approximately 10 respondents, principally large multinational asset managers or their interest 
representatives, criticised the 10% acquisition limit under Article 56 of the UCITS Directive, 
which they claim is triggered more easily for securitisation products than corporate debt. Critics 
of this provision argue that this limit, which aims to ensure diversification of risk and delimit 
excessive  investor  concentration,  is  unsuitable  to  securitisation  investments,  which  are 
intrinsically diversified compared to bond issuances.  These respondents emphasised the need 
for exemptions or adjustments to facilitate more competitive and diversified portfolio strategies 
for  EU  investors.  Stakeholders  disagree  on  which  type  of  securitisation  (traditional  vs. 
synthetic; STS vs. non-STS) can most significantly contribute to the achievement of CMU.  

A number of respondents (21 out of 131, 79 did not respond) agree that the current regulatory 
review should promote a comprehensive framework, rather than targeting certain segments. A 
minority of respondents (43 out of 131, 81 did not respond) believe that the principal reasons 

95 

 
for the slow growth of the placed traditional securitisation are low returns due to high capital 
charges and operational costs, as well as difficulties in placing senior tranches.  

There  is  no  consensus  on  why  alternative  instruments  such  as  covered  bonds  are  preferred 
funding instruments in the EU. However, there is a consensus that a combination of targeted 
measures can stimulate traditional securitisation issuance, and that there is no “silver bullet” to 
singularly revitalise the market. Furthermore, in the view of 22 respondents, simplifying due 
diligence  and  transparency  requirements  would  be  beneficial,  while  only  one  respondent  (a 
major asset manager) viewed that the due diligence and transparency requirements were not a 
cause for concern. 

Finally,  as  far  as  securitisations  of  consumers  loans  and  specifically  mortgage  loans  are 
concerned, consumer organisations reiterated their concern that the securitisation  severs the 
link between lenders and borrowers, making forbearance and loan restructuring more difficult 
to apply to the detriment of borrowers. 

1.6. Additional or late feedback 

Stakeholders were offered the opportunity to make an attachment to their contribution to cover 
any  topic  or  provide  any  complementary  information  that  they  would  deem  useful.  57 
stakeholders  provided  such  inputs.  Most  of  them  aimed  at  expanding  or  clarifying  the 
stakeholder’s point of view on certain areas of the consultation.  

2 – Call for Evidence 

A call for evidence was opened between 19 February 2025 and 26 March 202584 to request 
feedback from stakeholders on the review of the Securitisation Framework. Stakeholders were 
asked  to  provide  views  on  the  Commission's  understanding  of  the  problem  and  possible 
solutions,  as  well  as  provide  relevant  information,  including  on  the  possible  impacts  of  the 
different options. 34 respondents replied to the call for evidence and presented their views.85 
Out of those 34 respondents, 2686 had also replied to the targeted consultation with their views 
remaining  broadly  the  same  as  outlined  in  the  sections  above.  Points  made  by  first-time 
respondents  –  outlined  is  greater  detail  below  -  were  also  consistent  with  the  targeted 
consultation feedback received earlier. Taken together, views submitted in response to the Call 
for Evidence are already reflected in the reasoning informing the Impact Assessment and do 
not  necessitate  any  change  to  the  problem  definition,  choice  of  options  and  assessment  of 
impact, as informed by previous feedback.  

The views of the 8 other respondents can be summarised as follows:  

1. One of the two EU citizens who responded raised concerns about market fragmentation and 
advocated for the creation of a government agency structure, akin to that of the United States, 

84 Securities and markets - review of the Securitisation Framework (europa.eu) 

85 One respondent made two separate (substantively similar) contributions; another respondent submitted three 
separate contributions. Therefore, 37 contributions were received, from 34 individual respondents.  
86 The respondents that had already replied to the targeted consultation represented: 7 companies/businesses, 15 
business associations, 2 non-governmental organisations (NGOs), 2 such respondents identified as “other”.   

96 

 
 
to  promote  securitisation  and  eliminate  agency  risk  and  moral  hazard.  They  disagreed  that 
AIFMs should be subject to the same capital rules as banks (to be noted that the capital rules 
for AIFMs are outside of the scope of the current initiative). The matter of public guarantees 
for securitisation structures is considered in Annex VI: Securitisation Platform(s). The other 
citizen  respondent  made  a  general  argument  against  government  economic  intervention; 
however, these points were not specific to securitisation or the instant initiative.  

2.  The  two  business  associations  represented  securitisation  market  participants  and  were 
broadly supportive of the review. One called for greater clarity on the scope and definitions of 
the  SECR  and  argued  that  AIFMs  should  be  granted  risk-retention  and  subject  to  the  same 
capital rules as banks. Scope and definitions are considered in the Impact Assessment Section 
5.2.1,  Measures  to  Reduce  High  Operational  Costs.  The  other  respondent  advocated  for  a 
simplification of transparency and due diligence requirements. This concern is addressed in the 
above Impact Assessment, see Section 7, Comparison and Preferred Combination of Policy 
Options.  

3. One company was in favour of introducing more risk-sensitive prudential rules, including 
recalibrating securitisation capital charges for banks and insurers. They highlighted the need 
for  capital  rules  that  reflect  the  actual  risks  of  securitisation  exposures,  to  facilitate  grater 
investment, particularly for the climate and digital transitions. This concern is addressed in the 
above Impact Assessment, see Section 7, Comparison and Preferred Combination of Policy 
Options.  Another  company  made  the  point  that  debtors  must  be  given  the  first  chance  to 
repurchase their securitised loans at the same price.  

4. The NGO respondent pointed out that while increased securitisation might free up additional 
lending, this may not necessarily benefit green or sustainable investments, but may rather be 
channelled  towards  polluting  activities.  It  therefore  called  for  mandatory  rules  for  green 
securitisations, and the establishment of environmental safeguards to avoid securitisation being 
used  for  fossil  fuel  assets.  Section  7.2  above  discusses  the  current  framework  for  green 
securitisation. 

5. A respondent identifying as “Other” (though representing companies in the investment and 
pension fund sectors), called for a review of SECR and IFRS 9 to change how institutional 
investors’ fund investments are treated, as current rules increase balance sheet volatility and 
discourage investment. Any review or amendment to IFRS 9 is beyond the scope of this current 
initiative.  

3 - Bilateral contacts with stakeholders 

A wide range of bilateral contacts were held with various stakeholders during the preparation 
of  this  initiative,  mostly  by  videoconference.  Consulted  parties  included  issuers,  investors, 
sponsors, servicers, arrangers, third-party verifiers, data repositories, rating agencies, industry 
associations,  and  competent  authorities.  For  the  most  part,  the  stakeholders  with  whom  the 
Commission engaged bilaterally also responded to the targeted consultation, and their written 
response to the survey captured or repeated the main messages they had previously conveyed 
in the bilateral meetings.  

97 

 
4 - Stakeholder Workshop 

On  3  July  2024,  the  Commission  hosted  a  Securitisation  Workshop,  which  invited  28 
representatives of EU securitisation participants to an in-person event on the Commission’s 
premises  in  Brussels,  to  share  their  views.  The  day-long  discussion  was  split  across  three 
panels:  (i)  EU  securitisation  market  developments:  focus  on  the  issuers’  perspective;  (ii) 
Balancing  safety  and  effectiveness  of  securitisation  exposures:  prudential  requirements  for 
banks and insurers; and (iii) Decrypting the demand side: zooming into STS and due diligence. 
Amongst  attendees  were  representatives  from  the  banking  industry/associations,  Ministries, 
European Supervisory Authorities, the SSM, EIB, insurers, asset managers, and pension funds. 
A summary of the main takeaways by topic is presented below.  

Improvements  in  disclosure  and  due  diligence  are  nice  to  have,  but  changes  in  prudential 
treatment for banks and insurers are a must-have. With the withdrawal of the ECB from the 
market, participants reported a lack of senior investor base, leading to the market struggling to 
absorb bigger transactions. Issuers reported that when it comes to placing a deal, the biggest 
issue is finding investors for the senior tranche due to its size and low yield. Senior investors 
are primarily banks and insurers which are weighted down by capital requirements which often 
make investing in senior tranches unattractive compared to the yield.  The absence of insurers 
among senior investors was highlighted. UCITS regulation (the 10% issuing entity limit) also 
seems to limit the ability of UCITS to participate more strongly in the market. 

With  regard  to  the  prudential  treatment  for  banks,  some  respondents  called  for  a  holistic 
approach and suggested the following measures:  

• 

Introducing a risk-sensitive risk-weight floor was favoured by the floor as an idea 
that can be introduced relatively quickly (quick-fix), could incentivise the 
securitisation of low-RW assets and does not seem controversial. 

•  Revising the p-factor, on the other hand, would require more work (not a short-term 
solution as it ideally has to go through Basel) and it might not have the desired 
impact as it could incentivise banks to buy into riskier tranches. 

•  LCR treatment is an important factor but there does not seem to be consensus that 
ABS positions are sufficiently liquid to deserve an upgrade in the LCR buckets. 
Nevertheless, improvements could be made in this area, namely addressing the 
haircuts that apply to ABS positions in the LCR buckets and the ratings cliff. 

On  the  topic  of  prudential  regulation  for  insurers,  insurance  industry  representatives 
acknowledged  that  due  to  the  nature  of  their  business,  securitisation  would  remain  a  niche 
investment  in  their  portfolio.  They  argued  that  the  impact  of  the  Solvency  II  formulas  on 
securitisation investment is stronger than what supervisors perceive, even for internal-model 
users which can be asked to justify significant deviation from standard formulas parameters. 
The capital treatment of holding non-STS securitisation was viewed as both punitive and not 
reflecting risk.   

The Securitisation Framework’s due diligence requirements were listed as a barrier for smaller 
investors to enter the market. Compliance costs were reported as unduly high due to lack of 

98 

 
proportionality (e.g. repeat transactions with the same issuer and from the same programme 
require the same due diligence). 

On transparency disclosure, various, sometimes conflicting, points were made from different 
market participants. For synthetic and other private securitisation investors, the standard 
templates were not  seen to  be useful,  and  investors  reported that they obtain the necessary 
transparency  information  through  bilateral  negotiation  rather  than  relying  on  the  standard 
templates. Other investors viewed access to standardised information as important: the more 
information  available  via  the  repositories,  the  better.  A  supervisor  highlighted  that  the 
templates  should  better  reflect  investor’s  basic  needs  and  should  be  more  developed  in 
cooperation with the industry. 

Participants requested that synthetic securitisation not be neglected in any forthcoming review 
of  the  Framework.  While  they  highlighted  the  importance  of  reviving  the  cash  segment, 
synthetic transactions also contribute toward financing the real economy. No obvious avenues 
were  highlighted  to  increase  the  use  of  Simple,  Transparent  and  Standardised  (STS) 
securitisation or to scale up the market through the use of STS.  

While participants reported investor demand for SME/corporate loan securitisation, access to 
the right information for due diligence was cited as a challenge.  Investors tend to  be more 
comfortable  when  the  securitised  portfolios  involve  long-standing  clients  of  the  originating 
bank(s). SME loans were viewed as more likely to be securitised synthetically. Finally, some 
respondents  pointed  out  that  as  SMEs  are  part  of  all  market  segments  (trade  receivables, 
leases), incentivising securitisation across the board will also benefit SMEs (e.g. an SME that 
borrows using real estate as collateral will not appear on the banking book as an SME loan but 
rather as a mortgage loan).  

The Commission services invited workshop participants to provide their views through the 
targeted consultation that would follow, which would be duly considered in the preparation of 
the impact assessment and any ensuing legislative proposal.  

5 - Input from the ESAs and ESRB  

The  ESAs  were  consulted  and  carried  out  important  analytical  that  fed  our  analysis.  In 
particular, the 2021 Art. 44 Joint Committee report on the implementation and functioning of 
the  Securitisation  Regulation87  which  focused  on  the  implementation  of  the  general 
requirements  applicable  to  securitisations,  including  the  risk  retention,  due-diligence  and 
transparency  requirements  as  well  as  on  the  specific  requirements  related  to  STS 
securitisations. The Joint Committee has been working on its second report due for publication 
by early 2025. The expert discussions that took place in the preparation and drafting of this 
document have also informed our reasoning. Another important contribution came from the 
findings of the ESAs opinion on the jurisdictional scope of the Securitisation Regulation88 and 
the compliance challenges that such jurisdictional scope posed for market participants.  

87https://www.eiopa.europa.eu/system/files/2021-05/jc-2021-31-jc-report-on-the-implementation-and-
functioning-of-the-securitisation-regulation.pdf 
88https://www.esma.europa.eu/sites/default/files/library/jc_2021_16_-
_esas_opinion_on_jurisdictional_scope_of_application_of_the_securitisation_regulation_003.pdf 

99 

 
 
Another  important  input  has  been  the  ESAs’  Joint  Committee  advice  on  the  review  of  the 
securitisation prudential framework89, which was published in December 2022 in response to 
the  call  for  advice  from  the  European  Commission  of  October  2021. The  Joint  Committee 
report assessed the performance of the rules on capital requirements (for banks, insurance and 
reinsurance  undertakings)  and  liquidity  requirements  (for  banks)  with  respect  to  the 
framework’s  original  objective of contributing  to  the sound revival of the EU securitisation 
framework. 

Finally,  the  insights  from  the  2022  European  Systemic  Risk  Board’  report  “Monitoring 
systemic risks in the EU securitisation market”90 on the financial stability implications of the 
EU securitisation market have also helped the assessment.  

5 - Input from Member States 

National  authorities  were  consulted  in  the  framework  of  the  Eurogroup  Working  Group+ 
(EWG+), and the Council Financial Services Committee (FSC). Several Member States also 
replied to the Targeted Consultation above through their finance ministries or central banks 
(FI, FR, IT, ES, DK, NL, BE, PL).  

Overall, Member States (expressing their views in the FSC and the EWG+) showed general 
willingness to reduce the operational costs for issuers and investors. They are more split as 
regards  their  appetite  to  reconsider  prudential  requirements  for  banks  and  insurers,  and 
generally are unwilling to deviate materially from the Basel standards. Member States reported 
an openness  to  explore the potential benefits  of a securitisation platform(s) as a measure to 
facilitate standardisation of the market, but most expressed opposition to a platform based on 
public  guarantees  (as  in  the  US,  where  a  significant  part  of  the  securitisation  market  is 
guaranteed by Government-Supported Entities or GSEs, such as Fannie Mae and Freddie Mac).  

During the session of October 2024, the FSC discussed the issue of securitisation under the 
agenda item: “Follow up on the future of CMU”. COM and ECB representatives introduced a 
COM non-paper with a factual comparison of the securitisation frameworks in some selected 
jurisdictions, that was developed at the rest of the FSC. There was overall a very  extensive 
debate, with almost all Members taking the floor, and commenting not only on the content of 
the COM and ECB presentations, but also on what should be the focus of the upcoming reforms 
on securitisation. The Members seem to be open to introducing proportionality in transparency 
and due diligence requirements, and supporting the standardisation of the transactions, some 
are open to look into Solvency treatment. Many Members suggested examining the demand 
side as well (i.e. call for increasing the investor base in securitisation). Others expressed caution 
with respect to changes in the prudential treatment. Some Members highlighted the reforms 
should not endanger financial stability.  

89 ESAs publish joint advice to the EU Commission on the review of the securitisation prudential framework | 
European Banking Authority 
90 https://www.esrb.europa.eu/pub/pdf/reports/esrb.report_securisation.20220701~27958382b5.en.pdf 

100 

 
 
 
 
 
Many  Members  also  commented  on  the  issue  of  platform:  generally,  Members  supported 
platforms that support standardisation of the securitisation transactions, but were more cautious 
as  regards  the  platforms  involving  the  state  guarantees.  Some  Members  highlighted  it  is 
important to define target and objective of the reforms. The Chair concluded that some areas 
may be more important than the prudential treatment and may have bigger impact on the EU 
market  (transparency,  due  diligence,  supply  and  demand  issues,  standardisation  etc),  also 
because of the specificity of the EU market where we have many synthetic transactions.   

During the FSC session of February 2025, the Commission shared preliminary feedback on 
the results of the consultation on the Securitisation Framework, as set out in the Section 1 of 
this  Annex.  Overall,  views  were  expressed  on  both  the  conservative  and  ambitious  side  of 
where to set the “cursor” for the ambition of the initiative. There was a clear consensus on the 
need for action on the Framework, with Member States emphasising that any measures must 
be evidence-based and balanced. On the platform and public guarantees, the issue needs further 
analysis and the different approaches – national, EU-wide, or private – merit further discussion. 
No clear picture emerged from respondents favourable or opposed to guarantees – many large 
financial institutions on both sides of the debate, alongside NGOs and MS.  

During the session of 28 November 2024 EWG+ there was a high degree of convergence on 
the  issues  to  tackle:  prudential  regulation,  reporting  requirements,  the  need  to  simplify,  to 
correct  an excessive reaction in  previous round of legislation. On the Platform,  preliminary 
discussions  at  the  EWG+  indicated  very  few  Member  States  would  favour  a  pan-European 
platform  with  guarantees  (national,  supplemented  by  EU-level).  For  most  Member  States, 
however, attaching public guarantees to securitisation issuance is a controversial topic. One 
MS appeared to favour a market-led structure without guarantees.  

101 

 
 
 
 
 
ANNEX III: WHO IS AFFECTED AND HOW?  

1 - Practical implications of the initiative 

This  Annex  summarises  the  costs  and  benefits  of  the  preferred  options,  which  address  the 
following problems identified in chapter 2:  

•  Problem 1: High operational costs for all issuers and investors  
•  Problem 2: Undue prudential barriers for banks to issue and invest in securitisation 
•  Problem 3: Undue prudential costs for insurers to invest in the EU securitisation market 

In order to address the identified problems,  a combination of three policy options is chosen 
(see Section 5 for a detailed description and Section 6 for an assessment): Option 1.1 targeted 
measures to reduce high operational costs, Option 2.1 targeted changes to existing prudential 
(capital  and  liquidity)  framework  for  banks,  and  Option  3.2  improving  risk  sensitivity  and 
removing  prudential  barriers  to  investments  by  insurers  in  the  safest  tranches  of  non-STS 
securitisation. 

Under  option  1.1.,  issuers  (originators,  sponsors  and  SSPEs)  would  have  to  disclose 
information  for  their  securitisations  using  simpler  templates  than  under  the  baseline. 
Consequently, issuers would have to adapt their reporting systems. Investors would carry out 
lighter and more proportionate due diligence on their securitisation investments. 

Under  option  2.1  banks  would  be  subject  to  more  risk  sensitive  capital  requirements  for 
securitisation positions. In addition, banks would be able to hold a broader set of securitisations 
for their liquidity buffers. Finally, option 2.1 banks would be able to benefit from faster and 
more coherent process of supervisory assessment of transactions’ eligibility for capital relief. 

Under  Option  3.2,  insurers  would  apply  differentiated  capital  requirements  for  their 
investments into senior and non-senior tranches of non-STS securitisations. 

2 - Summary of costs and benefits 

The figures below summarise first the costs and benefits of the preferred option:  

•  Figure  7:  Provides  an  overview  of  benefits  of  the  preferred  combination  of  policy 

options. 

•  Figure 8: Summarises the costs of the preferred combination of policy options 
•  Figure 9: Summarises the administrative cost changes of the preferred combination of 

policy options for the one-in-one-out calculator 

•  Figure 10: Summarises the costs and benefits of the baseline scenario of the current 

Securitisation Regulation (based on the Evaluation) 

•  Figure 11: Shows how the preferred combination of policy options might impact the 

sustainable development goals 

102 

 
Figure 7:  

Overview benefits of the preferred combination of policy options 

Description 

Amount 

Comments 

Reduction of operational costs for due 
diligence  and  transparency  require-
ments Articles 5 and 7 of SECR  

EUR 310 million p.a. 
of recurring costs 

Removal of undue prudential 
barriers and increase of risk 
sensitivity of the capital 
requirements for banks 

Expected reduction of 
capital requirements 
for senior tranches, to 
which banks are most 
exposed to, by one 
third 

More consistent liquidity framework 
in banking 

Not quantifiable 

Increased robustness and efficiency 
of the SRT framework 

Not quantifiable 

Improving risk sensitivity and 
removing prudential barriers to 

The  capital  relief  is 
estimated to be around 
EUR 5.9 bn. 

103 

Direct benefits 

For a detailed explanation of the cost savings see “Details of costs and benefits” section below. 

Making  capital  requirements  for  securitisation  more  risk-sensitive  will  reduce  the 
amount of capital requirements for banks’ securitisation exposures in some cases, but the 
overall level of capitalisation is expected to remain prudent and proportionate and risk-
sensitive to the associated risks. 

The changes would strengthen the incentives for banks to invest in publicly traded STS 
traditional  securitisations,  would  help  diversify  banks’  liquidity  buffers  and  would 
increase  the  liquidity  of  this  market  segment.  It  is  not  possible  to  estimate  banks’ 
behavioural changes in a reliable way and the exact impact is therefore not quantifiable.   

The  changes  would  increase  the  reliability  and  predictability  of  the  supervisors’  SRT 
assessments.  They  are  expected  to  make  the  SRT  framework  more  robust,  introduce 
more clarity and increase the efficiency of the supervisory assessment processes.  The 
changes are qualitative (improving the quality of the and are therefore not quantifiable. 
The  changes  are  qualitative  (improving  the  quality  of  the  SRT  framework)  and  are 
therefore not quantifiable.  

Undue  prudential  barriers  to  investments  in  senior  non-STS  securitisations  and 
incentives for excessive risk taking would be removed. 

 
 
Description 

Amount 

Comments 

investments in the safest tranches of 
non-STS securitisation by insurers 

Facilitation of market entry 

Not quantifiable 

Details see below. 

Indirect benefits 

Increased issuance of securitisations  Not quantifiable 

The removal of undue prudential barriers and the increased risk sensitivity of the capital 
framework in banking are expected to boost issuance of securitisations. 

Increased 
senior 
investments 
tranches  of  STS  securitisations  by 
banks 

in 

Investment in senior tranches of non-
STS securitisations by insurers could 
increase 

Participation of life insurance holders 
in 
returns  of  securitisation 
the 
investment 

Not quantifiable 

The  removal of undue  barriers in  the  prudential  and liquidity  framework  for banks  is 
expected to increase banks’ investments in senior tranches of STS securitisations. 

Not quantifiable 

Insurers’ investments in senior non-STS securitisations could increase if they decide to 
use the capital relief for this purpose. 

Not quantifiable 

For  life  insurance,  the  lower  due  diligence  requirements  and  the  reduction  in  capital 
requirements on non-STS senior tranches is conducive of more investments in non-STS 
‘safe’ tranches and higher profits – which can still provide higher return on investments, 
part of which has to be shared with policyholders (life policyholders are entitled to some 
of the investment profits made by insurers). Life policyholders (consumers) can therefore 
obtain higher return on their savings. 

*Some elements are not quantifiable due to various reasons, such as (i) it is difficult to assess behavioural changes of market participants as a 
result of the changed framework; (ii) the options include a series of measures including several parameters, rather than a single measure; and 
(iii) a number of measures are qualitative (i.e. increasing the quality of the rules).  
(1) Estimates are gross values relative to the baseline for the preferred option as a whole (i.e. the impact of individual actions/obligations of the 
preferred option are aggregated together); (2) Please indicate in the comments  column which stakeholder group is  the main  recipient  of  the 
benefit;(3) For reductions in regulatory costs, please describe in the comments column the details as to how the saving arises (e.g. reductions in 
adjustment costs, administrative costs, regulatory charges, enforcement costs, etc.;);.  

104 

 
 
 
 
Figure 8:  

Overview costs – preferred option 

Targeted 
measures to 
reduce high 
operational costs 
in due diligence 
and disclosure    

Direct adjustment 
costs 

Direct 
administrative costs 
– linked to the due 
diligence and 
transparency 
requirements of Art. 
5 and Art. 7 

Direct regulatory 
fees and charges 

Direct enforcement 
costs 

Indirect costs 

Citizens/ Consumers 

Businesses 

Administrations 

One-off 

Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

None 

None 

None 

None 

None 

None 

Additional 
reporting of 
private 
transactions to 
securitisation 
repositories: 
EUR 7 million 
p.a. 

None 

None 

None 

None 

None 

None 

None 

Supervisors will 
have to spend 
more resources 
to understand 
risk management 
practices. Costs 
are not 
quantifiable. 

None 

None 

None 

None 

None 

Implementation of 
simplified reporting 
template: EUR 33 
million. 

None 

None 

None 

None 

None 

None 

None 

None 

None 

105 

 
 
 
 
 
 
 
 
 
Citizens/ Consumers 

Businesses 

Administrations 

One-off  Recurrent 

One-off  Recurrent 

One-off 

Recurrent 

Direct adjustment 
costs 

None 

None 

None 

Minor 
implemen-
tation costs 
for banks 
(negligible) 

Costs for supervisors 
to adapt their metho-
dologies, however, 
overall, supervisory 
processes would be 
simplified 

Targeted 
changes to 
the capital 
and 
liquidity 
prudential 
framework 
for banks 

Direct admin-
istrative costs 

Direct regulatory 
fees and charges 

Direct enforce-
ment costs 

Indirect costs 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

The measures should not result in in-
creased number of supervisory objec-
tions to the SRT for specific transact-
ions; rather, rules that supervisors 
follow when assessing the transactions 
before the SRT validations should be 
clearer and more solid where possible. 

106 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Citizens/ Consumers 

Businesses 

Administrations 

One-off 

Re-current  One-off 

Recurrent 

One-off 

Recurrent 

Direct adjustment 
costs 

None 

None 

Limited 
implement-
tation costs 

None 

Limited  costs  for 
to 
supervisors 
adapt 
IT 
systems 

their 

Limited  implementation  costs 
of  monitoring  distinctly  what 
is  senior  from  what  is  non-
senior 
non-STS 
within 
securitisation. This is however 
likely already done by insurers 
as  part  of 
their  own  risk 
management processes 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

Improving 
risk 
sensitivity 
and removing 
prudential 
barriers to 
investments 
in the safest 
tranches of 
non-STS 
securitisation 

Direct adminis-
trative costs 

Direct regulatory 
fees and charges 

Direct enforcement 
costs 

Indirect costs 

None 

None 

None 

None 

None 

None 

Estimates (gross values) to be provided with respect to the baseline; (2) costs are provided for each identifiable action/obligation of the preferred 
option otherwise for all retained options when no preferred option is specified; (3) If relevant and available, please present information on costs 
according to the standard typology of costs (adjustment costs, administrative costs, regulatory charges, enforcement costs, indirect costs;).  

107 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Businesses 

New administrative burdens (INs) 

Removed administrative burdens 
(OUTs) 
Net administrative burdens* 
Adjustment costs** 

Citizens 

New administrative burdens (INs) 
Removed administrative burdens 
(OUTs) 
Net administrative burdens* 
Adjustment costs** 

Figure 9:  

Application of the ‘one in, one out’ approach – Preferred option(s) 

One-off 

[M€] 

(annualised total net present 
value over the relevant period) 

Recurrent 

Total 

(nominal values per year) 

Transparency 
IT 
implementation  approx.  EUR 
3.3 million p.a.91 

EUR 3 million p.a  
(rounded). 

-EUR 310 million 

-EUR 310 million 

EUR 3 million p.a. (rounded) 

-EUR 310 million 

-EUR 310 million  

None 

None 

None 
None 

None 

None 

None 
None 

None 

None 

None 

-EUR 310 million p.a. 
(rounded to full 10 million) 

Total administrative burdens*** 

EUR 3 million 

-EUR 310 million 

(*) Net administrative burdens = INs – OUTs;  
(**) Adjustment costs falling under the scope of the OIOO approach are the same as reported above. Non-annualised values;  
(***) Total administrative burdens = Net administrative burdens for businesses + net administrative burdens for citizens. 

91 Assuming that the one-off IT implementation cost of 33 million for the EU market is written-off over a period of 10 years this would result in approx. EUR 3.3 million p.a. 
of additional costs. 

108 

 
 
 
 
 
 
 
 
 
3 - Details of costs and benefits 

1.  Status quo & Overview of costs and benefits identified in the evaluation  

The below tables reproduce the conclusions of the Evaluation (Annex V), to demonstrate the 
full  scale  of  the  benefits  (e.g.  the  administrative  cost  savings)  of  the  preferred  option,  in 
comparison to the administrative and substantive cost burdens that are incurred in securitisation 
transactions under the status quo. 

Figure 10:  

Costs and benefits of the current Securitisation Regulation (based on the Evaluation) 

Citizens/Consumers  

Businesses 

Administrations 

Cost or 
Benefit 
description: 

Type 

Details (monetary value or qualitative description where no quantification 
possible) 

Direct compliance costs (adjustment costs, administrative costs, regulatory charges 

Due diligence 
and 
transparency 
requirements 
of Articles 5 
and 7 

Due diligence  
and 
transparency  
requirements 
of Articles 5 
and 7 

One-off  Not affected. 

Not affected. 

EUR 10 million to EUR 15 million for 
familiarisation and set-up of due 
diligence procedures and about EUR 370 
million for reporting templates (including 
IT implementation) 

Prevention of market entry for issuers 
and investors. 

Details below. 

Recurring  Not affected. 

EUR 780 million. 

Not affected. 

Long time to market/missed 
opportunities of not being able to invest 
in certain transactions as due diligence 
takes longer than offering window. 

See details below. 

Enforcement costs: (costs associated with activities linked to the implementation of an initiative such as 
monitoring, inspections and adjudication/litigation) 

Indirect costs (indirect compliance costs or other indirect costs such as transaction costs) 

Direct benefits (such as improved well being: changes in pollution levels, safety, health, employment; market 
efficiency) 

More efficient 
regulatory 
framework 

109 

Revival of the EU securitisation market, 
enhancing access to a financial 
instrument that can provide funding and 
capital relief for originators. On the 
investor side, enhancing risk 
diversification via the exposure to assets 

Better 
monitoring 
possibilities of 
the 
securitisation 
market and the 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
that are usually ineligible for capital 
market financing (e.g. SME or corporate 
loans). Investors may further benefit 
from the possibility to choose the 
securitisation tranche that matches their 
risk-preferences.  

overall 
economy. 

Indirect benefits (such as wider economic benefits, macroeconomic benefits, social impacts, environmental 
impacts) 

Real economy: More available funding.  

More efficient 
regulatory 
framework 

Increased financial 
and 
macroeconomic 
stability due to a 
more balanced 
distribution of risks 
in the financial 
sector. Bank credit 
and capital market 
cycles are not 
perfectly correlated 
and therefore one 
can substitute at 
least partially for 
the other in case of 
shortages.92  

2.  Size of the market for securitisations 

The  following  figure  overviews  the  approximate  size  of  the  securitisation  market,  which  is 
relevant for the later extrapolation of costs and benefits. 

As the securitisation market is very diverse, no single data source describes the market as a 
whole.  Data  for  the  public  market  is  drawn  from  the  Association  for  Financial  Markets  in 
Europe (AFME). Less data is publicly available for the private market, however the EBA is 
collecting data in their Common Reporting Framework (GL). EBA data can show only that 
part  of  the  private  market  where  a  bank  is  involved  in  least  on  one  side  of  the  transaction 
(investor or originator/sponsor/original lender). To our knowledge, no data is available for the 
private market without any bank involvement.  

The below cost estimation uses the latest available data (end-2023) for both public and private 
market segments.  

92  Kroszner,  Laeven  and  Klingebiel  (2007)  present  in  their  paper  “Banking  crises,  financial  dependence,  and 
growth” (Journal of Financial Economics Vol. 84, 1) empirical evidence based on a study with 38 countries that 
shows that economic sectors that are dependent on the banking system see a substantially greater fall in output as 
response to a banking crisis.  

110 

 
 
 
 
 
 
 
Figure 11:   Market data on EU securitisations (end-2023) 

Public market93  
EUR 1 003.3 billion.95 

Private Market94  
EUR 632 billion.96 

Dimension 
Outstanding  notional 
amount (end 2023) 
Synthetic 
Traditional  

vs. 

Asset class 

The  public  market  links  to 
traditional securitisations. 

The  public  market  (excluding 
ABCP ~10%) is dominated by 
residential  mortgages  (~47%), 
followed 
corporate 
by 
exposures  securitised  as  CLO 
(~19%),  SME  ABS  (~13%), 
Consumer  loans  (~9%),  Auto 
loans 
other 
including 
(~5%) 
exposures 
corporate  mortgages,  credit 
cards and leases. 

(~7%), 

and 

SRT vs. non-SRT 

Retained vs. Placed 

AFME  estimates  2021-2023 
European  (also  including  non-
EU)  SRT  to  total  EUR  263.3 
billion. Assuming that 75% of 
this  total  can  be  attributed  to 
EU  countries  and 
the 
still 
volume  was 
issued 
outstanding by the end of 2023, 
this corresponds to about EUR 
197 billion or about 20%. 
Recent  issuance  data  shows 
that  on  average  2019-2023, 

that 

93 AFME Market data report, Q4:2023 

94 EBA CoREP S2-2023 

The  non  ABCP  share  of  the 
private  market  (about  88%)  is 
split  approx.  50%-50%  between 
synthetic 
traditional 
and 
securitisations. 
For the synthetic market segment 
apply and receive significant risk 
transfer (almost 100%) the main 
underlying collateral is corporate 
loans  including  SME  (~73%) 
followed 
residential 
by 
mortgages,  consumer  loans  and 
credit card exposures with about 
For  ABCP 
6-8% 
transactions  the  main  collateral 
receivables 
types 
trade 
(~50%)  and  corporate 
loans 
(~30%). 
Most  SRT 
are 
synthetic.  If  a  securitisation  is 
synthetic,  it  is  linked  1:1  to  an 
SRT  application,  so  100%  of 
synthetic  transactions  are  SRT. 
For  the  traditional  segment  the 
SRT share is about 20%.  

transactions 

each. 

are 

In  synthetic 
the 
assets are always retained on the 

transactions, 

95 This number is composed as follows: For end 2023: AFME reports for the total European market EUR 963 
billion of securitisations, of which 76% accrue to the EU Market; in addition, it reports EUR 228.8 billion CLO 
for the whole of Europe, of which, assuming the same EU percentage, an estimate of EUR 174.4 accrues to the 
EU. Furthermore, it reports Asset Backed Commercial Paper of EUR 123.2 with an estimated EU share of 74%, 
i.e. EUR 103.2 in absolute terms. Please note that this figure is larger than the estimate for the public securitisation 
market by the EBA using COREP figures. To prevent a possible underestimation of costs, we have used this larger 
estimate for the public market to estimate the due diligence and transparency costs. 
96 Please note that the private market consists to a large extent of synthetic SRT transactions, where the notional 
amount of assets in the securitised pool is much higher (often 10x or more) than the invested amount.  

111 

 
 
 
Dimension 

STS vs. non-STS 

AAA, 
other 
investment grade, sub-
investment grade 

Public market93  
of 
the 
about 
50% 
securitisations 
(excluding 
ABCP)  are  retained  on  the 
balance sheet whereas the other 
50% are placed on the market. 
STS  transactions  volumes  for 
the  public  market  are  not 
publicly  reported, 
therefore, 
we 
rely  on  COREP  data 
examined  by  the  EBA  which 
indicates a share of about 34% 
STS  transactions  for  public 
securitisations  with 
bank 
involvement. 
Most  securitisations  are  AAA 
(54%) or AA (31%), followed 
by  (11%)  in  the  investment 
grade  segment  and  only  3% 
sub-investment grade. 

Private Market94  
balance  sheet,  only  the  risk  is 
transferred. 

In the private market about 40% 
are  STS,  based  on  COREP  data 
examined by the EBA. 

For the private segment no rating 
distribution  is  available,  but  we 
expect  a  significantly  higher 
share with  lower ratings as  SRT 
is  only  possible  for  exposures 
bearing risk. 

3.  Nature of duties due diligence requirements (Article 5) 

The due diligence requirements of Article 5 SECR oblige institutional investors to perform a 
risk assessment of the securitisations they invest in. These requirements are designed to protect 
investors,  to  assure  regulatory  compliance  and  to  ensure  that  all  parties  involved  in  the 
securitisation  transaction  have  access  to  accurate  and  timely  information  concerning  the 
underlying  assets,  securitisation  structure,  and  associated  risks.  The  main  due  diligence 
requirements apply to investors and include:  

1.  Verification requirements prior to entering into a securitisation position:  

o  Verification of credit granting standards (only if the originator is neither an 
EU investment firm nor an EU credit institution or if it is located outside of 
the EU) 

o  Verification of risk-retention 
o  Verification of fulfilment of disclosure obligations required by Article 7 by the 

originator or sponsor or SSPE 

o  Verification of sound selection procedure and pricing for non-performing 

exposures 

2.  Risk-assessment prior to entering a securitisation position including:  

o  Assessment of risk characteristics of the individual position and of the 

underlying exposures 

o  Assessment of the structural features of the securitisation that can materially 

impact the performance of the securitisation position, including the contractual 
priorities of payment and priority of payment-related triggers, credit 

112 

 
 
enhancements, liquidity enhancements, market value triggers, and transaction-
specific definitions of default; 

o  STS verification: checking the compliance of that securitisation with the STS 
requirements provided for in Articles 19 to 22 or in Articles 23 to 26, and 
Article 27 

3.  Ongoing monitoring of the risk characteristics after entering a securitisation position 

including  

o  percentage of loans more than 30, 60 and 90 days past due,  
o  default rates,  
o  prepayment rates,  
loans in foreclosure,  
o 
recovery rates,  
o 
repurchases,  
o 
loan modifications,  
o 
o  payment holidays,  
o  collateral type and occupancy, and  
o 

frequency distribution of credit scores or other measures of credit worthiness 
across underlying exposures,  
industry diversification  
o 
o  geographical diversification,  
o 

frequency distribution of loan to value ratios. 
4.  Ongoing stress-testing after entering a securitisation position: 

regularly perform stress tests on the cash flows and collateral values 

o 
o  or stress test loss assumptions. 

5.  Ongoing reporting, both internally and to authorities: 

o  The securitisation transaction must be backed by a homogeneous pool of 
exposures, such as pools of residential loans or corporate loans. The 
underlying exposures should not include transferable securities. 

However, sell-side parties support this due diligence process, e.g. by performing due 
diligence sessions where they guide investors through all relevant questions that need to be 
answered over the course of their due diligence process. 

4.  Cost drivers for Article 5 costs and separation of incremental costs from 

business-as-usual costs:  

Investors perform due diligence activities in their regular course of business. These costs that 
are linked to business-as-usual due diligence activities (“BAU costs”) are not relevant for the 
cost assessment, which focusses on “incremental costs”, i.e. costs that businesses would not 
incur  in  the  absence  of  the  EU  Securitisation  Framework.  In  the  stakeholder  consultation, 
securitisation investors pointed to the following costs that go beyond what those incurred in 
the regular course of business:  

•  Verification beyond the assessment of the risk characteristics and the structural 

features of the transaction 

•  Due diligence on originators that are regulated entities and that therefore can be 
assumed to have originated their assets based on sound-credit granting standards 

113 

 
 
•  Elaborate due diligence for secondary market transactions that have already been 

checked by primary investors or are in the end of their life cycle with a high collateral 
to outstanding asset-ratio and hence with very low risk 

•  Due diligence on repeat issuers that are already familiar to the investor 
•  STS verification 
•  Elaborate due diligence on low-risk transactions  
•  Certain activities that are considered duplicative in nature, e.g. secondary or tertiary 

real-estate price valuations 

•  Repetition of due diligence activities that have been performed by another party in the 

process (e.g. the asset manager)  

5.  Classification of due diligence costs from a better regulation perspective 

Given  that  the  substantial  due  diligence  requirements  extend  largely  to  checking  whether 
originators  having  fulfilled  their  duties  in  the  credit  origination  and  transparency  process 
(which is an inspection duty performed on behalf of public authorities), as well as to internal 
reporting, it is reasonable to classify these as administrative costs for purposes of the better 
regulation process and to consider them in the One-In-One-Out calculation.97 

6.  One-off costs due diligence 

To  establish  appropriate  due  diligence  procedures,  investors  in  securitisations  incur  one-off 
efforts to adapt their due diligence procedures to the requirements of Article 5 SECR. Such 
one-off efforts involve familiarisation with the new rules, potentially obtaining legal advice for 
the correct interpretation of the rules and adapting internal procedures and guidance. It was not 
possible  to  obtain  information  on  one-off  implementation  costs  from  the  stakeholder 
consultation. Several large asset managers mentioned that they had already similar procedures 
in place before the legal framework was put into place, so there was no implementation effort. 
Other respondents mentioned that they had spent significant efforts, but that their processes 
adapted slowly over time and the exact costs of this effort cannot be accurately estimated.  

The business association AFME estimated for new businesses the time necessary to understand 
and implement due diligence procedures to be 2-3 months out of the approximately 9 months 
required to set-up the whole securitisation business and has  collected a cost sample for due 
diligence  costs  of  that  constitutes  about  20%  of  asset  managers  investing  in  European 
securitisations, representing about 50% by ABS assets under management. They estimated the 
one-off start-up costs for a securitisation business to about EUR 400 000, with about 30% due 
to  Art.  5  due  diligence  requirements,  i.e.  approx.  EUR  130 000.  AFME  estimates  the  total 
number of asset managers investing in securitisations in the European market to be less than 
20. In addition, the EBA estimates the number of bank investors to 55-127, where the lower 
bound are banks with the role “investor” only and the upper bound includes also banks with 
the role “originator”, “original lender” or “sponsor”. This means that the upper bound includes 
also banks that invest only in the retained tranches of their own securitisations, which are not 

97 The One-In-One-Out-Principle requires for each Euro of additional administrative burden introduced by a new 
regulation for citizens, businesses or administrations, the removal of an equivalent amount in order to limit the 
costs of bureaucracy over time. 

114 

 
 
 
acting as investors into third-party transactions in the market. To isolate market investors only, 
we assume that about half of the bank investors invest only inhouse, which corrects the range 
of  bank  investors  to  about  55-90  institutions.  In  addition,  to  get  an  indication  of  non-bank 
investors, we refer to published data of the ESRB that estimates the holding share of banks in 
securitisations to 84%98 , which implies an estimate of about 25 investors including an estimate 
of 11 investment firms99. in total about 80-115 investors, this amounts to about EUR 10 to 15 
million.  

7.  Recurring costs due diligence 

While due diligence requirements apply mainly to buy-side parties/investors, the consultation 
process has shown that sell-side parties (originators, original lenders, sponsors) take also a role 
in this process by supporting investors, e.g. by performing due diligence sessions where they 
guide investors through all relevant questions that need to be answered over the course of their 
due  diligence  process.  Furthermore,  for  certain  transactions  due  diligence  activities  are 
performed by asset managers acting as intermediaries as well as end-investors. The table below 
provides an  estimation  of the costs that  apply  at  all levels  of the due-diligence process  and 
yields in total ab EUR 660 million p.a. 

Segment 

Sell-side 
due 
diligence 
support 
costs(6) 

Buy-side due diligence 
cost(5) 

Total due 
diligence 

Investment 
firm 
(intermediary) 

End 
investor  

In basis points of underlying asset pool 

Market 
share in 
terms of 
underlying 
assets 
outstanding 
Billion EUR  Million EUR 

Estimated 
market due 
diligence 
cost 

Synthetic 

Tradit-
ional 

Observations(1) 
Max 
Min 

Observations 
Min  
Max 

0.3(2) 
N=6 
1.2 
0.03  
2.0(7) 

N=3 
1.5 
2.5 

n/a 

12%(4)x2.5=0.3 

N=16 
0 
24 

0.3(3) 
N=6 
0.6 
0.02 
2.5(8) 

0.6 

295 

18 

4.8 

1 340 

643 

Total 

1 635 

661 
660 
(rounded) 

98 The latest ESRB report on Monitoring systemic risks in the EU securitisation market, July 2022, published 
every  3  years,  estimates  in  chart:  2a  that  84%  of  euro  area  securitsation  holdings  are  held  by  deposit-taking 
institutions (banks), and the reminder of 16% by Central state and government, Insurance corporations, Pension 
funds,  Investment  funds  non-financial  and  other  financial  corporations  and  non-profit  institutions  serving 
households.https://www.esrb.europa.eu/pub/pdf/reports/esrb.report_securisation.20220701~27958382b5.en.pdf?
94c1fd978e974454f65a21c399f44ff8  
99 This is based on the understanding that the bank-holdings include holdings of retained tranches, i.e. a basis of 
127  banks  that  corresponds  to  84%  of  securitisation  holdings  and  the  assumption  that  the  holding  shares  are 
proportional to the number of investors. 

115 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) The observations for synthetic securitisations rely on the submission of the International 
Association of Credit Portfolio Managers (IACPM) that has collected a sample of observations 
among their members. 
(2) The due diligence support of originators in the synthetic SRT segment has been translated 
in basis points (i.e. 1/100 of a percentage point) by dividing absolute values of costs in EUR 
p.a. per transaction by the estimated average pool size of a synthetic transaction.  
(3)  For  the  investor  side,  for  synthetic  SRT  transactions  the  costs  for  1-3  investors  per 
transaction  are  assumed100  and  the  mid-range  (2  investors)  is  shown.  To  translate  the  cost 
values in EUR per transaction p.a. in basis points (i.e. 1/100 of a percentage point), the pool 
size has been used (not the secured amount/investment ticket size) in order to be able to scale 
up the cost to the market size that is expressed in outstanding underlying asset volumes. 
(4) The share of 12% has been taken as assumption for the share of market involvement of 
asset managers in the investment process of non-synthetic transactions and is based on a ESRB 
publication on asset manager involvement in securitsation transactions (with a correction to 
exclude banks holding their own retained shares only)101.  
(5)  The  classification  as  investor  vs  sell  side  of  the  replies  received  in  the  stakeholder 
consultation is as follows: If in the reply to question 0.16 “involvement role” was one of the 
following  (no  buy-side  role  and:  “investor  in  synthetic  securitisations”  or  “Investor  in 
synthetic securitisations”) or in a follow-up with the stakeholder it was clarified an investor 
role or if both  roles were selected and  the principal  activity (question 0.13) is  “Investment 
Management”. 
(6) The classification of the replies received in the stakeholder consultation as sell-side has 
been  performed  if  exclusively  sell-side  roles  were  selected,  i.e.  “originator  of  synthetic 
securitisations”,  “originator  of  traditional  securitisations”,  “sponsor”  or  “arranger”  or  it 
was explicitly stated in a follow-up interaction. 
(7) Three observations were obtained in the traditional sell-side segment with a full range of 
1.5-2.5 bps and the mid-value of 2.0 bps has been selected as representative value.. 
(8)  Observations  from  stakeholder  consultation  and  related  follow-up  interactions.  If  reply 
showed absolute annual cost value per transaction, , a ticket size of EUR 10 million has been 
assumed  –  reflecting  the  median  size  of  a  median  market  transaction  of  approx.  EUR  400 
million and typical investor numbers per public transaction of 30-50 investors, which implies 
an average investment ticket size of EUR 10 million) – to translate into relative costs expressed 
in basis points. If explicitly stated in the reply, the ticket size of the respondent has been taken 
into account to obtain the relative costs.  

8.  Benefits  of  moving  to  a  more  principles  based  and  proportionate  due 

diligence approach 

Stakeholders responding to the public consultation almost unanimously welcomed the proposal 
of  Option  1.1,  i.e.  a  more  principles  based,  less  complex  and  proportionate  due  diligence 

100 See True Sale International in cooperation with the German Banking Association, Final Report on the 
securitisation task force, Annex 4, TSI_BVB_Final_report_of_the_securitisation_task_force_202409_en.pdf 
101 ESRB European Systemic Risk Board (July 2022): Monitoring systemic risks in the EU securitsation 
market, Chart 2a  
https://www.esrb.europa.eu/pub/pdf/reports/esrb.report_securisation.20220701~27958382b5.en.pdf?94c1fd978e
974454f65a21c399f44ff8 

116 

 
 
 
approach  (95%  -  i.e.  81/86  respondents  to  that  question.  Only  2  preferred  to  make  the 
requirements  even  more  detailed  and  prescriptive,  and  3  would  like  to  keep  the  regulation 
unchanged; an additional 45 respondents had no opinion).  

One  of  the  major  benefits  that  respondents  see  in  a  more  principles-based  approach  is  the 
possibility to focus on risk areas of the transaction. For some transactions respondents would 
prefer lower due diligence requirements as the risks involved would not justify certain efforts.  

Transactions  with  repeat  issuers  were  frequently  mentioned.  AFME  estimates  the  share  of 
repeat  issuance  to  about  67%  of  the  public  market.102  Apart  from  being  dissatisfied  with 
performing  controls  that  are  in  other  jurisdictions  performed  by  public  authorities,  e.g. 
verifying  EU  issuers’  compliance  with  risk  retention  requirements,  the  repetition  of  such 
checks  for  several  transactions  with  the  same  issuer  in  a  short  period  of  time  is  seen  as 
superfluous and unduly costly.  

Secondary  market  transactions  were  another  frequent  example  in  this  context,  where  due 
diligence requirements could have a prohibitive effect as the time window available to give an 
offer  (e.g.  1-2  days)  was  insufficient  to  perform  all  due  diligence  tasks.  These  can  take 
(according to the consultation replies) up to 10 days. As a result, non-EU investors are reported 
to benefit by getting easier access to the securitisation investments in the secondary market, 
while  certain  EU  investors  are  excluded.  Furthermore,  given  that  the  underlying  exposures 
amortise over time, the remaining time to maturity is much shorter and the relation between 
collateral and exposure much more favourable than for the initial primary transaction, hence 
the  remaining  risk  is  significantly  reduced  while  the  due  diligence  requirements  remain 
unchanged. To our best knowledge, there was no publicly available market data on the share 
of  primary  vs.  secondary  transactions,  but  one  experienced  asset  manager  estimated  the 
relationship  between  secondary  to  primary  market  transactions  as  about  50%:50%  in  the 
traditional  securitisation  market.  In  the  synthetic  market  investments  are  usually  held  to 
maturity or until it can be called, i.e. they are not relevant for secondary market transactions.  

Low-risk  transactions  in  the  AAA  or  investment  grade  segment  are  another  frequently 
mentioned example for transactions that require in the eyes of most investors a lower degree 
of due diligence activities. Investors would therefore prefer setting certain priority areas for 
their due diligence activities in line with the risk characteristics of the underlying collateral and 
the structural features of the transaction. 

While  banking  and  insurance  investors  can  offset  the  costs  of  additional  STS  compliance 
checks through preferential capital treatment, investment firms have no additional benefit and 
regard the label therefore rather as a “nice-to-have”. Transactions designated as STS are subject 
to additional checks which considered as particularly burdensome.  

Hence, an AAA transaction with a repeat issuer in the secondary market could be considered 
the heaviest in terms of regulatory burden and the perceived excess burden of such transactions 

102 
https://www.afme.eu/Portals/0/DispatchFeaturedImages/Article%205%20presentation%20for%20Commission
%2015.1.25.pdf 

117 

 
 
 
can be up to 75%. Based on the replies received in the stakeholder consultation, we estimate 
the savings potential as follows:   

Figure 12: Estimated savings recurring annual due diligence costs 

Sell-side 
due 
diligence 
support 
costs(6) 

Buy-side due diligence 
cost(5) 

Asset 
manager or 
other 
intermediary 

End 
investor 

Segment 

Synthetic(1) 

Traditional(2) 

Observations 
0-25% (avg. 
13%) 
26-50% 
(avg. 38%) 

Observations 
Min  
Max 

17%(3) 
N=7 
83% 

17%  

38%(2) 
N=2 
25% 
50% 

Total EUR million 

103 

Basis points 

0.63 

percent 

n/a 

16%(2) 
N=6 
86% 

14% 

50%(4) 
N=11 
0% 
50% 

188 

 1.15 

Total 
due 
diligence 
savings 
relative 
to asset 
pool 
basis 
points 
0.1(5) 

Market 
share in 
terms of 
underlying 
assets 
outstanding 

Estimated 
market 
due 
diligence 
cost 

Billion 
EUR 
295 

Million 
EUR 
3 

2.2(6) 

1 340 

289 

1 635 

290 
(rounded) 
1.8 

(1) In line with the observations of annual recurring due diligence costs, the submission of the 
association  IACPM  that  was  the  only  submission  explicitly  referring  to  synthetic 
securitisations  and  with  a  sample  collected  among  their  members  has  been  taken  as 
representative for the synthetic market segment. 
(2)  Observations  for  the  traditional  market  segment  have  been  taken  from  the  stakeholder 
consultation.  
(3) Weighted average savings potential, which results on the sell side from 83% of respondents 
stating a savings potential of 0%-25% (avg. 13%) and 17% of respondents estimating savings 
of 25%-50% (avg. 38%).. 
(4)  Median savings potential 
(5) 0.3 basis points * 17% + 0.3 basis points * 16% = 0.1 basis points. While this seems small, 
it  has  to  be  taken  into  account  that  in  the  synthetic  market  segment  only  about  8%  of  the 
underlying asset value are securitised (or invested).103 In relation to the invested tranche the 
savings potential is about 1.3 basis points. Initial values from the section above on recurring 
due diligence costs. 
(6)  2.0  basis  points  *36%+2.8  basis  points  *50%.  Initial  values  from  the  section  above  on 
recurring due diligence costs. 

103 Source: IACPM Balance Sheet Synthetic Securitisation Survey 2016-2023. 

118 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
We obtain a savings potential of about EUR 290 million for the EU securitisation market, due 
to the duplicative or redundant nature of the provisions that are proposed to be removed in the 
preferred combination of options. These savings come without expected negative impacts on 
the  risks  of  individual  transactions  as  well  as  the  securitisation  market  as  whole  and  EU 
macroeconomic financial stability.  

Another frequently mentioned point linked to  the due diligence  requirements  is  a barrier  to 
entry resulting from the magnitude of the due diligence duties. The barrier to entry is cited in 
over  40  replies  to  the  stakeholder  consultation.  AFME  estimates  that  setting-up  a  new  EU 
securitisation investment business requires about 9 months of start-up with 2-3 months alone 
to understand and implement the due diligence rules. They show for the example in the Figure 
13  below  that  an  AAA  STS  asset  management  business  requires  about  40  months  to  reach 
profitability. The reason is that for low-yield products, the management fee is correspondingly 
low, therefore it takes long time as well as a very large pool of assets (estimated to about EUR 
1,5  billion)  to  break  even.  This  effectively  excludes  certain  market  players.  This  applies  in 
particular  to  low  yield  high  grade  AAA  products  that  are  regarded  as  cash-equivalents  by 
investors and that are quickly divested once cash is needed, which makes it more difficult to 
keep  a  sufficient  investor  base  for  such  products.  AFME  estimates  the  universe  of  asset 
managers active in the public securitisation market to be below 20 players. For a comparable 
covered bond business, the number of players is significantly higher: AFME found alone 160 
investors in a single covered bond product. As a result, simpler and more proportionate due 
diligence requirements could lead to an investor base 5 to 10 times larger than today’s. More 
investors could significantly improve the liquidity in this market. 

Figure 13:   Estimated time to break-even for new market entrant building a business 
for a AAA STS securitisation 

9.  Nature of duties transparency requirements (Article 7) 

The  Transparency  Requirements  of  Article  7  SECR  oblige  issuers  of  securitisations: 
originators,  sponsors  or  SSPEs,  to  provide  investors  with  information  in  a  structured, 
comparable and reliable way. In contrast to other comparable instruments that require reporting 

119 

 
 
 
 
on an aggregate level, securitisations require reporting on a loan-by-loan basis, including for 
granular  exposures,  such  as  credit  card  receivables.  The  main  reporting  obligations  include 
among others:  

•  Transaction documentation to be made available before pricing: The originator and 
sponsor must make available the contractual documents (e.g. asset sale agreement, 
derivatives and guarantee agreements, collateralisation arrangement) and for public 
transactions, the prospectus, for STS transactions, the STS notification as well as 
additional information on the static and dynamic historical default and loss 
performance with a sample of the underlying exposures subject to verification by an 
external third party (“third party verification” or “TPV”) as well as in case of 
residential loans, auto loans or leases additional information on the environmental 
performance of the assets. 

•  Ongoing disclosure on underlying exposures: The originator and sponsor must make 
available on a quarterly basis (for ABCP on a monthly basis but only in aggregate 
form) information on the underlying exposures of a securitisation including the credit 
quality, performance, data on the cash flows generated and risk retained as well as 
event-triggered information (e.g. use of inside information or breach of obligations, 
change of structural features or risk characteristics). For STS transactions there are 
additional requirements to make available data on static and dynamic historical 
default and loss performance, such as delinquency and default data, for substantially 
similar exposures to those being securitised. Public securitisations are obliged to 
report to a Securitisation Repository and private securitisations via a private website 
following ESMA templates, which require a high number of datapoints compared to 
other financial instruments. 

10. Drivers  of  transparency  costs  and  separation  of  incremental  costs  from 

business-as-usual costs:  

As the main cost drivers for the transparency regime, stakeholders mentioned: 

•  The high level of detail required by ESMA templates and the lack of consultation of 
market participants in the templates’ creation, meaning that the templates often did 
not match investor needs and relevant information has to be obtained separately. 
•  The requirement of granular reporting, which can be very challenging for small 

exposures like credit-card, trade or leasing receivables. For comparable instruments 
like covered bonds, aggregate reporting is sufficient. 

•  The additional burden linked to STS reporting (such as default history) and 

verification 

Hence,  the  incremental  costs  of  Article  7  reporting  result  mainly  from  the  granularity  and 
unsuitability of templates, level of detail as well as from STS-specific reporting. 

120 

 
 
11. Classification of transparency costs from a better regulation perspective 

As the transparency requirements of Article 7 clearly link to disclosure and reporting they are 
classified as administrative costs from a better regulation perspective and are to be reported for 
One-In-One-Out purposes104. 

12. One-off costs transparency 

At  the  time  of  the  introduction  of  the  Securitisation  Framework,  issuers  (originators  and 
sponsors)  of  securitisations  incurred  one-off  implementation  costs  to  adapt  to  the  new 
disclosure  infrastructure.  Such  implementation  activities  included  (but  were  not  limited  to) 
familiarisation with the new transparency requirements (Level 1 regulation, Level 2 RTS, ITS 
and  FAQ),  sometimes  involving  legal  advice,  and  IT  implementation.  Depending  on  the 
underlying exposures and issuers, the latter could require the opening of several relevant IT 
systems, e.g. for mortgages, corporate loans etc., adding to those systems data fields that were 
not previously covered. Furthermore, a reporting interface would need to be set up to provide 
disclosures  in  the  required  format.  For  small  issuers,  without  such  an  extensive  IT 
infrastructure, such disclosures might have been set-up in simpler ways, e.g. in Excel templates. 
In  this  context  the  number  of  asset  classes  covered  (e.g.  RMBS  or  corporate  loans)  is  an 
important cost driver as each asset class requires individual reporting templates. 

Consultation respondents reported one-off costs in the range of EUR 27 000 to EUR 4 000 000, 
with an interquartile range of EUR 400 000 to EUR 1 300 000 and a median of EUR 900 000. 
Based  on  data  provided  by  the  European  Data  Warehouse  we  estimate  approximately  260 
public market issuers (originators and sponsors)105 and based on EBA COREP data about 150 
private market issuers (originators and sponsors) that had to incur costs during the period 2019 
to 2025 to set up a transparency regime. Of these 410 originators, we estimate about 330 to be 
still active.106  

Taking the median value for implementation costs, i.e. EUR 900 000, we estimate the one-off 
implementation costs for the EU securitisation market to be approximately EUR 370 million. 

104 The One-In-One-Out-Principle requires for each Euro of additional administrative burden introduced by a new 
regulation for citizens, businesses or administrations, the removal of an equivalent amount in order to limit the 
costs of bureaucracy over time. 
105  European Data Warehouse is one of the two securities repositories for securitisations in Europe that covers 
approximately 90% of European public securitisation transactions. 
106 These estimations are based on the following considerations: The European DataWarehouse, covering about 
90% of the European public securitsation market, provides data on the active number of issuers of about 170 and 
the  number  of historically  active  issuers  since  2023  of 290.  Assuming,  a  constant  absolute  number  of  issuers 
leaving the market over time (i.e. 10 per year), an estimated 60 issuers were still active in the time period 2019 
(inception of SECR to today), we obtain in total 230 issuers, scaled up from 90% to 100%, we obtain 260 issuers. 
For  the  private  market  EBA estimates  about  100-140  issuers  (mid-point 120),  including  a  “historical  margin” 
covering issuers that left the market since SECR inception in 2019 comparable to the private market, we obtain 
about 150 issuers. In total this gives about 410 issuers. 

121 

 
 
 
These  costs  apply  to  businesses.  Citizens  were  not  directly  affected  by  Securitisation 
Framework and hence incur no costs. 

13. Recurring costs transparency 

On the recurring transparency costs, we have collected the following information:  

Figure 14: Estimated market transparency cost 

Type of 
transaction 

representativ
e value (by 
business 
association), 
rounded* 

obser-
vations 

thereof 
from 
busines
s 
associat
ions 

min 

max 

EUR 

# 

# 

EUR 

Estimated 
no. 
outstanding 
transaction
s 
(rounded)*
* 
# 

Estimated 
market cost 
(rounded) 

EUR 

820 

510 

100 

6 000 

N = 9 

N = 4 

N = 5 

N = 4 

N = 1 

N = 2 

50 000 

15 000 

74 000 

61 000 

50 000 

60 000 

100 000 

100 000 

110 
440 

6 000 000 

41 000 000 

51 000 000 

78 000 
10 000 

80 000 
20 000 

100 000 
35 000 

Traditional, 
non-STS  
Traditional, 
STS 
Synthetic,  non-
STS  
Synthetic, STS  
CLO  
TOTAL 
Rounded  
* Due to a very small number of observations for each transaction type, information reported 
from business associations with a broad base of contributing institutions has been taken as 
representative  value.  For  most  segments  the  values  reported  by  business  associations  are 
within the range of values reported by individual contributors. 
**The estimated transaction number is derived from the market volumes by segment as shown 
in Annex 3 and obtained from the AFME market data report Q4 2023 and the EBA. The market 
volume has been divided by average transaction sizes for the relevant market segment, where 
the average transaction size for public non-ABCP Transactions has been obtained from the 
European Data Warehouse; the average transaction size for private ABCP transactions from 
the  association  True  Sale  International  in  collaboration  with  the  German  Banking 
Association107;  and it has further been assumed that private traditional transactions have a 
comparable  average  size  as  public  traditional  and  private  synthetic  SRT  transactions.  The 
average  transaction  size  of  CLO  transactions  for  2024  has  been  obtained  from  the  The 
Alternative Credit Investor Magazine (March 10 2025). 

8 800 000 
8 800 000 
115 600 000 
120 000 000 

Consultation  respondents  considered  transparency  costs  for  EU  securitisations  to  be 
significantly  higher  by  stakeholders  than  the  costs  for  comparable  instruments  like  covered 
bonds, credit default swaps, credit linked notes, or non-EU securitisations (29 replies). Only 2 
respondents  assessed  the  costs  as  similar  or  moderately  lower.  The  main  reason  for  the 

107 TSI_GermanBankingAssociation_Addendum_to_StakeholderConsultation_CostEstimation 

122 

 
 
  
 
 
additional costs is the required granularity (loan-level data) and the high number of data fields 
required by the templates. 

There  might  also  be  opportunity  costs  in  the  sense  that  the  reporting  requirements  prevent 
certain assets from being securitised. Some respondents mentioned that they were not able to 
collect  or  report  certain  datapoints  for  legacy  transactions  and  therefore  were  not  able  to 
securitise them. However, such opportunity costs were not quantifiable by respondents. 

14. Impacts of the preferred policy option 

The  preferred  policy  Option  1.1  (“Streamline  the  current  disclosure  templates  for  public 
securitisations.  Introduce  a  simplified  template  for  private  securitisations.  Require  private 
securitisations to report to  securitisation repositories”) was the preferred choice of 76% of 
respondents  to  this  question  in  the  targeted  consultation  (54//71).  13  respondents  preferred 
option  1.2  (“Remove  the  distinction  between  public  and  private  securitisations.  Introduce 
principles‑based disclosure for investors without a prescribed template. Replace the current 
disclosure templates with a simplified prescribed template that fits the needs of competent”). 
4 respondents favoured “no change”, while 63 additional respondents had no opinion on this 
question.  

Option 1.1 was preferred by many respondents under the condition that it would mean retaining 
the  current  templates  while  introducing  flexibility  by  using  the  “no-data”  option  more 
extensively. Removing the requirement of loan-level reporting for granular transactions, and 
instead  allowing  for  aggregate  reporting  was  also  favoured.  Some  replies  called  for  greater 
flexibility in the required format, e.g. allowing disclosure in Excel format (rather than .xml). 
To meet the information needs of investors allowing the inclusion of additional data would also 
be welcomed. Some respondents  pointed also  to  the benefits  of  alignment and data sharing 
between authorities (ECB, NCAs) for the reporting entities. 

Most respondents, however, refrained from estimating the quantitative effects on the costs of 
the preferred option as they would depend on concrete details of the proposed change. Of the 
few replies received, most respondents envisaged “minor” or “moderate” costs, mainly as the 
bulk of the costs has been already incurred in the implementation of the existing templates. A 
change as in Option 1.1 of keeping the templates while increasing the flexibility could lead to 
moderate one-off IT adjustment costs and a reduction of on-going reporting costs of up to 15%-
25% (with an average value of 22.5%). Applied to the currently estimated EUR 120 million 
annually, this could correspond to a cost saving of EUR 26 million annually. 

The  securitisation  repositories  estimate  the  adjustment  costs  for  the  described  adaptation  to 
about EUR 50 000-70 000. If we assume that the approx. 330 active issuers have comparable 
cost and adding a margin of conservatism, we estimate about EUR 100 000 per issuer for an 
IT  adaptation  (there  will  be  smaller  players  operating  without  IT  infrastructure  and  larger 
players  with  more  complex  IT  systems  and  changes  and  assuming  that  as  many  existing 
datapoints will be utilised as possible), we obtain one-off implementation costs of about EUR 
33 million. 

123 

 
 
Furthermore, the potential requirement of private transactions to report the data (that is already 
collected today under Article 7) to securitisation repositories, would result in at least approx. 
EUR  10 000  p.a.,  which  translates  for  an  estimated  market  transactions  volume  of  660 
transactions to about EUR 6.6 million or EUR 7 million (rounded). 

Type of 
transaction 

representative 
value (by 
business 
association), 
rounded* 

Estimated 
no. 
outstanding 
transactions 
(rounded)** 

non-

Traditional, 
STS  
Traditional, STS 
Synthetic, non-STS  
Synthetic, STS  
CLO  
TOTAL 

EUR 

50 000 

100 000 
60 000 
80 000 
20 000 

# 

820 

510 
100 
110 
440 

Estimated 
market cost 
(rounded) 

EUR 

41 000 000 

51 000 000 
6 000 000 
8 800 000 
8 800 000 
115 600 000 

Saving expressed in basis points of market volume (EUR 1 635 billon) 

Estimated 
cost savings 

Saving 

23% 
(N=2:  
15-25%;  
avg. 22.5%) 

EUR 

9 225 000 

11 475 000 
1 350 000 
1 980 000 
1 980 000 
26 010 000 
0.2 

15. Summary 

Figure 15: Summary due diligence and transparency costs and impacts of preferred 
combination of options 

One-off costs 
Impact preferred option 

Recurring annual costs 
Impact  preferred  option  on 
recurring costs 

Due diligence  
EUR 10-15 million  
No 
impact  estimated  (as 
costs  are  sunk);  for  new 
market  entrants  costs  could 
go  down  by  15%-50% 
the  market 
depending  on 
segment 
transaction 
and 
types covered. 
EUR 660 million p.a. 
Saving  of  EUR  290  million 
p.a. 

Transparency  
EUR 370 million  
Implementation  costs  new 
templates  (assuming  re-use 
of  existing  data  fields  to  a 
maximum extent):  

EUR 33 million 

EUR 120 million p.a. 
Saving  of  EUR  26  million 
annually 
simplified 
for 
reporting 

Additional annual costs of at 
least  EUR  7  million  for  the 
private 
of 
reporting 
transactions  to  securitisation 
repositories.  

Figure 15 above summarises the cost estimations of the operational costs.  It is important to 
note  that  no  clear  distinction  between  Art.  5  and  Art.  7  related  costs  can  be  drawn  as  the 
respondents allocated the economic burden of due diligence duties and costs both to buy- and 

124 

 
 
  
  
  
  
  
 
 
 
sell-side  parties,  while  the  regulation  formally  allocates  Art.  5  related  due  diligence  duties 
exclusively to investors and Art. 7 related transparency duties to originators and sponsors. In 
relative terms, the total recurring operational costs are estimated to about EUR 780 million, 
which is about 4.8 basis points of the market volume of outstanding assets. The total savings 
potential that is estimated to EUR 310 million (rounded) corresponds to about 2.0 basis points, 
which  can  be  decomposed 
sell-side  parties 
(originators/sponsors/original  lenders)  and  1.2  for  buy-side  parties  (investors).  For  sell-side 
parties, the results could be corroborated with the results of a very detailed and comprehensive 
study performed by the association True Sale International in collaboration with the German 
Banking association that estimates the annualised savings potential of operational costs for sell-
side parties for a large sample of 310 transactions representing a market volume of about EUR 
300 billion, to about 0.9 basis points annually.108 Apart from those pure monetary benefits of 
regulatory simplification, it is worth noting that stakeholders put strong emphasis also on other 
aspects of the due diligence and transparency framework such as the barriers-to-entry and time-
to-market considerations. 

to  about  0.8  basis  points 

for 

4 - Relevant sustainable development goals109 

Figure 16:   Overview of relevant SDG – Preferred Option 

IV. Overview of relevant Sustainable Development Goals – Preferred Option(s) 
Relevant SDG 

Comments 

Expected  progress 
towards the Goal 

SDG  8  Economic 
Growth 

Potential 
improvement 
increased stability. 

and 

Deep and liquid capital markets next to a well-
developed  banking  system  can  contribute  to 
macroeconomic  stability  as  a  more  balanced 
distribution of risks in the financial sector leads 
to a diversification of financing in bank credit 
and  capital  markets.  As  their  cycles  are  not 
perfectly  correlated,  capital  market  financing 
can  substitute  at  least  partially  for  bank 

108 
https://www.true-sale-international.de/fileadmin/tsi-
gmbh/tsi_downloads/aktuelles/TSI_BdB_Addendum_Cost_Estimation.pdf. This is reflected in an annual savings 
potential of EUR 26.7 million for a transaction volume of EUR 310 000 million which corresponds to 0.9 basis 
points or 0.009 percentage points. 
109 1. No Poverty, 2. Zero Hunger, 3. Good Health and Well-being, 4. Quality Education, 5. Gender Equality, 6. 
Clean Water and Sanitation, 7. Affordable and Clean Energy, 8. Decent Work and Economic Growth, 9. Industry, 
Innovation and Infrastructure, 10. Reduced Inequalities, 11. Sustainable Cities and Communities, 12. Responsible 
Consumption and Production, 13. Climate Action, 14. Life Below Water, 15. Life on Land, 16. Peace, Justice and 
Strong Institutions, 17. Partnerships for the Goals, 

125 

 
 
 
 
SDG  13  Climate 
Action,  14.  Life 
below  Water,  15 
Life on Land 

Potential 
of 
improvement 
financing  the  green 
transition 

financing and vice versa in case of shortages, 
this can have a stabilising effect.110 

Securitisation may play a significant role in the 
green  transition  as  a  financing  instrument  for 
green businesses. 

ANNEX IV: ANALYTICAL METHODS  

To assess the impacts of the options, this report builds on the following sources of data: 

-  Consultation with stakeholders, the results of which are described in the synopsis report 

in Annex 2. 

-  Market and supervisory data provided during the consultation period 

The section with prudential options in banking and insurance builds primarily on the data and 
analysis provided by the ESAs, in particular the 2022 ESA’s Joint Committee advice on the 
review of the securitisation prudential framework, and the 2020 EBA report on the significant 
risk transfer in securitisation, which rely on data collected by the EBA directly from supervisors 
and credit institutions. Additional bank and insurance-specific data shared by EBA and EIOPA 
and extracted from banks and insurers’ reporting templates were also used. The analysis also 
draws on the insights provided by stakeholders in their responses to the Commission’s targeted 
consultation and various analytical papers on securitisation. 

The 2022 ESA’s Joint Committee report has been developed in response to the Commission’s 
call for advice (CfA) addressed to the ESAs in October 2021. The CfA has sought the Joint 
Committee advice on the performance of the rules on capital and liquidity requirements relative 
to  the framework’s original  objective of contributing  to  the revival of the EU securitisation 
market on a prudent basis. The report consists of two parts: the assessment of the securitisation 
market performance and appropriateness of the rules for banks on capital (laid down in Part 
Three Title II Chapter 5 of the CRR) and liquidity (laid down in the LCR delegated regulation), 
and the review of the securitisation capital framework applicable to (re)insurers (laid down in 
Solvency  II).  The  report  relies  on  data  collected  by  EBA  directly  from  banks,  through  the 
COREP reporting (in particular templates on securitisation are C14.00 and C14.01 where data 
are  collected  on  a  semi-annual  frequency.)  COREP  provides  very  granular  information  of 
securitisations originated by the banking sector and other securitisations in which banks invest 
in.  The  reported  transactions  include  public  and private  traditional  securitisations,  synthetic 

110 Kroszner, Laeven and Klingebiel (2007) present in their paper “Banking crises, financial dependence, and 
growth” (Journal of Financial Economics Vol. 84, 1) empirical evidence based on a study with 38 countries that 
shows that economic sectors that are dependent on the banking system see a substantially greater fall in output as 
response to a banking crisis.  

126 

 
 
 
 
securitisations and ABCP transactions, no matter the country to which the underlying assets 
belong to. Another input to the report was feedback given by the industry to a consultation 
launched by the Commission on the functioning of the EU securitisation framework in summer 
2021. The feedback given by the industry to this consultation has been analysed in depth by 
the EBA and has informed the response to this CfA. Moreover, an industry roundtable was 
held at the EBA premises on 30 May 2022. 

The  2020  EBA  report  on  the  significant  risk  transfer  in  securitisation  has  been  prepared  in 
accordance with the mandate under Articles 244(6) and 245(6) of the CRR. Taking into account 
the findings of the EBA Discussion Paper on the Significant Risk Transfer in Securitisation 
published in 2017, as well as further analysis based on the review of the SRT market practices 
and  the  supervisory  approaches  to  SRT  assessments,  the  report  included  a  set  of  detailed 
recommendations  to  the  European  Commission  on  the  harmonisation  of  significant  risk 
transfer (SRT) assessment practices and processes. 

Estimates of operational costs  

For the estimate of operational costs and benefits for due diligence and transparency that are 
classified as administrative costs in the Better Regulation terminology, the standard cost model 
(see Tool #58 EU Standard Cost Model of the Better Regulation Toolbox July 2023) has been 
used.111  

The Standard Cost Model estimates administrative costs in the following format:  

Number 
of entities 
affected 

x 

Frequency  of 
administrative 
action 

Tariff  per 
hour 

x 

in 

Time 
hours 

x 

+ 

Out-of 
pocket 
expenses 

This simple model does not work however for the complexity of the securitisation market for 
the following reasons:  

1.  The  recurring  operational  costs  that  apply  for  securitisation  transactions  are  not  per 

entity, but event-triggered, i.e. they apply whenever a transaction is performed 

2.  The number of transactions is not officially tracked or part of a statistic for the whole 
European securitisation market, instead volumes of outstanding underlying assets are 
reported.  

3.  Furthermore,  the  securitisation  market  can  be  decomposed  in  many  types  of 
transactions  or  dimensions  (see  Figure  17  below).  Ideally,  for  each  dimension  that 
affects the costs significantly, there should be a sample of cost observations and data 
on the size of the population. However, not for each of the dimensions mentioned by 
stakeholders as cost-drivers (see Figure 18) market data was available. For example, 
for  this  analysis  no  official  statistics  were  available  that  decompose  the  market  into 

111  https://commission.europa.eu/law/law-making-process/planning-and-proposing-law/better-regulation/better-
regulation-guidelines-and-toolbox_en 

127 

 
 
 
primary and secondary market investment, although this dimension has been mentioned 
as key cost driver of the operational costs linked to recurring due diligence activities. 

Figure 17: Dimensions of securitisation transactions 

Figure 18: Key cost drivers of regulatory operational costs of securitisations 

One-off 
costs 

Recurring 
costs 

Due diligence costs 
•  Due  diligence  standards  that  were  in 
place prior to the introduction of SECR; 
higher  initial  standards  required  lower 
adaptation efforts 

•  STS-status 
• 

Interaction  of  investor  with  new  vs. 
repeat issuer 
•  Risk characteristics 

128 

Transparency costs 
•  Number of asset classes covered (each asset 
reporting 
has 

specific 

needs 

class 
templates) 

•  Granularity of underlying assets 
•  Need  for  collection  of  data  that  is  not 
available in IT-Systems, e.g. historical data 

CLOpublicsemi-publicprivateshort-termlong-termSyntheticABCPSTSNon-STSSTSNon-STSTraditionalSTSNon-STSSTSNon-STSABCPTraditionalSTSNon-STSTransactions achievingsignificantrisktransfer(SRT)PlacementPlacedRetainedTime ofinvestmentAt issuanceIn thesecondarymarketUnderlying assetResidential mortgagesCorporate loansLoanstoSMEAuto loansNon-performingloansConsumer loansCommercialmortgagesCreditcardsLeasesTrade receivablesOtherInvestor counterpartyNew issuerRepeat (known) issuerRisk characteristicsAAA ratedInvestment grade(ex. AAA)Sub-investment gradeFurther dimensionsofsecuritisations 
 
 
 
 
•  Primary or secondary market investment 

To account for the specifics of the securitisation market, the following estimation approach has 
been taken to consider on the one hand to a maximum extent possible the cost drivers and on 
the other hand the structure of available market  data to  scale-up the sample obtained in  the 
stakeholder consultation:  

(1) One-off costs due diligence:  

Estimated number of 
investors in the market 

x 

Estimated 
cost 
investor 

per 

•  Estimate  of  number  of  investors:  The  estimate  has  been  obtained  based  on  data 
collected  by  the  EBA  in  its  COREP  statistics  on  the  number  of  bank  with  the  role: 
investor in securitisations, data from AFME on the estimated number of asset managers 
in the market112 and numbers of the ECB on the relative shares of different investor 
types  including  asset  managers,  funds,  insurance  companies,  pension  funds, 
supranationals and public development funds for the SRT market113 and assuming that 
the  shares  are  similar  for  the  SRT  and  non-SRT  market  segments.  As  there  is  no 
statistical tracking of securitisation investors, it should be noted that this is an estimation 
on a best effort basis. 

•  Estimated cost per investor: As only very few stakeholder replies were available, the 
one-off diligence costs were based on an estimate provided by AFME as supporting 
material to the stakeholder consultation.  

(2) One-off costs transparency 

Estimated number of 
issuers in the market 

x 

Estimated 
cost per issuer 

•  Estimated  number  of  issuers  in  the  market:  The  estimated  number  of  issuers  in  the 
market is based on the number of active issuers in the public securitisation market that 
was provided by the European DataWarehouse and COREP statistics of the EBA on 
banks with the role Original lender, Originator or Sponsor of a securitisations. 

•  Estimated cost per issuer: The one-off costs for transparency were estimated based on 
the replies received in the stakeholder consultation they are based on the median value 

5 

of 

Article 

AFME, 

112 
https://www.afme.eu/Portals/0/DispatchFeaturedImages/Article%205%20presentation%20for%20Commission
%2015.1.25.pdf 
113 Fernando Gonzalez and Cristina Morar Triandafil, European Systemic Risk Board, Occasional Paper Series, 
No 23, 2023, The European significant risk transfer securitisation market. 

securitisation 

regulation : 

Analysis, 

Impact 

p.3. 

EU 

129 

 
 
 
 
 
 
 
that  was  obtained  from  12  individual  contributions  and  8  contributions  of  business 
associations, where the median value of the pooled sample (N=20) coincides with the 
median value of the contributions of business associations.  

(3) Recurring costs due diligence 

Costs expressed in 
basis points of the 
deal amount114 

x 

Market size expressed 
in outstanding amount 
of underlying assets 

•  Market size expressed in outstanding amount of underlying assets: The market size has 
been  assessed  based  on  AFME  data  for  the  public  market115  and  on  EBA  COREP 
statistics for the private market. More details on the market data can be found in Annex 
III. 

•  Costs expressed in basis points of the deal amount: The annual recurring costs have 
been estimated based on the replies of the stakeholder consultation and several follow-
up  interviews  with  the  business  associations:  AFME,  IACPM  and  TrueSale 
International/The  German  Banking  Association  that  were  accompanied  by  further 
supporting materials. If the costs were provided as annual recurring cost per transaction 
without the transaction size for which the costs have been incurred, they were translated 
into  basis  points  by  assuming  the  typical  transaction  size  and  investment  period  or 
average life for the relevant market segment.  

(4) Recurring costs Transparency:  

Costs expressed in 
annual recurring 
cost per 
transaction116 

Estimated  number  of 
issued transactions for 
the market 

x 

•  Estimated number of issued transactions for the market: The estimated number of issued 
transactions  has  been  estimated  by  taking  the  market  volume  (see  Annex  III)  and 
dividing it by the average deal size of the relevant market segment, where the deal size 
has been estimated based on the following sources:  
1.  Public  transaction:  European  DataWarehouse:  average  transaction  size  for  data 
covering approx. 90% of the market volume of outstanding public transactions (ex. 
CLO and ABCP) 

114 One basis point is a percentage expressed as one hundredth of one percentage point. 

115 Securitisation Data Report Q3 2024. 

116 One basis point is a percentage expressed as one hundredth of one percentage point. 

130 

 
 
 
 
 
 
 
 
2.  Private transactions: It has been assumed that private traditional transactions have 
a similar transaction size as public traditional transactions on average. The same 
has been assumed for private synthetic transactions.117 

3.  ABCP transactions: Study performed by TrueSale International in cooperation with 
the German Banking Association for the private ABCP market.118Assumption of a 
comparable transaction size in the public ABCP market segment.  

4.  CLO transactions: Data published by the Alternative Credit Investor for 2024.119 

(5) Estimated cost savings linked to the proposed options 

•  Potential  savings  transparency  costs:  Values  obtained  in  the  stakeholder 

consultation 

•  Potential  savings  due  diligence  costs:  Values  obtained  in  the  stakeholder 

consultation 

Nature of costs and separation of business-as-usual costs from regulatory cost: The standard 
cost model requires to collect information that links only to the regulatory share of the cost, i.e. 
the part of the cost that is linked to the regulation and not incurred as part of the business-as-
usual  costs  that  the  stakeholder  would  incur  anyway  even  in  the  absence  of  the  relevant 
regulation.  To give an  example, an asset manager that had very sophisticated due diligence 
procedures in place already before the SECR applied, may have only marginal additional costs 
to adapt to SECR whereas a new investor without any procedures in place may have higher 
purely regulation incurred costs. The costs analysed in this section refer to the regulatory, also 
referred to as incremental share, only. 

Usually,  the  cost  estimations  provided  by  stakeholders  in  the  consultation  procedure  are 
compared to the initial estimations that were made at the time the regulation has been set-up 
and  impact  assessed  for  the  first  time.  However,  in  the  initial  impact  assessment  for  the 
SECR120, such estimations have not been made. Therefore, the estimations of the current cost 

117 The assumption for the private synthetic market has been discussed with IACPM (a business association with 
expertise for the private synthetic SRT market), where it is important to note that a typical public transaction is 
usually  significantly  smaller  than  a  typical  SRT  transaction.  However,  due  to  some  extremely  large  public 
transactions, e.g. in the RMBS segment the average deal size of the public market comes close to the average pool 
size of a deal in the private synthetic SRT market, whereas a typical transaction (e.g. represented by the median) 
is significantly smaller in the public market. 
118 
gmbh/tsi_downloads/aktuelles/TSI_BdB_Addendum_Cost_Estimation.pdf. 
119 
https://alternativecreditinvestor.com/2025/03/10/clo-issuance-volumes-hit-e10-8bn-in-february/  
120 eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52015SC0185 

https://www.true-sale-international.de/fileadmin/tsi-

TSI/Bankenverband 

Alternative 

Magazine 

Investor 

(March 

2025). 

Credit 

study: 

The 

The 

10 

131 

 
 
 
 
constitute  the  starting  point  for  our  baseline  scenario  and  will  not  be  further  assessed  or 
compared to a previous estimation. 

Dynamic nature: There were no forecasts available for the securitisation market going forward, 
therefore a static approach has been taken, i.e. assuming that the volume and structure of the 
securitisation market stays constant. 

Further details on the operational cost estimations can be found in Annex 3 and the references 
therein. 

132 

 
 
 
 
ANNEX V: EVALUATION 

1.  Introduction  

The Securitisation Framework, introduced to revive a safer securitisation market to improve the 
financing  of  the  EU  economy  (see  section  2.1  for  more  details),  entered  into  force  in  2019.  It 
comprises  a  new  Securitisation  Regulation,  alongside  certain  provisions  in  the    Capital 
Requirements Regulation (CRR), the Liquidity Coverage Ratio Delegated Regulation (LCR), and 
the Solvency II (SII) Delegated Regulation.  

1.1. Purpose of the evaluation of the Securitisation Framework 

The evaluation covers the period from the entry into application of the Securitisation Framework 
(1 January 2019) until present. In line with the Better Regulation Toolbox, it examines whether 
the  objectives  of  the  Securitisation  Framework  were  met  during  the  period  of  its  application 
(effectiveness)  and  continue  to  be  appropriate  (relevance)  and  whether  the  Framework,  taking 
account  of  the  costs  and  benefits  associated  with  applying  it,  was  efficient  in  achieving  its 
objectives (efficiency). The evaluation also considers whether the Securitisation Framework, as 
legislation at EU level, provided added value (EU added value) and whether it is consistent with 
other related pieces of legislation (coherence). 

The  evaluation  has  been  conducted  in  parallel  with  (‘back-to-back’)  the  impact  assessment 
accompanying the proposal revising the Securitisation Framework. The results of this evaluation 
have been incorporated in the problem definition of the impact assessment. 

1.2. Scope of the evaluation 

The scope of the present evaluation includes the legal framework in its entirety (SECR, relevant 
parts to the CRR121, LCR122 and SII123 legislative acts that pertain to securitisation transactions). 
The geographical scope of the evaluation extends to all EU Member States.  

1.3. Description of the methodology 

The  evaluation  was  supported  by  numerous  inputs,  including  stakeholder  consultations, 
stakeholder meetings and analytical work carried out by the ESAs, as well as other sources. Two 
targeted consultations were held. The first one124 in 2021, informed the preparation of the 2022 

121  For  the  CRR,  the  relevant  chapter  is  Chapter  5  of  Title  II  of  Part  III  of  Regulation  575/2013:  EUR-Lex  - 
02013R0575-20240709 - EN - EUR-Lex 
122For the LCR, the relevant provision is Article 13 of Commission Delegated Regulation (EU) 2015/61, as amended. 
123 For Solvency II, the relevant provision is Article 178 of Delegated Regulation (EU) 2015/35. 
124 https://finance.ec.europa.eu/regulation-and-supervision/consultations/2021-eu-securitisation-framework_en  

133 

 
 
 
Commission Report125 on the functioning of the SECR. A more recent targeted consultation126 on 
the  functioning  of  the  EU  securitisation  framework  (hereafter  ‘the  targeted  consultation’)  was 
launched in  October 2024. The targeted consultation  sought stakeholders’ feedback on a broad 
range of issues, including the effectiveness and scope of application of the existing framework, 
supervisory issues, the STS standard, the possible introduction of a securitisation platform(s), non-
prudential aspects including transparency and due diligence requirements, and prudential issues 
for  banks,  insurers,  and  IORPs/pension  funds.  Following  an  8-week  consultation  period,  the 
targeted consultation received 133 responses127 from a variety of stakeholders, mostly representing 
industry (associations and individual market participants) and supervisors. DG FISMA analysed 
the  submitted  responses,  which  informed  both  this  evaluation  and  the  forward-looking  impact 
assessment128.  In  addition,  DG  FISMA  held  many  bilateral  and  multilateral  meetings  with 
stakeholders and organised a workshop with market participants in 2024. 

This evaluation also benefits from the analytical work undertaken by the ESAs. In particular, it 
takes into account the 2021 Joint Committee report on the implementation and functioning of the 
SECR129,  which  focused  on  the  implementation  of  the  general  requirements  applicable  to 
securitisations, including the risk retention, due-diligence and transparency requirements as well 
as  on  the  specific  requirements  related  to  STS  securitisations.  The  Joint  Committee  has  been 
working on its second report due for publication by early 2025130. The expert discussions that took 
place in  the preparation  and drafting  of this document have  also  informed the evaluation. This 
evaluation also draws from the findings of the ESAs opinion on the jurisdictional scope of the 
SECR131  and  the  compliance  challenges  that  such  jurisdictional  scope  posed  for  market 
participants.  

Another input to the evaluation has been the ESAs’ Joint Committee advice on the review of the 
securitisation  prudential  framework132,  published  in  December  2022  in  response  to  the  call  for 
advice from the European Commission of October 2021. The Joint Committee report assesses the 

to 

the  public  consultation  which  were  authorised  for  publication  can  be  found  at: 

125 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52022DC0517  
126 Targeted consultation on the functioning of the EU securitisation framework 2024 - European Commission 
127 Of the 133 responses, 131 were submitted via the EU Survey online questionnaire and are therefore taken into 
account  for  the  statistical  calculation  of  survey  results.  Two  other  responses  were  submitted  by  email  –  these  are 
considered in the qualitative analysis of replies but not the statistical summary. 
128  Responses 
https://finance.ec.europa.eu/regulation-and-supervision/consultations-0/targeted-consultation-functioning-eu-
securitisation-framework-2024_en#contributions.  A  factual  summary  of  the  consultation  will  be  published  in  due 
course. 
129 
functioning-of-the-securitisation-regulation.pdf 
130 At the time of the submission of this evaluation, the report has not been adopted. 
131 
_esas_opinion_on_jurisdictional_scope_of_application_of_the_securitisation_regulation_003.pdf 
132  ESAs  publish  joint  advice  to  the  EU  Commission  on  the  review  of  the  securitisation  prudential  framework  | 
European Banking Authority 

https://www.eiopa.europa.eu/system/files/2021-05/jc-2021-31-jc-report-on-the-implementation-and-

https://www.esma.europa.eu/sites/default/files/library/jc_2021_16_-

134 

 
 
 
recent  performance  of  the  rules  on  capital  requirements  (for  banks,  insurance  and  reinsurance 
undertakings)  and  liquidity  requirements  (for  banks)  with  respect  to  the  framework’s  original 
objective of contributing to the sound revival of the EU securitisation framework. The findings of 
the EBA report on the significant risk transfer in securitisation  published in November 2020133 
have also contributed to the evaluation.  

Finally, the evaluation draws on the insights from the 2022 European Systemic Risk Board’ report 
“Monitoring  systemic  risks  in  the  EU  securitisation  market”134  on  the  financial  stability 
implications of the EU securitisation market.  

1.4. Limitations and robustness of the methodology 

The analysis of the performance of the Framework comes with limitations and uncertainties.   

First, the reporting of EU securitisation market transactions to an official securitisation repository 
is  limited  to  public  transactions  (i.e.  transactions  for  which  a  prospectus  in  compliance  with 
Directive 2003/71/EC has been issued). By contrast, private transactions are under no obligation 
to  report  to  a  repository  and  are  often  conducted  directly  between  the  parties  undertaking  the 
securitisation  without  public  announcement.  As  a  result,  it  is  challenging  to  obtain  a 
comprehensive  view  of  the  EU  securitisation  market's  size  and  scope.  To  address  this  data 
limitation, estimates of the private securitisation market have been derived from various alternative 
sources,  including  supervisory  reporting135  and  market  estimates  by  industry  associations.  By 
combining  these  data  points,  a  more  accurate  picture  of  the  EU  securitisation  market  can  be 
obtained. It is not possible to empirically assess the effectiveness of previous measures in reducing 
operational  costs  since  quantitative  information  on  operational  costs  was  not  collected  in  the 
previous impact assessment. 

Second, drawing causal links between the implementation of the EU securitisation framework and 
the subsequent market developments is a complex task. This is due to the multifaceted nature of 
the  framework,  which  has  undergone  various  updates  over  the  years,  making  it  challenging  to 
isolate the specific impact of each change. The interpretation is all the more challenging due to the 
overlap  of  the  framework  implementation  and  the  Covid-19  pandemic,  which  can  act  as  a 
confounding factor.  

Furthermore,  the  framework's  interaction  with  other  regulatory  and  economic  factors,  makes  it 
difficult to determine the framework's unique contribution. Additionally, the time lag between the 
implementation of a regulatory change and the observed market reaction can be significant, which 

133 Microsoft Word - EBA Report on SRT.docx 
134 https://www.esrb.europa.eu/pub/pdf/reports/esrb.report_securisation.20220701~27958382b5.en.pdf 
135 The EBA’s common reporting framework (COREP) applies to credit institutions and investment firms and allows 
us to gather data on private securitisations where such institutions are involved as issuers or investors. 

135 

 
 
 
may lead to attribution errors and obscure causal relationships. As a result, any attempts to draw 
causal  links  between  the  EU  securitisation  framework  and  market  developments  must  be 
approached with caution to avoid over-simplification or misattribution of causality. 

Thirdly, some of the objectives of the intervention, such as the removal of stigma from investors, 
increasing market standardisation or tackling regulatory inconsistencies, are not precisely defined 
and are not directly measurable. Therefore, the evaluation relies on the responses to the targeted 
consultation  to  gauge  stakeholders’  views  with  respect  to  the  attainment  of  these  objectives. 
However,  responses  should  be  interpreted  with  caution  as  respondents  may  have  a  different 
understanding of what a given policy objective means. 

2.  What was the expected outcome of the intervention? 

2.1. Description of the intervention and its objectives 

Before  the  introduction  of  the  Securitisation  Framework,  the  EU  securitisation  market  was 
suffering from the following main problems (see 2015 Impact  Assessment136 for more details). 
First, during the GFC complex and opaque securitisations led to severe losses for investors. The 
resulting lingering stigma attached to securitisation products has been reflected in subdued investor 
demand.  These  practices  and  the  subsequent  high  losses  were,  however,  mostly  limited  to 
securitisations originated in the US market. Second, insufficient risk-sensitivity (i.e. the pre-2019 
framework applied the same capital requirements for all types of transactions, regardless of their 
complexity  or  level  of  transparency  in  the  regulatory  framework  disadvantaged  simple  and 
transparent  securitisation  products.  Third,  a  lack  of  consistency  and  standardisation  across 
legislation led to high operational costs for investors and issuers. The Securitisation Framework 
was created to address these key problems/needs.  

Its general objective was the revival of a safer EU securitisation market that would improve the 
financing of the EU economy, weakening the possible link between banks’ deleveraging needs 
and credit tightening in the short run, and creating a more balanced and stable funding structure of 
the EU economy in the long run.  

To  achieve  this  general  objective,  the  2015  Impact  Assessment  identified  three  specific 
objectives: 

•  Remove stigma towards securitisation; 
•  Remove regulatory disadvantages for simple and transparent securitisation (STS) products; 
•  Reduce/eliminate unduly high operational costs for issuers and investors. 

To achieve these objectives the Securitisation Framework (input) was adopted: the SECR defined 
(i)  disclosure,  (ii)  due  diligence  and  (iii)  risk  retention  rules  for  all  EU  securitisations,  (iv) 

136 EUR-Lex - 52015SC0185 - EN - EUR-Lex 

136 

 
 
 
introduced specific criteria to identify simple, transparent and standardised securitisation (STS), 
and (v) banned re-securitisations. In addition, more risk sensitivity was introduced in the prudential 
frameworks  for  banks  (in  the  CRR)  and  insurers  for  STS  securitisations  (SII  Delegated 
Regulation).  

The Securitisation Framework was expected to achieve the following outputs:   

•  Differentiate simple, transparent and standardised securitisation products from more opaque 

and complex ones;  
•  Support standardisation in the market;  
•  Remove regulatory inconsistencies in the treatment of securitisations.  

The implementation of the inputs and achievement of the outputs mentioned above were expected 
to have the following results: first, increased supply of STS securitisations in comparison to non-
STS securitisations – with a growth rate expected to be higher for STS products than for non-STS 
products.  Second,  higher  prices137  of  STS  vs.  non-STS  products  due  to  their  increased 
attractiveness  for  investors.  Third,  standardised  marketing  and  reporting  material.  Finally,  a 
reduction of unduly high costs for issuers and investors. These results should have ultimately had 
long-term impacts in the form of increased investor trust in securitisation products (particularly 
STS),  and  in  promoting  securitisation  as  an  improved  financing  channel  for  the  economy.  To 
measure  these  results,  the  2015  Impact  Assessment  identified  the  following  indicators:  1)  STS 
products' price and issuance, 2) the degree of standardisation of marketing and reporting material 
and 3) feedback from market practitioners on operational costs' evolution.  

When  assessing  the  framework,  it  is  important  to  keep  in  mind  that  there  are  several  external 
factors  outside  the  remit  of  the  Framework  that  also  influenced  the  performance  of  the  EU 
intervention. These include monetary policy, the level of interest rates, Brexit, the level of demand 
for  credit  in  the  economy  and  developments  on  the  supply  side  regarding  alternative  funding 
channels (i.e. covered bonds, non-bank lending, unsecured credit, etc.). By injecting liquidity into 
the economy at a very low price, loose monetary policy can make wholesale funding in general, 
and  securitisation  in  particular,  less  competitive  and  attractive.  The  ECB  launched  its  ABS 
purchase programme in 2014, to further enhance the transmission of monetary policy (as of July 
2023,  it  has  stopped  conducting  further  direct  purchases).  While  a  low  interest  rate  could  also 
support securitisation activity by inducing banks to take on more risk in general138, banks could 

137 The price of a financial bond is inversely related to its yield. Because of the higher quality of the STS securitisation, 
it is expected that there would be more investor demand and therefore that investors would accept a lower yield. This 
would mean an STS bond would obtain a higher price than a non-STS one. 
138  Zhang, J. and Xu, X. (2019) ‘Securitization as a response to monetary policy’, International Journal of Finance 
&  Economics,  24(3),  pp.  1333–1344.  doi:10.1002/ijfe.1721  and  Maddaloni,  A.  and  Peydro,  J.-L.  (2010)  Evidence 
standards,  European  Central  Bank.  available  at: 
the  U.S. 
from 
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1248.pdf (Accessed: 10AD). 

the  euro  area  and 

lending 

137 

 
 
 
rely more on traditional funding sources and therefore reduce their securitisation activities139. In 
such  low-interest  rate  environment,  securitisation  -  a  relatively  complex  and  less  accessible 
instrument - is one of the first ones to be crowded out by cheaper and easier to access alternatives. 
The impact of Brexit on the EU securitisation market was expected to be negative since it involved 
the  fragmentation  of  a  previously  harmonised  market,  and  therefore  it  resulted  in  additional 
regulatory costs for market participants140.  

139    Bakoush,  M.,  Mishra,  T.  and  Wolfe,  S.  (2018)  ‘Securitization,  monetary  policy  and  bank  stability’,  SSRN 
Electronic Journal [Preprint]. doi:10.2139/ssrn.3630704. 
140 For a more detailed discussion on how Brexit impacted the securitisation industry, see for example  Brexit-and-
Securitisation-the-rubber-hits-the-road.pdf 

138 

 
 
 
 
 
2.2. Intervention Logic: EU Securitisation Framework 

139 

 
 
 
 
2.3. Description of the situation before the intervention 

The  present  evaluation  assesses  the  Securitisation  Framework  against  the  baseline  scenario 
included  in  the  Impact  Assessment141  accompanying  the  proposal  on  the  EU  securitisation 
framework in September 2015. 

2.3.1. Non-prudential rules 

Prior to the introduction of the SECR, non-prudential rules for securitisations were scattered across 
different sectoral legislations. These legislations included the CRR for banks, the SII Directive and 
Delegated Regulation for insurers and reinsurers, and the UCITS and AIFMD Directives for asset 
managers. Legal provisions on information disclosure and transparency were also laid down in the 
Credit  Rating  Agency  Regulation  (CRAIII)  and  in  the  Prospectus  Directive.  The  2015  Impact 
Assessment  concluded  that  inconsistencies  regarding  originators’  disclosure  and  investors’  due 
diligence  requirements,  as  highlighted  by  the  ESAs  Joint  Committee,  resulted  in  overlaps  and 
inconsistencies  across  different  financial  services  regulations  and  sometimes  within  the  same 
sector142.  

This  patchwork  of  rules  was  deemed  to  be  too  costly  and  did  not  ensure  a  level  playing  field. 
Greater  consistency in the regulatory  framework and standardisation of  EU securitisations was 
expected  to  increase  legal  clarity  and  comparability  across  asset  classes,  ease  investors’ 
assessments,  facilitate  issuance,  and  reduce  issuance  costs  for  originators.  In  addition,  greater 
standardisation  of  the  instruments  was  expected  to  increase  market  liquidity  and  help  the 
development of secondary markets143. As such, the 2015 Impact Assessment proposed a unified 
legislative framework for non-prudential securitisation provisions – the Securitisation Regulation 
– with the aim of simplifying and standardising the regulatory environment. Greater consistency 
was also expected to help supervisory authorities to monitor macro-prudential risks and the risk 
profile of financial intermediaries.  

2.3.2. Banking prudential rules 

The  CRR  sets  out  detailed  rules  on  how  to  calculate  the  capital  requirements  for  banks’ 
securitisation exposures, whether as originator (for the securitisation positions the bank retains), 
investor  (for  the  securitisation  positions  that  bank  invests  in)  or  sponsor  (for  the  securitisation 
positions the bank is exposed to as sponsor).  

141 EUR-Lex - 52015SC0185 - EN - EUR-Lex   
142 2015 Impact Assessment, p. 61 
143 2015 Impact Assessment, p. 60. 

140 

 
 
 
Prior  to  the  introduction  of  the  Securitisation  Framework  in  2019,  there  was  no  STS  standard. 
Capital requirements for all securitisations, including those that would be considered as STS under 
the current framework, were generally lower than those under the current regime.  

In addition, the calculation of bank capital requirements for securitisation positions was heavily 
reliant  on  external  credit  ratings.  The  framework  did  not  sufficiently  consider  the  relative 
complexities of the structural features of the transactions, which were not always properly reflected 
in  the  external  ratings  and  hence  also  not  in  the  resulting  capital  requirements  for  those 
securitisations.  In  this  vein,  the  2015  Impact  Assessment  noted  that  the  securitisation  capital 
framework in the CRR did not adequately address the risks that materialised during the GFC, in 
particular for complex securitisations that were originated in the US. Also, the absence of a clear 
regulatory distinction between STS and non-STS transactions made it more difficult for investors 
to identify simple and transparent transactions that performed strongly compared to more complex 
transactions. This lack of differentiation contributed to the investor stigma associated with all types 
of securitisation144.  

The  2015  Impact  Assessment  therefore  recommended  to  increase  the  capital  charges  for  more 
insufficient 
complex  securitisations 
conservativeness of the capital treatment for such securitisations. It also recommended to develop 
a preferential capital treatment for the new class of simple securitisations (STS) compared to non-
STS securitisations. 

to  address  supervisors’  concerns 

regarding 

the 

In particular, the new Securitisation Framework provided that transactions that are compliant with 
both  the  STS  criteria  (which  focus  on  capturing  and  mitigating  the  major  drivers  of  risk  of  a 
securitisation related to modelling and agency risks, as revealed during the GFC) and the additional 
criteria  specified  in  the  CRR  (which  focus  on  the  minimum  credit  quality  of  the  underlying 
exposures) benefit from preferential capital treatment.  

Another core element of the securitisation prudential framework are the rules on ‘significant risk 
transfer’ (SRT). SRT refers to a process where a bank transfers a substantial portion of credit risk 
associated with a portfolio of assets to external investors. This transfer of risk allows the bank to 
reduce the capital requirement linked to those assets. To qualify for SRT, the transfer must meet 
specific CRR-specified criteria, ensuring that the risk transfer is sufficient and genuine. The EU 
has had a comprehensive SRT framework in place since 2006, according to which the competent 
authorities assess the compliance of individual securities transactions against quantitative tests and 
qualitative criteria. If approved, the bank benefits from lower capital requirements, improving its 
balance sheet and lending capacity. The Securitisation Framework under assessment introduced 
no substantial changes to these rules, compared to the previous regime.  

144 This was noted in the 2015 Impact Assessment. 

141 

 
 
 
Finally, the LCR Delegated Act sets out how securitised assets are to be classified and treated for 
liquidity purposes. It requires banks to hold sufficient liquid assets (High-Quality Liquid Assets, 
or HQLA) in the form of a “buffer” that can be sold quickly for cash, if needed. This aims to ensure 
banks can withstand short-term stress scenarios while maintaining access to funding. To support 
diversification  within  the  liquidity  buffers  of  banks  and  to  facilitate  the  financing  of  the  real 
economy, the LCR Delegated Act expanded the list of HQLA (i.e. assets eligible in the liquidity 
buffers),  beyond  Residential  Mortgage-Based  Securities  (RMBS)  (which  are  included  in  Basel 
standards), to certain other forms of securitisation, namely those backed by auto loans, consumer 
credit and SME loans. Before the adoption of the framework, there was no differentiation between 
simple  and  complex  transactions  and  both  types  of  securitisations  were  eligible  for  the  LCR 
liquidity buffer. The framework clarified that only STS securitisation of high credit quality can be 
included in the banks’ liquidity buffers, thereby limiting the use of securitisations for the liquidity 
buffer.  

2.3.3. Insurance prudential rules 

Insurance companies are subject to the SII Directive145 and the SII Delegated Regulation146, which 
regulate  how  much  capital  insurers  should  set  aside  to  cater  for  the  risks  arising  from  their 
investment activities147. Prior to the initiative, SII included standard formula capital requirements 
for securitisation investments. These capital requirements distinguished simple securitisations (so-
called ‘type 1’, following a logic like the one underlying the later introduction of the STS category) 
from other securitisations (‘type 2’) which were subject to higher capital requirements148.  

The 2015 Impact Assessment concluded that substantial differences between the capital treatment 
of banks and insurance companies investing in the same product were documented and suggested 
greater convergence149.   

145 Directive 2009/138/EC 
146 Delegated Regulation 2015/35 
147  While  larger  insurers  generally  use  risk  modelling  tailored  to  the  specificities  of  their  risk  profile  (‘internal 
models’), smaller ones (which make up  over 86% of insurance firms) use the ‘standard formula’ which prescribes 
capital requirements. For the purpose of computing capital requirements for securitisations, insurers using an internal 
model are relatively autonomous in their assessment of market and credit risks (subject to prior supervisory approval), 
while “standard formula” insurers have no discretion. 
148 The capital requirements for ‘type 2’ securitisations were in line with EIOPA’s proposed calibration in 2013. See 
EIOPA  Technical  Report  on  Standard  Formula  Design  and  Calibration  for  Certain  Long-Term  Investments  –  
https://register.eiopa.europa.eu/Publications/Reports/EIOPA_Technical_Report_on_Standard_Formula_Design_and
_Calibration_for_certain_Long-Term_Investments__2_.pdf 

149 At the time of drafting the initial Impact Assessment, a comparative study of the applicable Basel 2.5 (for banks) 
and Solvency II (for insurers) frameworks showed that "considerable differences in required capital for the same type 
and amount of asset risk [existed], burdening insurers with almost twice as high capital requirements than banks." (see 
Laas and Siegle, 2014). 

142 

 
 
 
 
To  enhance  the  coherence  of  the  capital  treatment  for  banks  and  insurers,  as  well  as  to  better 
differentiate simple and transparent transactions from more complex and opaque ones, the 2015 
Assessment  recommended  to  update  SII  to  reflect  the  introduction  of  the  newly  created  STS 
standard  and  to  introduce  preferential  capital  charges  for  STS  securitisations.  These  would  be 
differentiated between ‘senior’ and ‘non-senior’ tranches150 to address the concern that if insurers 
only invest in senior STS tranches, this may not be enough to stimulate the development of STS 
securitisation deals. This differentiation between ‘senior’ and ‘non-senior’ tranches has made the 
framework more risk sensitive in a way that riskier (i.e. non-senior) tranches can attract a higher 
capital charge than less risky (more senior) ones. 

3.  How has the situation evolved over the evaluation period?  

3.1. Current state of play 

The following section presents the changes introduced by the Securitisation Framework. 

3.1.1 Securitisation Regulation 

As explained in Section 2, the SECR built on several provisions that were scattered across various 
sectoral legal acts that applied to different market entities. It defined (i) disclosure obligations for 
the issuers of securitisations, (ii) due diligence obligations for investors, (iii) risk retention rules 
for  all  EU  securitisations,  (iv)  introduced  specific  criteria  to  identify  simple,  transparent  and 
standardised  securitisation  (STS),  and  (v)  banned  re-securitisations.  It  created  a  single  and 
harmonised legal framework directly applicable to the main parties involved in a securitisation 
transaction. This framework also includes regulatory and implementing technical standards and 
supervisory guidelines (see Table 2 at the end of this section). In addition, it introduced a common 
set of reporting templates for both private and public securitisations and ESMA was tasked with 
the development of Regulatory Technical Standards to specify precise information and formats for 
these disclosures. Over time, ESMA has continued to review and refine these templates151.  

Building  on  the  practice  of  disclosure  of  derivative  transactions,  the  SECR  established 
securitisation repositories to serve as centralised hubs for information on public securitisations, 
making it easier for investors and supervisors to access information. Since the entry into force of 
the SECR, two entities have been registered as securitisation repositories for the European Union: 
European  DataWarehouse  GmbH  (based  in  Germany),  and  SecRep  B.V.  (based  in  the 
Netherlands)152.  

150 Instead of applying the preferential treatment to senior tranches only, while the non-senior tranches would remain 
subject to the same risk factors as non-STS securitisations 
151 E.g. ESMA’s December 2023 consultation seeking market feedback on potential improvements to the Article 7 
disclosure templates and the February 2025 one on disclosure requirements for private securitisations 
152 ESMA registers European DataWarehouse GmbH and SecRep B.V. as Securitisation Repositories 

143 

 
 
 
The  pre-existing  risk-retention  requirement,  which  was  designed  to  ensure  that  issuers  retain  a 
sufficient economic interest in a securitisation, was kept in substance but extended in scope. The 
Securitisation Regulation requires not only that investors verify that the securitisation positions 
they hold comply with risk retention (the pre-existing indirect approach), but also directly requires 
all  EU  issuers  to  apply  risk  retention  to  the  securitisations  they  issue.  This  helps  to  prevent 
excessive risk-taking and promotes more responsible securitisation practices.  

Drawing heavily on the work of the international supervisory community, the SECR created the 
STS  standard  for  a  new  class  of  high-quality  securitisations.  This  standard  allows  investors  to 
easily distinguish between simple and transparent securitisations and more complex ones.  

To facilitate assessment of compliance with the STS criteria, the SECR provided for Third-Party 
Verifiers  (TPVs).  These  independent  entities  verify  that  a  securitisation  meets  the  STS 
requirements, providing an additional layer of assurance and trust in the market. To operate as a 
TPV, an entity must obtain authorisation from ESMA - two such entities have been authorised to 
date: PCS Europe ASBL, and STS Verification International GmbH. Most STS transactions have 
used the services of one of these entities153.  

Finally, the SECR introduced a ban on re-securitisation, subject to a limited set of exceptions. This 
ban is intended to prevent the creation of complex and opaque financial instruments, which can be 
very susceptible to changes in market conditions, making them difficult to value and manage. The 
ban has been consistently enforced and there does not appear to be any notable re-securitisation 
activity on the European market since entry into force of the Framework.  

One of objectives of these regulatory requirements was to address and mitigate the specific risks 
that may result due to the structuring process of a securitisation, notably the agency and model 
risks.  Agency  risk  results  from  the  information  asymmetry  and  the  potential  misalignment  of 
interests between the originator and the investor in a securitisation, whereby the investor, unlike 
the originator, may have limited knowledge and understanding of the underlying portfolio. This 
misalignment of interest or information asymmetry can lead to poor outcomes. Model risk arises 
when  the  financial  models  used  to  predict  cash  flows  at  the  portfolio  level  or  the  assumptions 
underpinning the tranching of the credit risk under these models are wrong or inaccurate. In such 
a scenario, the securitised product could turn out riskier than expected.  

The SECR was first amended in 2021154 as part of the effort to help the EU economy to recover 
from the COVID-19 pandemic. The amendments expanded the scope of the STS regime to on-

153 2022 Report on the Functioning of the Securitisation Regulation 
154 Regulation (EU) 2021/557 of the European Parliament and of the Council of 31 March 2021 amending Regulation 
(EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, 
transparent and standardised securitisation to help the recovery from the COVID-19 crisis 

144 

 
 
 
balance-sheet  synthetic  securitisations  and  removed  certain  regulatory  impediments  to  the 
securitisation of non-performing loans.  

More than three years after the entry into application of the Securitisation Framework, in line with 
the legal mandate under Article 46 of the SECR, the Commission adopted a report taking stock of 
the development of the market in 2022. The report highlighted that while the  SECR seemed to 
have positively contributed to achieving its original objectives, there were issues in certain areas 
where problems were observed (e.g. disclosure, due diligence, prudential treatment) and concluded 
that more time was needed to get a full picture of the impact of the new Securitisation Framework 
in  light  of  the  new  elements  added  in  April  2021.  The  report  also  provided  guidance  on  some 
aspects of the legal framework.  

In  2024,  a  dedicated  regime  for  green  securitisations  was  introduced  as  part  of  the  EUGBS, 
following  the  recommendations  of  a  report  from  the  EBA155.  The  EUGBS,  applicable  as  of 
December 2024, focuses on the use of proceeds arising from the issue of the bonds, with a view to 
ensure  that  these  proceeds  are  used  towards  a  sustainable  activity  within  the  meaning  of  the 
Taxonomy Regulation. The EUGBS introduces a voluntary standard that provides a specific legal 
framework for bonds that want to be labelled as green. To qualify as a EUGBS securitisation bond, 
the bond’s originator must use the proceeds from the issue of the securitisation bond to refinancing 
or  financing  of  Taxonomy-aligned  assets  and  the  securitised  exposures  must  comply  with 
minimum sustainability requirement. For the moment, synthetics securitisations are excluded from 
the scope.  

Since  the  SECR  is  a  binding  legal  act  that  must  be  applied  in  its  entirety  across  the  EU,  no 
transposition issues have arisen. That being said, the regulation’s application has suffered of a lack 
of supervisory convergence. According to the findings from the peer review carried out by ESMA 
for  the  supervision  of  STS  transactions  in  2024156,  there  are  different  supervisory  practices 
affecting the sound and consistent level of supervision. Moreover, there have been delays in the 
designation of the supervisor by some countries despite the entry into force of the regulation more 
than five years ago but the situation is on track now. The 2022 Report on the functioning of the 
SECR  reported  feedback  from  some  market  participants  about  differences  in  the  supervisory 
approaches of Member States and also flagged that greater convergence and better coordination 
between supervisors would be beneficial. 

Table 2: List of mandates for regulatory technical standards, Implementing technical standards, 
Delegated Regulation or Guidelines in the Securitisation Regulation 
Type  of  Act:  Regulatory 
technical 
standard  (RTS),  Implementing  technical 

Short name 

155https://www.eba.europa.eu/sites/default/files/document_library/Publications/Reports/2022/1027593/EBA%20rep
ort%20on%20sustainable%20securitisation.pdf 
156 At the time of the submission of this evaluation, the report has not been adopted. 

145 

 
 
 
standard  (ITS),  Delegated  Regulation 
(DR) or Guidelines (GL) 
RTS 

RTS 
RTS 
RTS 
RTS 
RTS 

RTS 

DR 

RTS 
RTS 
RTS 
GL 
GL 

GL 

for 

securitisation 

Authorisation  of  third-party  verifiers  of  STS 
transactions 
Homogeneity of underlying exposures 
Transparency requirements 
STS notification 
Registration of securitisation repositories 
Operational 
guidelines 
repositories 
Cooperation and exchange of information between 
National Competent Authorities and the ESAs 
Fees  to  be  charged  by  ESMA  to  securitisation 
repositories 
Risk retention 
Disclosure of principal adverse impacts 
Specification of the performance-related triggers 
STS criteria 
Portability  of  Information  between  Securitisation 
Repositories 
Data completeness and consistency thresholds 

3.1.2. Capital requirements for banks 

The current prudential securitisation framework for banks (set out in the CRR) implements the 
Basel III securitisation framework157 and introduced significant changes relative to the previous 
framework. It aimed to address the weaknesses that were revealed during the GFC. As a result of 
the amendments, the prudential framework is now simpler, more risk sensitive, more prudently 
calibrated and more consistent with the underlying credit risk framework.  

In  terms  of  risk  sensitivity  and  prudence,  the  intervention  significantly  increased  capital 
requirements for banks’ securitisation exposures compared to the previous regime: as a measure 
of prudence a considerable level of overcapitalisation was introduced, to address the agency and 
model risks inherent to securitisation transactions.  

More specifically, there are two correction factors in the CRR capital framework that safeguard 
and ensure the capital ‘non-neutrality’158, of the framework: (i) a risk weight floor for exposures 

157 Revisions to the securitisation framework - Basel III document 
158 ‘Non-neutrality’ of capital requirements  means  that holding all the securitisation tranches in a securitisation is 
subject to a higher capital charge than in a counterfactual where the bank has a direct holding of all the underlying 

146 

 
 
 
 
to the senior tranche – which defines an absolute minimum risk weight for banks’ exposures to the 
senior tranche of securitisation; and (ii) a (p) factor (‘penalty factor’) which defines the relative 
capital  surcharge  for  all  securitisation  exposures,  compared  to  the  capital  requirement  for  the 
underlying pool of exposures. Each bank needs to reflect the risk weight floor and the (p) factor in 
the calculation of the minimum capital requirement that applies to their securitisation exposures. 

The current framework allows securitisations, that comply with the STS criteria and with some 
additional specific requirements to minimise credit risk of the underlying exposures, to be eligible 
for a more favourable capital treatment compared to non-STS securitisations. At the same time, 
the  capital  requirements  for  STS  are  still  generally  higher  than  capital  requirements  applied  to 
comparable transactions under the previous regime.  

Other  significant  revisions  with  respect  to  the  previous  framework  relate  to  changes  in  the  so-
called ‘hierarchy of approaches’ that banks must use for calculating capital requirements for their 
securitisation exposures159. The new framework reduced complexity by reducing the number of 
the approaches allowed for determining capital charges, reduced mechanistic reliance on external 
ratings  and  improved  the  overall  calibration  of  the  capital  requirements.  Additionally,  the 
framework revised the risk drivers used in each approach – the calculation of capital requirements 
is  now  more  risk  sensitive  and  allows  to  capture  some  of  the  risk  drivers  not  reflected  in  the 
previous framework.  

3.1.3. Liquidity requirements for banks 

The liquidity requirements for banks securitisations specified in the LCR Delegated Act implement 
the Basel III international standards that the EU agreed to implement as part of the wide-ranging 
reform of the prudential framework for banks. Only STS securitisations are currently eligible to 
qualify as HQLA under the LCR Delegated Act.  

3.1.4. Solvency II / insurance prudential rules 

In  line  with  the  preferred  policy  option  of  the  latest  impact  assessment,  differentiated  capital 
requirements  for senior  STS and non-senior STS securitisations  were introduced, replacing  the 
existing ‘type 1’ securitisation capital charges. Under the new framework, such capital charges 
depend on credit quality (rating) and duration of the asset. Finally, transitional arrangements were 

non-securitised assets. Only by transferring a sufficient amount of risk (by selling tranches to an external investor or 
obtaining a credit protection for certain tranches) can an originator bank achieve capital requirements which are the 
same or lower than those previously held against the underlying assets. 
159  Banks  use  one  of  the  CRR-prescribed  ’approaches’  when  calculating  the  capital  requirements  for  their 
securitisation position, following the ’hierarchy’ or approaches prescribed in the CRR (i.e. the selection of an approach 
is not discretionary). The previous framework contained a number of approaches and several exceptional treatments. 
The  current  framework  includes  three  hierarchical  approaches:  SEC-IRBA  (Securitisation  Internal  Ratings-Based 
Approach)  is  at  the  top  of  the  revised  hierarchy.  When  SEC-IRBA  cannot  be  used,  SEC-SA  (Securitisation 
Standardised Approach) and SEC-ERBA (Securitisation External Ratings-Based Approach) have to be used.   

147 

 
 
 
introduced  to  ensure  that  insurers  holding  ‘type  1’  securitisations  would  not  be  subject  to  a 
significant increase in capital requirements if such investments did not meet the newly introduced 
STS criteria. As a result, capital requirements for senior STS securitisation are two to three times 
lower  than  former  type  1  capital  requirements,  and  non-senior  STS  capital  requirements  are 
broadly comparable to the former type 1 capital requirements. By contrast, capital requirements 
for ‘type 2’ securitisations (now called ‘non-STS’ securitisations) were not amended and remain 
applicable.  

3.2. Market context   

The market is gradually growing but continues to operate below its potential when looking at the 
limited share of placed traditional securitisation and limited investor base, as well as in comparison 
with  other major jurisdictions. The geographical  distribution of the EU securitisation market  is 
uneven, and banks in many Member States prefer alternative instruments, such as covered bonds. 

While we estimate the combined EU public and private market to at least EUR 1.6 trillion by the 
end of 2023160, we focus in the following on the part of the EU market where banks are involved 
as  issuers  (originators  or  sponsors  or  original  lenders)  or  as  investors.161  This  part  of  the  EU 
securitisation market stood at approximately EUR 1.2 trillion in terms of outstanding volumes at 
the end of 2023 (see Figure 1). It is composed of 68% traditional, 25% synthetic and 7% asset-
backed commercial paper securitisations. There has been a change of composition in recent years, 
with the share of traditional securitisation decreasing from 77% in the first half of 2020, mainly as 
a result of an expanding share of synthetic securitisation. 

160 Details in Annex III. Please note that in particular the private market segment might be incomplete as there is no 
systematic public reporting due to the private nature of the transactions in this segment. 
161 Reason for this focus is that the EBA has the most comprehensive dataset (CoREP statistics) that allows breaking 
down  the  market  with  consistent  definitions  across  the  different  dimensions  (i.e.  STS/non-STS;  public/private; 
SRT/non-SRT;  synthetic/traditional  and  across  asset  classes).  However,  the  limitation  of  the  EBA  dataset  is  that 
certain transactions without bank involvement cannot be covered. 

148 

 
 
 
Figure 1: Outstanding volumes of transactions by type

Source: EBA COREP, S1 refers to the first half of the year. S2 refers to the second half of the year. 

Looking at the composition of securitised exposures, the most commonly securitised asset class is 
corporate  loans  (see  Figure  2).  This  reflects  the  ongoing  change  in  market  composition  from 
traditional  to  synthetic  securitisation,  as  well  as  the  rise  in  collateralised  loan  obligations162. 
Corporate loans make up nearly 80% of the assets securitised in synthetic transactions, compared 
to about 25% in traditional securitisations. 

At the same time, the share of residential mortgage-backed securities, formerly the dominant asset 
class in the EU and by far the most commonly securitised asset in other jurisdictions, shrank from 
46% in the first half of 2020 to 33% by end 2023 and remains in second place. 

162 See for example European_securitisation_market_–_ready_for_a_comeb.pdf 

149 

 
 
 
 
Figure 2: Outstanding volumes of transactions by asset class

Source: EBA COREP 

While  the  public  EU  securitisation  market  remains  significantly  below  its  peak  in  2008-2009 
(~EUR  2trn  outstanding  volume),  it  shows  signs  of  gradual  recovery.  Following  the  entry  into 
force of the new Securitisation Framework in 2019, in particular the outstanding balance of EU 
securitisations with bank involvement163 has gradually increased from under EUR 800 billion to 
the level of EUR 1.2 trillion at year-end 2023, while average annual issuance in the period 2020 – 
2023 amounted to EUR 218.25bn (see Figure 3).   

163 Reflected in CoREP statistics. 

150 

 
 
 
 
Figure 3: Total issuance by type of securitisation (EUR bn) 

 Source: EBA COREP 

Despite recent  market  growth, a  significant  portion of the traditional securitisation transactions 
remains retained on the balance sheets of the issuing banks rather than placed on the market with 
external investors164. This means that the bank retains (most of) the securitisation tranches that it 
issues (and it is the main investor in its own securitisation). Retained traditional securitisations are 
used primarily to obtain funding, i.e. the senior tranche is used as collateral to obtain liquidity from 
the ECB. Securitisation is an attractive tool for this purpose because the senior securitisation notes 
are eligible collateral for the ECB’s liquidity operations, whereas the underlying pools of loans are 
not eligible. According to the ECB’s database, asset-backed securities represented 19% of the use 
of collateral and outstanding credit for liquidity operations in the last quarter of 2024 and has the 
highest utilisation rate among all types of eligible assets, i.e. 46.9% of the eligible asset-backed 
securities were used as collateral.  

This is also evident in the persistently low rates of placements (see  Figure 4). Banks’ retention 
levels  differ  for  each  securitisation  type:  banks  have  retained  more  than  80%  of  the  SME 
securitisations and more than 70% of RMBSs in Q3 2023; in case of other types of securitisations 
half of the tranches are still sold to the market.   

164 Bloomberg, ECB calculations. 

151 

 
 
 
Figure 4: Share of placed vs retained traditional securitisation (left) and share of outstanding 
EU securitisation that is retained by banks and that qualifies as STS, Q3 2023 (right) 

Source: Association for Financial Markets in Europe (AFME) (left) and Bloomberg and ECB calculations (right)  

Not placing the tranches with external investors prevents the originating banks from transferring 
risk and achieving capital relief and hence limits their ability to free up their balance sheets and 
redeploy released capital and deepen capital markets.  

The limited use of traditional securitisations for capital relief purposes can also be observed in the 
composition of SRT transactions (see Figure 5 below). Securitisation allows the originating banks 
to achieve capital relief and free up their balance sheets for further lending on the condition that 
the securitisation complies with SRT rules in the CRR, i.e. a significant amount of risk associated 
with the underlying pool of assets is transferred to external investors.  A substantial majority of 
SRT transactions are synthetic transactions. For the traditional securitisation market segment, the 
share of traditional securitisations that achieve SRT is about 20% of the outstanding volume as 
traditional securitisations, and 37% of the outstanding volume of EU SRT transactions in general, 
as of end 2023 (taking into account that the traditional securitisations tend to be used primarily for 
funding purposes). 

152 

 
 
  
Figure 5: Outstanding volumes of all types of transactions by SRT (bn euro, 2023-S2)

Source: EBA COREP 

The narrow investor base (i.e. the number of investors typically involved in one transaction) in the 
EU limits the capacity of banks to place their securitisations on the market and results in a limited 
capacity  to  absorb  increased  supply.  Typically,  about  30-50  investors  are  involved  in  a  public 
traditional transaction, 15-25 investors in a collateralised loan obligations transaction165 and 1-3 
sponsors in an asset-backed commercial paper (ABCP) securitisation. For synthetic securitisations, 
the  typical  investor  base  is  between  1-3  investors  (smaller  than  for  traditional  securitisations, 
reflecting  primarily  the  private nature of these transactions)166. Typically, the type of investors 
involved in senior tranches in traditional securitisations in the EU are banks and asset managers 
seeking low-risk and highly liquid investment products. By contrast, investors in junior tranches 
usually look for higher yield. Similarly, the investors in synthetic transactions differ from those in 
traditional ones. Investors in synthetic securitisations are institutions specialised in assessing credit 
risk,  typically  specialised  funds,  asset  managers,  insurance  and  pension  companies  or 
supranational  institutions,  that  often  seek  to  establish  a  longer-term  relationship  with  the 
originating bank in view of the more demanding due diligence required.167 Banks are typically not 
directly investing in synthetic securitisations.  

165Structured financial product that pools together a portfolio of corporate loans - typically leveraged loans - and then 
tranches them into different layers of risk and return for investors. 
166 Source: TSI_BVB_Final_report_of_the_securitisation_task_force_202409_en.pdf 
167 ESRB, Fernando Gonzalez, Cristina Morar Triandafil, Occasional Paper Series No. 23, The European significant 
risk transfer securitisation market Table 2. 

153 

 
 
 
 
The  EU  investor  base  is  much  smaller  than  the  one  in  the  US,  with  about  80-115  investors  in 
total.168  The  investor  base  for  EU  securitisations  is  also  much  smaller  than  for  other  EU  fixed 
income instruments, such as investment grade corporate bonds and covered bonds, with an average 
of 80-115 investors alone per bond169. Market data points to a particularly narrow investor base 
for senior (i.e. the best quality) tranches of traditional securitisation instruments, which hinders the 
ability of issuers to place these traditional securitisation transactions with external investors.  

As a result of the characteristics described above, securitisation currently plays a limited role in 
the EU economy. Despite its recent growth, securitisation issuance as a percentage of GDP remains 
much lower in the EU than in other major jurisdictions (see Figure 6). For the US, we use figures 
which exclude the market supported by Government-Supported Entities, such as Freddie Mac and 
Fannie Mae, which represents the largest part of the US securitisation market. The exclusion of 
this segment of the US market makes the data more comparable to the EU securitisation market, 
where publicly guaranteed securitisation plays a much less prominent role.  

Figure 6: International securitisation issuance as a proportion of GDP (2024H1 vs 5Y and 
10Y average, %) 

Source: AFME Capital Markets Union Key Performance Indicators – 7th edition (November 2024). US and Australian 
volumes include ABS, RMBS, CMBS and CDO.  

Moreover,  the  EU  securitisation  market  is  highly  concentrated,  with  80%  of  securitisation 
issuances concentrated in five Member States (Italy, France, Germany, the Netherlands and Spain). 
Several reasons can explain this high degree of concentration in those Member States, such as:  

168 Details of this estimate can be found in Annex III in the section on one-off due diligence costs. 

169 Source: AFME 

154 

 
 
 
  
 
i. 

the existence of a stronger institutional originator and investor base and market depth, 
which creates the necessary conditions to make securitisation more cost-efficient, 
ii.  more  developed  mortgage  markets  which  provide  banks  with  a  sufficiently  large 

homogenous asset class to securitise,  

iii.  the  existence  of  public  guarantee  schemes,  e.g.  GACS  in  Italy,  which  incentivises 

securitisation of non-performing loans, and  

iv.  legacy of past financial crises that shaped market developments.  

For example, Italy and Spain saw increased securitisation activity following the sovereign debt 
crisis, as banks sought alternative funding channels.  The table below shows the location of the 
securitised loans. Securitisation has a wider footprint in terms of jurisdictions than the table below 
might  suggest.  For  instance,  Irish  and  Luxembourgish  securitisation  special  purpose  entities 
account for nearly half of the total securitised assets in the Euro Area even though the table below 
shows modest securitisation markets in those Member States. While the securitised loans might be 
originated in one Member State, other key services necessary for the securitisation transaction to 
take place, such as legal advisory, corporate service providers, auditors, administrators and trustees 
might be provided in another Member State. 

Table 3: Breakdown of the securitised assets by Member State, end-2023 

Jurisdiction 

 Austria 
 Belgium 
 Bulgaria 
 Croatia 
 Cyprus 
 Czechia 
 Denmark 
 Estonia 
 Finland 
 France 
 Germany 
 Greece 
 Hungary 
 Ireland 
 Italy 
 Latvia 
 Lithuania 
 Luxembourg 
 Malta 
 Netherlands 

of 

 Amount  (bn 
euro) 
 20 
 47 
 1 
 1 
 5 
 2 
 6 
 0 
 5 
 244 
 195 
 64 
 1 
 22 
 282 
 0 
 1 
 9 
 0 
 128 

 Percentage 
total 
 1.70% 
 3.95% 
 0.12% 
 0.09% 
 0.45% 
 0.17% 
 0.54% 
 0.00% 
 0.38% 
 20.30% 
 16.28% 
 5.33% 
 0.05% 
 1.80% 
 23.48% 
 0.03% 
 0.05% 
 0.77% 
 0.01% 
 10.64% 

155 

 
 
Jurisdiction 

 Poland 
 Portugal 
 Romania 
 Slovakia 
 Slovenia 
 Spain 
 Sweden 
 TOTAL 

of 

 Amount  (bn 
euro) 
 12 
 18 
 0 
 1 
 0 
 132 
 4 
 1,200 

 Percentage 
total 
 0.96% 
 1.50% 
 0.03% 
 0.04% 
 0.00% 
 11.00% 
 0.32% 
 100.00% 

Note:  Whenever  there  are  more  countries  of  origination,  only  the  major  one  shall  be  reported.  Therefore,  the 
breakdown may be biased in that some EU countries may not be captured. 

4.  Evaluation findings  

The  evaluation  of  the  Securitisation  Framework  is  structured  around  five  assessment  criteria 
defined by the Better Regulation Guidelines (effectiveness, efficiency, coherence, EU added value 
and relevance). These criteria are individually analysed to assess to what extent the intervention 
was successful and why.  

4.1. Effectiveness 

The  effectiveness  analysis  considers  how  successful  the  Securitisation  Framework  has  been  in 
achieving the general objective laid out in the 2015 Impact Assessment, namely: 

“to revive a safer securitisation market that will improve the financing of the EU economy, 
weakening the link between banks deleveraging needs and credit tightening in the short-run, 
and creating a more balanced and stable funding structure of the EU economy in the long-
run.” 

To evaluate the general objective, we assess the framework's success in achieving the following 
specific and operational objectives outlined in the 2015 Impact Assessment: 

•  Remove stigma from investors;  

•  Remove regulatory disadvantages for simple and transparent  securitisation products.  To 
enable  the  achievement  of  this  objective,  the  intervention  aimed  to  differentiate  'STS' 
products from more opaque and complex ones; 

•  Reduce/eliminate unduly high  operational  costs  for issuers  and investors. To enable the 
achievement  of  this  objective,  the  intervention  aimed  to  support  the  standardisation  of 
processes and practices in securitisation markets and tackle regulatory inconsistencies. 

156 

 
 
 
Where  the  framework  is  considered  to  have  been  effective  in  achieving  these  specific  and 
operational objectives, it is also considered as effective in contributing to the general objective. 
This  section  will  quantitatively  and  qualitatively  consider  the  effects  of  the  intervention,  the 
external factors affecting progress towards the objectives, and the unexpected or unintended effects 
driving or hampering progress. 

4.1.1. How effective was the Securitisation Framework in removing investor stigma 
towards securitisation 

In the aftermath of the GFC, global securitisation markets suffered from investor stigma. In 2014, 
a  survey  from  the  BCBS-IOSCO  (Basel  Committee  on  Banking  Supervision  -  International 
Organisation of Securities Commissions) showed that investor perception was the most critical 
factor  driving  securitisation  market  developments.  The  main  concerns  were  the  perceived 
complexity of securitisations and the potential for conflicts of interest and information asymmetry 
between issuers and investors. 

The SECR aimed to reduce the investor stigma associated with securitisation by i) aligning the 
interests  of  issuers  with  those  of  investors  via  mandatory  risk  retention,  ii)  supporting  market 
transparency (thus reducing information asymmetry), iii) banning complex re-securitisations, iv) 
differentiating STS securitisations from  more complex ones, and v) introducing  rules on credit 
granting standards for securitised exposures.  

Investor stigma is a subjective concept based on the investor’s perception. Therefore, the best way 
of  measuring  it  is  via  stakeholder  feedback.  The  feedback  suggests  that  the  Securitisation 
Regulation has been partly effective in reducing investor stigma. Views were largely split in the 
stakeholder feedback gathered during the latest targeted consultation (December 2024). 44 out of 
131  respondents  reported  that  the  Framework  has  been  effective  at  reducing  investor  stigma 
towards  EU  securitisations  (13  “Fully  agree”,  31  “Agree”).  31  respondents  disagreed  (22: 
“Somewhat  disagree”,  9:  “Fully  disagree).  Notably,  amongst  the  respondents  identifying  as 
investors,  the  ratio  of  negative  responses  is  higher  –  19  out  of  51 investors  responded  that  the 
Framework has not been effective in reducing investor stigma. On the other hand, bilateral contact 
with investors has seen many speak positively about securitisation.  

Robust  credit  performance  should  help  to  address  the  investor  stigma  associated  with 
securitisation. Figure 7 below explains the cumulative five-year average default rates for different 
asset classes and time periods during the period of past 20 to 40 years (e.g. in the case of European 
RMBS,  it  shows  the  5-year  cumulative  default  rate  between  1988  and  2023).  This  number  is 
comparable  with  other  fixed  income  asset  classes,  like  European  corporate  bonds  or  global 
sovereign bonds, reflecting the strong credit performance of RMBSs. 

157 

 
 
 
Figure  7:  5-year  average  cumulative  default  rates  –  European  ABS,  European  RMBS, 
European CLOs, and other fixed income asset classes 

Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence’s CreditPro, and Fitch 
Ratings 

4.1.2.  How  effective  was  the  Securitisation  Framework  in  differentiating  simple, 
transparent and standardised securitisation products from more opaque and complex ones 
and  in  removing  regulatory  disadvantages  for  simple  and  transparent  securitisation 
products? 

4.1.2.1.  Differentiating  simple,  transparent  and  standardised  securitisation 
products from more opaque and complex ones 

The  Securitisation  Framework  aimed  to  distinguish  simple,  transparent,  and  standardised 
securitisation products from more complex ones through the creation of the STS label. The label 
outlines specific criteria for simplicity, transparency and standardisation that securitisations must 
meet to be considered STS. There are distinct STS criteria that apply to longer-term traditional 
(true-sale) securitisation, to short-term ABCP securitisations, and to synthetic (on-balance-sheet) 
securitisations. Only when these criteria are fulfilled can securitisations be labelled as STS. This 
new  label  therefore  makes  it  straightforward  for  investors  to  identify  and  distinguish  STS 
securitisations from non-STS ones, which are typically less transparent and more complex as they 
have presumably failed to meet at least one of the STS criteria. 

Most  stakeholders  agree  that  the  Framework  has  been  effective  in  differentiating  simple, 
transparent and standardised securitisations from more opaque and complex ones. 43 out of 131 

158 

 
 
 
respondents to the targeted consultation responded positively (16 out of 52 investors), while only 
21 had a negative assessment. Figure 8 below presents the balance of opinions.  

Figure 8: Responses to the question whether the securitisation framework has been effective in 
differentiating simple, transparent and standardised securitisation products from more opaque 
and complex ones (total of 131 respondents) 

Source: European Commission  

Looking at market developments, there is a clear trend pointing to an increasing preference for 
STS issuance (see Table below). The share of STS issuance has been the highest in the synthetic 
segment in 2021 and 2022, while in 2023 it was higher in the traditional segment due to the one-
off impact of a particularly large, retained transaction. This one-off transaction, however, is not 
indicative  of  a  general  market  trend  in  the  direction  of  higher  share  of  STS  issuance  in  the 
traditional securitisation segment. 

Table 4: Share of STS issuance in the EU, placed and retained 

Source: EBA, COREP statistics. Total issuance figures are in EUR bn. ABCP issuance is excluded as there are no 
available figures on origination amounts. These figures include securitisations originated by banks (i.e. bank is an 
originator or original lender), and non-bank originated securitisations where a bank plays a role as investor. 

There  are  no  available  figures  to  confirm  a  significant  price  difference  between  STS  and 
comparable non-STS products. 

In  view  of  these  findings,  we  conclude  that  the  securitisation  framework  has  been  effective  in 
achieving  the  operational  objective  of  differentiating  STS  products  from  more  opaque  and 
complex ones. 

4.1.2.2.  Removing  regulatory  disadvantages 
standardised securitisations 

for  simple, 

transparent  and 

159 

2020202120222023Total issuance168219230322Share of STS issuance17.9%40.2%40.4%73.6% 
 
 
 
a) Banking 

As  part  of  the  Framework  the  CRR  was  amended  to  establish  a  more  risk-sensitive  prudential 
framework  for  STS  securitisations.  By  introducing  a  dedicated  capital  treatment  for  STS 
securitisations, the Framework has been effective in removing undue regulatory disadvantages for 
STS securitisations, relative to non-STS ones. Figure 9 below compares the average risk weights 
for  STS  versus  non-STS  securitisations  and  illustrates  that  average  STS  risk  weights  are 
approximately half of non-STS securitisation risk weights. The STS framework therefore allows 
the  banks  to  achieve  more  significant  capital  relief  compared  to  non-STS  securitisations,  and 
results in a more risk-sensitive and hence more efficient capital allocation for banks. 

Figure 9: Average risk weights STS versus non-STS, by different approaches to the calculation 
of securitisation capital requirements for banks, Europe (G1), in Q4 2023 

Source: BCBS Dashboard (sample of 15 banks; IRBA means Securitisation Internal-Ratings Based Approach, ERBA 
means  Securitisation  External  Ratings-Based  Approach,  IAA  means  Internal  Assessment  Approach,  SA  means 
Securitisation Standardised Approach). 

As  issuance  and  investment  in  STS  transactions  have  become  significantly  more  attractive 
compared  to  non-STS  alternatives,  one  would  expect  absolute  and  relative  volumes  of  STS 
transactions to have increased significantly over time and to have scaled up the market more in 
general. Based on data from EBA, since the entry into force of the framework in 2019, the share 
of STS transactions for banks has slowly and gradually increased and reached 25% and 53% of 
the  overall  outstanding  volume  for  traditional  securitisation  and  synthetic  securitisation, 
respectively, at end 2023. Figure 10 illustrates that overall outstanding volume of STS transactions 
represent EUR 420 bn as of end 2023 (out of which EUR 155 bn are STS synthetic transactions, 
EUR 203 bn are STS traditional securitisation, and EUR 62 bn are STS ABCP securitisations).  

Figure 10: Overall outstanding volumes of securitisation transactions held by banks, by STS 
label (bn EUR) 

160 

 
 
 
Source:  EBA,  COREP  statistics  (to  note  these  figures  include  securitisations  originated  by  banks  (i.e.  bank  is  a 
originator or original lender), and non-bank originated securitisations where a bank plays a role as investor). 

While the STS-label has had a more positive impact on the synthetic segment, the take up for the 
traditional  securitisation  segment  and  the  overall  STS  market  developments  have  been 
underwhelming to date. The reduction in the capital conservativeness for STS securitisations, in 
comparison to non-STS, does not seem to have provided a strong impetus for banks to engage 
more broadly in the STS market segment. The STS label and the Framework in general did not 
bring a significant amount of new bank originators or bank investors to the market, nor did it help 
expand the securitisation issuance to additional Member States. Also, it is likely that a part of the 
STS market are transactions that would have been issued anyway, even in the absence of the STS 
framework (as these have existed also before the introduction of the framework).  

Several bank respondents point to the overall complexity of the STS requirements to explain why 
STS  issuance  has  remained  below  expectations.  Others  highlight  the  fact  that  the  preferential 
capital treatment is made conditional on the compliance with additional criteria specified in the 
CRR that prescribe a minimum credit quality of the underlying exposures (arguing that de facto it 
is a ‘STS+’ label), which unduly limits the scope of transactions potentially eligible for the STS 
preferential  treatment.  All  this  may  explain  why  most  respondents  to  the  targeted  consultation 
seem  to  view  the  Framework  as  unsuccessful  in  removing  regulatory  disadvantages  for  STS 
products:  52  either  fully  or  somewhat  disagreed  with  the  statement  that  the  framework  had 
removed regulatory disadvantage for STS. In contrast, only 13 somewhat agreed or fully agreed 
(12; 1, respectively).  

These  STS  developments  need  to  be  interpreted  within  the  broader  securitisation  market 
developments.  The  impact  of  the  Securitisation  Framework  on  reviving  banks’  interest  in  the 
securitisation market developments in general is  ambiguous.  Unduly high capital requirements, 

161 

 
 
 
both for non-STS as well as STS securitisations, has been a key element of stakeholder feedback 
related to the bank prudential framework.  

The ESAs170 estimate that the revised prudential framework has led to an increase in banks’ capital 
requirements for securitisation exposures of 114% for bank originators, 77% for bank sponsors 
and 105% for bank investors across the market, with large variations in the impact depending on 
the  composition  of  the  tranches  held,  compared  to  the  previous  regime.  Senior  tranches  of 
securitisations  have  experienced  an  increase  of  more  than  100%  in  capital  requirements,  while 
mezzanine  tranches  have  experienced  an  even  more  significant  increase  of  capital  requirement 
with  a median increase  of 281%. Also,  as shown  in  Figure 11  below, on average, the required 
capital for securitisations is approximately double the capital required for the capitalisation of the 
underlying pool of non-securitised assets. 

Figure  11:  Capital  non-neutrality,  median  for  three  regulatory  approaches  to  calculation  of 
capital in securitisation 

Source: EBA (IRBA means Securitisation Internal Ratings-Based approach, SA means Securitisation Standardised 
Approach, and ERBA means Securitisation External Ratings-Based Approach) 

As securitisation adds a layer of risk in the form of complexity, agency risk and model uncertainty, 
the capital charges for a securitisation should be higher than for its underlying assets (i.e. neutrality 
is  not  justified  and  non-neutrality  is  one  of  defining  elements  of  the  securitisation  capital 
framework). Nevertheless, the current degree of non-neutrality imposed by the existing rules does 
not  appear  fully  proportionate  to  the  increase  in  risk  introduced  by  the  securitisation  process. 
Therefore, while the presence of non-neutrality is justified, it is the degree of it that does not seems 
so.  

170 JC 2022 66 - JC Advice on the review of the securitisation prudential framework - Banking.pdf 

162 

 
 
 
 
 
Concretely,  the  level  of  capital  non-neutrality  seems  disproportionately  high  relative  to  the 
remaining levels of agency and model risks in some types of securitisation transactions, given that 
these risks have been significantly reduced following the GFC, thanks to several supervisory and 
regulatory  initiatives  implemented  in  the  EU.  Model  risks  have  been  mitigated  by  several 
initiatives that have enhanced the banks’ internal models (e.g. SSM completed its Targeted Review 
of Internal Models (TRIM), EBA completed its IRB repair programme, the CRR3 is phasing in 
the output floor requirement; all of which come on top of risk retention and the banning of re-
securitisations in the Framework171). Agency risk has been addressed by introducing risk retention 
requirements (which apply universally to all securitisations, unlike in the US where a majority of 
securitisations  are  fully  excluded)  and  by  creating  the  STS  standard  (where  STS  rules  are 
significantly more prescriptive than equivalent Basel ‘STC’ standards).  

Also,  the  EBA  acknowledges  the  reduction  in  model  and  agency  risk,  associated  with  some 
specific types of securitisation transactions, since the introduction of the Securitisation Framework 
in the EU172. It should also be noted that the EU securitisation framework is applied more broadly 
than required under Basel standards. Unlike other jurisdictions, the EU applies the Basel standards 
to all its banks, large and small, both at consolidated and individual entity level, which introduces 
additional layers of prudence in the EU financial system, compared to other jurisdictions.  

Capital non-neutrality also seems disproportionately high in light of the robust credit performance 
of the EU securitisation market over the years173. The EU securitisation market’s resilience has 
been  tested  through  multiple  economic  cycles  and  periods  of  stress,  including  the  GFC,  the 
Eurozone sovereign debt crisis, and the COVID-19 pandemic.  

Default rates of EU securitisations have been significantly lower than those of US securitisations. 
Figure 12 below illustrates that US RMBS defaults in the period 2007-2022 dwarf those of EU 
RMBS in the same period.  

Also, very few senior tranches of securitisations have ever suffered losses. Data over a 30-year 
time period show that default risk and ratings transition of European securitisations across tranches 
rated AAA to BB are commensurate with default and ratings transition data for other fixed income 

171  Unlike the US, Japan, Australia and Canada where re-securitisation is still permitted. 
172  The  EBA  acknowledges  the  reduction  in  model  and  agency  risk  associated  with  some  specific  securitisation 
transactions  (transactions  associated  to  originators  retaining  senior  securitisation  tranches,  subject  to  safeguards 
ensuring  resilience  of  transactions),  and  advices  some  targeted  measures  to  improve  risk  sensitivity  in  the  capital 
prudential framework.   JC 2022 66 - JC Advice on the review of the securitisation prudential framework - Banking.pdf   
173 Apart from that, there are discrepancies between the rules applied under the securitisation internal-rating based 
approach (SEC-IRBA) and securitisation standardised approach (SEC-SA), resulting in undue discrepancies between 
the capital requirements for the same securitisation, when used by different types of banks. Divergencies also exist 
between the prudential and regulatory treatment of the securitisations and other comparable funding tools, such as 
covered bonds. 

163 

 
 
 
 
 
 
 
asset classes, such as European corporate bonds or global sovereign bonds, rated the same level, 
reflecting the strong credit performance of securitisations.  

For  example,  based  on  data  from  S&P  for  the  whole  universe  of  European  structured  finance 
covering  the  period  from  1983  to  2023,  the  yearly  default  rate  for  a  mezzanine  securitisation 
tranche with BBB rating is less than 0.5%, while the resulting risk weights under the securitisation 
capital framework are 220%174. A BBB-rated mezzanine tranche is historically comparably risky 
on average as an investment grade corporate bond, which receives a 60% risk weight or 100% risk 
weights under the applicable framework. The ratio of overcapitalisation is therefore between x3.7 
and x2.2, in this example.   

Figure 12: Annual default rates of structured credit by sector contributions in per cent 

Source: BCBS dashboard (https://www.bis.org/bcbs/dashboards.htm)   

In addition, unjustified differences have been identified between the capital treatment of equivalent 
securitisation exposures calculated by different banks using different approaches to the calculation 
of capital. The level of non-neutrality under the standardised approaches (SEC-SA) is significantly 
higher  than  the  level  of  non-neutrality  under  the  internal  approaches  (SEC-IRBA),  which 
disincentivises less sophisticated banks from engaging in securitisation.  

Besides undue levels of capital conservativeness, the evaluation of the Framework has uncovered 
a number of additional issues, which also could provide undue barriers for the banks’ participation 
in  the  securitisation,  whether  as  originators  or  investors.  One  of  those  issues  relates  to  the 
Significant Risk Transfer (SRT) framework. The design of the ‘SRT tests’, which specify how 
much risk needs to be transferred to third parties to benefit from capital relief, have a number of 
structural  flaws.  The  SRT  tests  do  not  allow  to  appropriately  capture  all  possible  structures  of 

174  and can be even higher, depending on the approach used for the calculation of capital. 

164 

 
 
 
 
 
 
securitisations and may fail to target the transfer the risk in some cases, which may impede on the 
robustness of the SRT framework175.   

The existing SRT tests also do not provide sufficient guidance on how to assess some common 
structural  features  of  securitisation  transactions,  which  may  affect  the  effectiveness  of  the  risk 
transfer  and  may  cast  doubt  on  the  ability  of  a  given  transaction  to  meet  SRT  conditions.  In 
addition,  the  processes  applied  by  the  competent  authorities  to  assess  the  SRT  have  in  some 
instances  been  inconsistent,  lengthy  and  cumbersome.  These  SRT  Framework  limitations, 
analysed in detail by EBA176, have contributed to uncertainty for the market and delays for some 
securitisation  transactions  and  have  led  in  some  cases  to  unjustified  inconsistencies  in  SRT 
outcomes  and  capital  calculations  in  the  SRT  treatment  of  securitisations  with  comparable 
characteristics across Member States. Overall, this has constrained banks in their capacity to use 
securitisation as a capital optimisation tool and risk transfer tool.  

This  has  also  been  confirmed  in  the  public  consultation,  where  a  majority  of  respondents  who 
actively responded do not consider the existing process of SRT supervisory assessments efficient 
and adequate. Despite the more recent increase in SRT securitisation transactions (i.e. transactions 
executed with a capital relief purpose)177 and improvements in the SRT assessments and processes, 
some  targeted  changes  to  the  existing  SRT  framework  seem  still  warranted  to  increase  the 
robustness  and  efficiency  of  the  SRT  framework.  With  respect  to  the  SRT  tests  applied  to 
securitisations, responses have been more nuanced; industry generally agrees with the conditions 
of  the  tests  governing  the  transfer  of  risks  and  do  not  see  a  need  to  make  them  more  robust, 
although  they  are  not  opposed  to  it.  Public  authorities  on  the  other  hand  deem  it  necessary  to 
increase the robustness of the framework, in line with the EBA report.  

Another issue relates to the undue strictness of the eligibility rules for securitisation in the LCR. 
The LCR Delegated Act seeks to ensure that banks hold a sufficient and diversified liquidity buffer 
of high-quality liquid assets (HQLA) to meet net outflows under 30-day severe idiosyncratic and 
market wide stress conditions. Senior tranches of securitisations of various asset classes (including 
RMBS, auto loans and leases, consumer credit and SME loans) are eligible for the inclusion in the 
liquidity  buffer,  subject  to  certain  conditions.  Many  stakeholders,  however,  point  to  the  overly 
restrictive nature of the eligibility conditions, in particular as regards the rating requirements (only 
AAA-rated  exposures  are  allowed)  and  haircuts  (which  extend  from  25  to  35%).  Stakeholders 
argue that the eligibility criteria are not commensurate with the market liquidity observed in the 

175  Other  identified  shortcomings  include  lack  of  clear  safeguards  against  the  use  of  tranches  with  insufficient 
thickness,  lack  of  additional  requirements  to  assess  the  sustainability  of  the  SRT,  limited  focus  on  the 
commensurateness of the transferred risk, and other specific limitations of each test. 
176 Microsoft Word - EBA Report on SRT.docx 
177 Based on data from EBA, 63% of all SRT transactions are synthetic transactions (93% of synthetic transactions 
apply and achieve SRT). The ECB/SSM as the main supervisor has recently been cooperating with representatives of 
industry towards speeding up and simplifying the SRT processes. 

165 

 
 
 
 
 
 
product,  exhibited  even  under  recent  stressed  liquidity  conditions.  This  has  also  negatively 
impacted the bank investors’ demand for the STS traditional securitisations, because the ability of 
the securitisation to  be LCR-compliant is  a primary criterion for banks’ investment  in the STS 
market  segment.  In  turn,  this  has  contributed  to  reduced  demand  by  bank  treasuries  for  senior 
tranches of publicly offered STS traditional securitisation and is having a negative impact on the 
market liquidity for those securitisations. Due to these regulatory restrictions, banks’ share in the 
liquidity  buffers  is  negligible  and  has  never  materially  changed.  Banks  in  the  European  Union 
invest less than 1% of their liquidity buffer in securitisations.  

In sum, the evaluation of the Framework more generally has uncovered a number of undue barriers 
for  banks  to  engage  in  securitisation,  impacting  STS  securitisations,  but  also  the  securitisation 
market developments more broadly.  

Possible amendments  to the Framework should focus on removing undue  barriers for banks as 
issuers of securitisations. As one of the objectives should be to transfer risks outside of the banking 
sector,  to  other  actors  in  the  financial  system  best  placed  to  bear  them,  banks  should  not  be 
incentivised as investors in  the risky tranches of the securitisations, i.e. first  loss or mezzanine 
tranches  which  account  for  the  majority  of  risks  associated  with  securitisations.  No  prudential 
concerns have however been perceived with respect to banks’ investments in the senior tranches, 
especially  of STS securitisations, which contain minimal  risk, and also  in  the context of wider 
efforts to enlarge the investor base for the senior tranches on a larger scale.  

b) Insurance 

High level description of Solvency II 

Insurance companies are subject to SII which regulates how much capital  insurers should set 
aside  to  cater  for  the  risks  arising  from  their  investment  activities.  While  bigger  insurers 
generally  use  their  own  modelling  of  risks  (‘internal  model’)  which  is  more  tailored  to  the 
specificities of their risk profile, the smaller ones use the so-called ‘standard formula’ which 
clearly prescribes capital requirements on investments. As regards securitisation, while insurers 
using an internal model are relatively free to determine how to assess market and credit risks 
(subject to prior supervisory approval) – and they do invest more in securitisation than standard 
formula  insurers16  –,  companies  which  use  the  standard  formula  have  no  discretion  when  it 
comes to computing capital requirements.  

The initiative has been effective in removing regulatory disadvantages for simple and transparent 
securitisation products in terms of levels of capital requirements in comparison with more opaque 
ones. It has done this by lowering the level of capital requirements for STS transactions compared 
to before, and by keeping the capital requirements for non-STS transactions unchanged. Although 
not explicitly identified as an objective by the initial initiative, it can be inferred that the removal 
of prudential obstacles was expected to result in a framework that is more conducive to investments 

166 

 
 
 
 
 
in  high-quality  securitisations.  In  fact,  the  initiative  has  contributed  to  increasing  insurers’ 
investments  in  securitisation  in  absolute  amounts,  though  the  share  of  this  class  in  insurers’ 
portfolios remains modest178.  

This  evolution  confirms  the  feedback  collected  by  the  Commission  through  its  consultation 
activities.  For  instance,  a  majority  of  respondents  to  the  Commission  targeted  consultation 
expressed an interest in increasing their exposure to securitisation, at the same time acknowledging 
the importance of risk-return profiles and pointing to high compliance costs stemming from due 
diligence requirements.  

Assessment of effectiveness in terms of levels of capital requirements 

The  introduction  of  dedicated  prudential  treatment  for  STS  securitisation  has  resulted  in  more 
differentiation between capital requirements for this type of securitisation compared with non-STS 
transactions.  As  such,  this  has  been  effective  in  removing  undue  disadvantage  for  simple  and 
transparent  securitisation  when  the  standard  formula  is  used.  Capital  requirements  for  simple 
securitisations  are  now  up  to  10  times  lower  than  those  applicable  to  non-STS  securitisations 
(depending on the duration and seniority of the STS securitisation).  
Compared with previous rules, the Commission services have estimated that capital requirements 
for investments  in  simple and transparent  securitisation are now 21.5% lower than prior to  the 
initiative (circa 100 billion in capital relief).   

The  table  below  shows  applicable  capital  requirements  for  different  durations  and  ratings  – 
reflective of relevant investment categories by insurance companies.  

2-year 
AAA-rated 

duration 

7-year  duration 
AA-rated 

3-year  duration 
BBB-rated 

2% 

STS 

STS 

7,4% 

Senior 
securitisation 
Non-senior 
securitisation 
Non-STS 
securitisation 
Note: How to read the table: when investing EUR 100 in a 2-year duration AAA-rated securitisation, the amount of 
capital to set aside for insurers is EUR 2 if the securitisation is “senior STS”, EUR 5.6 if the securitisation is non-
senior STS, and EUR 25 if the securitisation is non-STS. 

20,8% 

23,7% 

93,8% 

59,1% 

8,4% 

5.6% 

25% 

As expected, the reform had no effect on insurers which use an internal model. This is because 
even before the initiative, insurers using  an internal  model had the ability to  make tailor-made 
modelling  of  the  risk  profile  of  their  actual  portfolio.  The  change  to  standard  formula  capital 
charges – which they do not use – has therefore no effect on their modelling capacities.  

178 In view of the trillion euros of assets under management, even a slight increase in  the share of investments in 
securitization can translate into a material increase in investments in absolute amounts. 

167 

 
 
 
 
 
 
As part of the targeted consultation, some stakeholders – the majority of which are non-insurers – 
claim  that  like  for  the  standard  formula,  capital  requirements  based  on  internal  models  can 
disincentivise  investments  in  securitisations.  However,  the  detailed  answers  supporting  such 
criticisms suggest  other  factors being  pertinent,  such as  risk modelling maintenance (e.g., high 
costs  of  keeping  the  model  fit  for  purpose  and  up-to-date),  data  miscalibrations  (e.g.,  some 
stakeholders complain about the use of historical post financial crisis data dominated by spread 
volatility, rating migration, etc.) which are not securitisation-specific, but concern any asset class. 
In  addition,  supervisory  authorities  may  also  have  negative  perceptions  about  securitisation 
(stigma)  and  could  exercise  stricter  scrutiny  when  approving  internal  models  on  securitisation, 
although there is no available concrete evidence of such possible risk. On the other hand, some 
other  insurance  stakeholders  point  out  that  internal  models  capture  the  risk  reduction  benefits 
associated with securitisation more effectively than the standard formula for capital requirements. 
In any case, no stakeholder identified a clear area of ‘change’ to the internal model framework 
applicable to securitisation. 

Assessment  of  effectiveness  in  terms  of  increasing  levels  of  investments  in  simple  and 
transparent securitisations 

The  effectiveness  of  prudential  changes,  stemming  from  the  2019  reform,  on  the  level  of 
investments  in  simple  and  transparent  securitisations  is  more  ambiguous.  Investments  in  STS 
securitisations remain the minority of insurers’ securitisation investments despite the much lower 
capital  requirements.  In  absolute  amounts,  securitisation  investments  have  increased  by  EUR 
between 5 and 6 billion between end-of-2018  and end-of-2023, 2018 being the last  year under 
‘old’ rules prior to the introduction of the current Framework179. In relative terms, this represents 
a significant increase of between 50% and 66%, albeit from a very small base180. 

Capital requirements on senior STS securitisation are very close to those applicable to bonds. Still, 
the  share  of  STS  securitisation  in  investment  portfolios  is  negligible,  whereas  corporate  bonds 
make up 18% of total investments. In fact, there is no evidence that STS securitisation offers a 
return that is significantly higher than that applicable to other fixed income asset classes of similar 
credit  quality.  For  instance,  according  to  some  data  shared  by  industry  stakeholders  with  DG 
FISMA, in January 2025 there was a 10-basis point differential between the spreads on AAA-rated 
(senior) STS mortgage-backed securitisation and corporate bonds with the same ratings181.  

179  The  figures  cover  standard  formula  insurers  which  are  the  beneficiaries  of  the  changes  in  prudential  rules. 
Depending on the data source, these vary slightly. 
180 The uncertainty stems from inconsistencies in insurers’ reported data, which vary depending on the quantitative 
reporting template based on which the Commission services’ assessment is made 
181 Source: BofA Global Research 

168 

 
 
 
 
 
 
One of the reasons for the low yield on senior STS securitisation, in particular STS RMBS, may 
be the fact that the pool of loans to be securitised was originated during times where interest rates 
on such loans were exceptionally low (in some Member States even 1% or lower), which means 
that  the  most  senior  tranches  of  a  securitisation  of  such  loans  would  have  very  low  yields.  In 
addition, capital requirements, though quite low, remain slightly higher than those applicable to 
such  similar  asset  classes.  Investments  in  securitisations  requires,  in  addition,  implementing 
extensive  due  diligence  requirements  –  more  extensive  than  for  other  asset  classes  (see  next 
section). This means that the return on risk adjusted capital (i.e. put in simpler terms, financial 
return  divided  by  applicable  capital  and  compliance  requirements)  remains  lower  for  STS 
securitisation.  

According  to  the  responses  to  the  targeted  consultation,  for  a  majority  of  stakeholders  capital 
requirements are disproportionate and not commensurate with the risk of STS securitisations. It is 
however disputable that prudential rules on STS securitisation are a major obstacle to investments.  

As regards senior STS securitisations, capital requirements only exceed those of corporate bonds 
by less than 2 percentage points, depending on the rating and duration. Despite the small difference 
in capital requirements, insurers allocate a much bigger portion of their investment portfolio to 
corporate  bonds  in  comparison  to  securitisation  products  (circa  28%  vs  less  than  1%  of  total 
investments in 2023182). This indicates that other factors, besides capital requirements, influence 
insurers’ preference for corporate bonds. 

As regards non-senior STS securitisations, the average ratio of capital charges for non-senior to 
senior STS securitisation is broadly in line with banking rules under the 2019 framework183. The 
lack of supply of non-senior STS tranches may be driving the low level of insurers’ investments. 
Based on data by AFME, the outstanding balance of securitisation tranches rated A or lower (used 
as a proxy for non-senior tranches) represented 13.3% of the total outstanding balance of rated 
securitisations in Europe at the end of 2023. By comparison, in the US where insurers are much 
more active investors in the securitisation market, this ratio stood at 45.2%. Another obstacle to 
insurers’ investment in this segment could be high market competition, as originating banks also 
confirm that non-senior STS tranches are largely over-subscribed (i.e. the demand exceeds by a 
large multiple the supply). 

182 Source: EIOPA’s statistics 
183  In  fact,  the  STS  calibrations  for  Solvency  II  precisely  aimed  at  ensuring  sufficient  consistency  with  the 
requirements  under  the banking  external ratings-based  approach  (SEC-ERBA),  which  is  technically  the  closest  to 
Solvency II rules and allows for the most ‘straightforward’ comparison. 

169 

 
 
 
 
 
 
 
There  are  other  reasons  which  may  also  explain  why  insurers  are  not  more  engaged  in  the 
securitisation  market.  The  2022  EIOPA  advice  on  securitisation184  indicates  that  securitisation 
does not match insurers’ investment preferences which are focused on the ‘financial risk / return 
profile’  (and  not  the  ‘prudential  cost  /  return  profile’)  of  the  investment  and  asset-liability 
management, in particular for insurance products with long-term life liability and fixed cash flows 
(which is the case not only for life insurers, but also for many non-life insurers offering liability 
insurance) which insurers seek to cover with long-term fixed rate investments in order to reduce 
the  risk  that  changes  in  the  level  of  interest  rates  or  in  the  rhythm  of  cash  inflows,  lead  to  a 
deterioration of their capital position. The importance of an effective asset liability management 
became evident during the past years when interest rates varied a lot. However, this assessment 
needs to be nuanced. EU insurers were more active in the securitisation market prior to the GFC 
which suggests that they did identify an interest in this asset class. In addition, US insurers are 
significantly  investing  in  securitisation.  This  contradicts  the  statement  that  securitisation  is  not 
appropriate to match long-term liabilities as US life insurers largely underwrite annuity products 
with very long duration and regular cash outflows.  

Another  reason  for  the  lack  of  demand  for  securitisation  from  the  insurance  industry  is  that 
investors  perceive  securitisation  as  a  complex  product  with  extensive  and  costly  due  diligence 
requirements (see assessment in section 4.1.3. below). 

the  Securitisation  Framework  been 
4.1.3.  How 
reducing/eliminating unduly high operational costs for issuers and investors?  

effective  has 

in 

The 2015 Impact Assessment highlighted the absence of standardisation in data provision across 
different types of securitisations as a determining factor behind the costly due diligence and credit 
risk  analysis  by  investors.  Moreover,  differences  in  disclosure  and  due  diligence  requirements 
applicable to securitisations between the various sectoral legislation at the time also resulted in 
unduly high costs for issuers and investors. 

While  the  framework  sought  to  reduce  operational  costs  that  stemmed  from  regulatory 
inconsistencies  and  a  lack  of  standardisation,  stakeholder  feedback  from  the  2021  targeted 
consultation185 reveals that high operational costs for issuers and investors remain a significant 
issue.  31  of  55  respondents  (~56.4%)  considered  the  due  diligence  and  transparency  regime 
provided for in the SECR to impose unduly high operational costs for issuers and investors. 

Stakeholders  considered  compliance  with  these  requirements  to  be  overly  costly,  in  requiring 
specialized  processes  that  are  more  time-consuming  and  complex  than  those  used  for  other 

184 
framework_en 

See: 

https://www.eiopa.europa.eu/publications/joint-committee-advice-review-securitisation-prudential-

185 Summary of responses - Targeted consultation on the functioning of the EU securitisation framework 

170 

 
 
 
 
 
 
 
financial instruments, such as covered bonds. Respondents also cited the need to involve external 
consultants,  providing  IT  solutions  and  legal  advice,  as  a  significant  cost  of  operations,  and  a 
barrier to entry for new issuers and small investors. 

Recent  stakeholder  feedback  gathered  during  the  latest  targeted  consultation  (conducted  from 
October – December 2024) confirms the 2021 feedback. 79 out of 131 respondents report that the 
framework  has  not  been  effective  in  reducing  unduly  high  operational  costs  and  only  five 
respondents (two government authorities and three associations) responded positively.  

4.1.3.1. Due diligence requirements 

Based  on  the  feedback  provided  by  stakeholders,  Article  5  (due  diligence  requirements)  has 
resulted  in  an  estimated  additional  one-off  costs  of  EUR  13-26  million,  and  approx.  EUR  520 
million annual recurring costs for all investors in the market. For due diligence, most of the costs 
for investors are recurring as for each investment transaction a comprehensive due diligence check 
needs to be performed that takes for most investors several days.  

Next to this stakeholder feedback, a comparison of the due diligence requirements applicable to 
major  institutional  investors  (see  Annex  XII),  confirms  that  that  the  regulatory  due  diligence 
burden  is  much  higher  for  securitisation  than  for  other  instruments.  While  for  other  financial 
products,  investors  must  only  comply  with  the  general  principles-based  due  diligence  rules 
included  in  their  respective  sectoral  legislations,  the  requirements  are  more  detailed  for 
securitisations.  

Some of these additional regulatory due diligence requirements may be justified due to the specific 
nature and risk characteristics of securitisation transactions (e.g. requiring investors to look at the 
structural characteristics of a securitisation) but other requirements cannot be justified on these 
grounds.  For  example,  in  addition  to  carrying  out  a  thorough  assessment  of  the  risks  prior  to 
holding  a  securitisation  position,  EU  investors  are  required  to  carry  out  a  list  of  extensive 
verification  activities  to  check  that  originators  have  complied  with  Article  6  (risk  retention), 
Article 7 (disclosure), Article 9 (credit granting criteria), and Articles 19 to 22 and 23 to 26 (STS 
criteria). These verification activities (requiring investors to check issuer compliance with certain 
criteria)  are  unique  to  securitisations  and  are  largely  duplicative  since  EU  supervisors  are  also 
required to check that EU originators comply with these requirements. They significantly increase 
due  diligence  costs  for  institutional  investors  (several  respondents,  including  associations 
representing  larger  groups  of  investors,  estimate  potential  cost  savings  of  removing  the  above-
mentioned verification activities to 20%-50%).  

Moreover,  stakeholders  argue  that  the  risk  assessment  that  is  required  to  be  carried  out  under 
Article  5(3)  is  not  proportionate  because  it  does  not  differentiate  between  different  types  of 
securitisation positions. For example, a senior investor investing in a triple A tranche has the same 
requirements as a junior investor investing in a first-loss piece, even though the risk of the position 

171 

 
 
 
 
 
 
is much lower for the senior investor than the junior investor. While this may not be an issue for 
large investors that invest in a large number of securitisation positions and can therefore benefit 
from  economies  of  scale,  it  can  be  a  barrier  to  entry  for  small  investors  that  would  only  be 
interested  in  investing  in  less  risky  positions.  The  high  one-off  due  diligence  effort  placing 
effectively  a  barrier  to  entry  for  smaller  players  has  been  pointed  out  as  a  major  obstacle  and 
opportunity cost by 10 respondents including 3 business associations representing larger investor 
groups. 

Industry  respondents  to  the  targeted  consultation  state  that  the  magnitude  of  the  due  diligence 
duties act as a barrier to entry. This has been mentioned in more than 40 replies. The Association 
for Financial Markets in Europe (AFME), representing an estimated share of about 50% of the 
public traditional market, estimated that it takes about 9 months to set-up a new business for EU 
securitisation investment, of which two months would be necessary to understand and put in place 
a framework that implements the due diligence rules. According to the example in “Annex III: 
Who is affected and how?”, it may require up to 40 months and a minimum investment pool of at 
least EUR 1.5 billion for a low-risk STS asset management business to break even. This makes 
market  entry  unattractive  for  investors  focusing  on  high-rated  and  low-yield  securitisation 
products. AFME estimates the universe of asset managers that are regularly active in the public 
securitisation market to below 20 players. In one comparable covered bond transaction alone, the 
number of investors is significantly higher than 20.  

4.1.3.2. Transparency requirements 

Based on the feedback provided by stakeholders, the transparency requirements imposed on the 
issuers/originators, one-off costs are estimated at EUR 370 million and make up the biggest share 
of the additional costs posed by Article 7. This is due to the IT  investments necessary to put a 
reporting system up and running, whereas afterwards the ongoing costs are usually moderate, in 
this case we estimate approx. EUR 120 million annual recurring costs for all EU issuers in the 
markets.  

While  there  was  significant  information  disclosure  in  securitisation  transactions  prior  to  the 
Securitisation  Framework,  there  were  no  direct,  and  sanctionable,  disclosure  requirements  that 
applied to all types of securitisation issuers (banks and non-banks). In general, the amount and 
type of information disclosed was determined by the needs of the market. Large banks that sought 
access to the ECB’s liquidity framework had a more developed disclosure infrastructure to comply 
with the ECB’s collateral requirements.  

Implementing the transparency framework involved significant implementation costs for all types 
of issuers. These costs consisted of: i) gathering information at the level of each individual loan 
prior to issuance, ii) updating this information at least quarterly (monthly in the case of short-term 
securitisations),  iii)  disclosing  all  information  necessary  for  investors  and  supervisors  to 
understand  the  features  of  the  transaction,  iv)  in  the  case  of  STS  securitisations,  disclosing 

172 

 
 
 
 
 
information  on  compliance  with  the  STS  criteria,  and  v)  preparing  regular  investor  reports. 
Reporting entities had to develop the necessary IT infrastructure to report this information to the 
securitisation  repositories  in  the  required  format.  Moreover,  securitisation  repositories  had  to 
develop the infrastructure to receive and provide access to this information to investors, potential 
investors and competent authorities.  

Costs  are  driven  by  the  wide  scope  of  the  transparency  requirement.  Both  public  and  private 
transactions  are  captured  and  must  provide  the  same  information  to  their  investors.  However, 
stakeholders  have  reported  that  investors  in  a  public  securitisation  do  not  have  the  same 
information needs as investors in a private securitisation. The latter have a stronger negotiation 
position vis-à-vis the issuer of the transaction, compared to a public securitisation which is offered 
to  a  multitude  of  investors  on  terms  determined  by  the  issuer.  This  means  that  a  private 
securitisation tends to be structured according to the particular requirements and information needs 
of the investor. Moreover, private transactions are often tailored to fit the needs for investors. They 
have  particular  characteristics  and  tailored  underlying  pools  of  assets,  and  therefore  detailed 
standardised  disclosure  templates  do  not  adequately  capture  the  essence  of  the  transaction  in  a 
fully satisfactory way for the investor. As a result, issuers of a private transaction will have  to 
disclose information that satisfies the investor’s needs which may not be satisfied by the Article 7 
disclosures, increasing disclosure burden without an accompanying increase in transparency.  

in-scope  securitisation 

Furthermore, the extent of the information that is required is overly wide. The SECR introduced 
comprehensive  disclosure  requirements  for  all 
instruments  (i.e. 
securitisations  that  are  issued  by  an  EU-based  original  lender,  originator  or  sponsor,  and/or 
securitisations  that  EU  institutional  investors  invest  in).  This  aimed  to  increase  market 
transparency and provide investors with sufficient information to carry out due diligence. These 
disclosure  requirements  were  further  specified  in  the  October  2019  Regulatory  Technical 
Standards, which included detailed loan-level disclosure templates for all securitisations falling 
under the scope of the SECR (the ‘ESMA templates’). The ESMA templates built upon the ECB’s 
existing loan-level templates, but significantly increased the number of mandatory fields across all 
asset  categories,  thus  increasing  the  reporting  burden  for  issuers.  Stakeholder  feedback  has 
indicated that not all the information that is reported in the ESMA templates is useful for investors. 
There is room to significantly reduce the number of required data fields, thus reducing the reporting 
burden, without impacting the usefulness of the information to investors.  

The  above  is  also  confirmed  by  stakeholder  feedback.  Stakeholders  that  participated  in  the 
consultation report that securitisation disclosure costs are significantly higher than those for other 
instruments with similar characteristics (29 out 131 replied ’significantly higher’, 5 ‘moderately 
higher’,  95  didn’t  reply  or  said  they  don’t  know).  Respondents  pointed  out  in  particular  the 
difference  in  disclosure  requirements  between  securitisation  and  covered  bonds.  Industry 
stakeholders  characterised  covered  bonds  disclosure  as  “subject  to  much  high-level  and  less 
prescriptive transparency provisions and require aggregated data reporting (rather than loan-by-

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loan)” and driven by industry consensus via the ECBC Covered Bond Label. Annex X provides a 
detailed comparison of the disclosure requirements for securitisations and covered bonds. 

Figure 13: Responses to the question how do the disclosure costs (for securitisations) 
compare with the disclosure costs for other instruments with similar risk characteristics?

Furthermore,  the  transaction  information  provided  under  the  SECR  is  not  suited  to  its  primary 
audience – investors. Usage statistics186 for public securitisations show that only a limited number 
of large public investors are using the data reported under the ESMA templates.  In fact, many 
investors have reported that they rely on alternative disclosure channels to obtain the information 
they need for their due diligence. 

Figure 14: Distribution of the number of downloads of the securitisation data templates 
prescribed by the Commission Delegated Regulation 2020/1224 by category of data users 
(August 2023 – July 2024) 

Source: JCSC Article 44 report (reference to be updated once the report is public) 

186 Statistics from European Data Warehouse, the largest securitisation repository in the EU. 

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In view of these findings, we conclude that the securitisation framework has not been effective in 
reducing/eliminating unduly high operational costs for issuers and investors.  

4.1.4.  How  effective  has  the  Securitisation  Framework  been  in  supporting 
standardisation and in tackling regulatory inconsistencies? 

According to stakeholder feedback gathered during the targeted consultation, a large majority (i.e. 
54 out of 82 respondents with opinion with 131 total respondents) considers the current framework 
as effective in supporting standardisation processes and practices. In particular, stakeholders find 
that the framework has been effective in increasing the degree of standardisation of marketing and 
reporting material, but a significant majority disagrees that the framework has reduced operational 
costs  linked  to  standardised  securitisation  products.  The  latter  is  consistent  with  the  negative 
assessment of the effectiveness of the framework in reducing unduly high operational costs for 
issuers and investors overall.  

The  Securitisation  Framework  has  played  a  crucial  role  in  promoting  standardisation  in 
securitisation markets by introducing a list of common definitions and establishing common rules 
for transparency, disclosure, due diligence, and risk retention. These rules apply uniformly to all 
securitisations and all parties involved, helping to eliminate regulatory inconsistencies and support 
standardisation in processes and practices in the EU securitisation market. While the Securitisation 
Framework has brought greater uniformity to the market, the high operational costs it entails for 
issuers and investors has offset some of the benefits that standardised processes were intended to 
bring to the EU securitisation market.  

As regards regulatory inconsistencies – before the SECR came into place there was no common 
definition of a securitisation across the EU, nor were there common due diligence, transparency, 
or risk retention rules. Instead, rules were fragmentated across different sector specific legislation 
and  across  different  Member  States.  As  a  result,  in  2015,  the  Joint  Committee  of  the  ESAs 
recommended to harmonise regulatory requirements for securitisations. 

With respect to tackling the regulatory inconsistencies, despite the consolidation of the applicable 
requirements to all market participants in a single legislative instrument, stakeholders generally 
disagree that the framework has been effective in tackling regulatory inconsistencies. Only 21 out 
of 131 total respondents indicated some level of agreement (9 out of 52 investors and 3 out of 32 
originators).  Indeed,  some  elements  that  are  important  for  the  securitisation  market,  such  as 
insolvency  legislation,  were  left  outside  the  scope  of  the  securitisation  framework.  Lack  of 
standardisation in these areas has been recently pointed out by stakeholders and researchers as one 
of the factors determining the muted development of the securitisation market in the EU. At the 
same time, these issues are not specific to securitisation but are of broader significant for capital 
markets  development  in  the  EU.  Therefore,  any  measures  to  address  them  should  be  part  of  a 
broader strategy.  

In  view  of  these  findings,  we  conclude  that  the  securitisation  framework  has  been  effective  in 
achieving  the  operational  objective  of  supporting  standardisation  of  marketing  and  reporting 

175 

 
 
material,  but  it  has  not  been  fully  effective  in  tackling  regulatory  inconsistencies  in  the 
securitisation market. 

4.2. Efficiency 

The  efficiency  analysis  assesses  the  benefits  and  costs  arising  from  the  EU  intervention  and 
whether it was cost effective. The analysis draws upon stakeholder feedback on costs associated 
with  the  Framework,  from  the  2024  targeted  consultation.  While  the  implementation  of  the 
Framework is  considered  somewhat  cost-effective for the prudential  aspects,  its non-prudential 
elements have resulted in high costs for issuers and investors. 

4.2.1. Benefits 

The main benefit associated with the introduction of the SECR is the overall increase in market 
transparency,  as  well  as  investor  protection.  This  benefit  contributes  to  the  attainment  of  the 
objective  of  “removing  investor  stigma”.  By  introducing  clear  transparency  requirements, 
investors and supervisors are better able to assess the risks of securitisations. Similarly, a robust 
due diligence process ensures that investors know what they are buying and increases trust in the 
securitisation market. The main benefit of the introduction of the STS framework is that it has 
fostered  simplicity,  transparency  and  standardisation  of  the  securitisation  structures  in  the  EU. 
Such structures are easier for investors and supervisors to assess.  

The  framework  has  differentiated  the  capital  requirements  for  banks’  STS  securitisations 
compared to non-STS ones, in an efficient way. Capital requirements for STS securitisations can 
be  as  low  as  half  of  the  capital  requirements  for  non-STS  securitisations,  even  if  STS  capital 
requirements  are  still  generally  higher  than  what  they  would  have  been  for  equivalent 
securitisations before the framework came into place. Banks face lower capital requirements for 
their exposures to STS securitisations in two ways: (i) a reduced (p) factor (the (p) factor for STS 
transactions is half the level of the one for non-STS transactions, and can therefore result in half 
of the capital requirements for the respective tranches, compared to a non-STS securitisation); (ii) 
a lower floor for minimum capital requirements (10% risk-weight floor for capital requirements 
for their exposure to senior tranches in STS securitisations, compared to 15% for senior tranches 
in non-STS securitisation).   

For insurers, the changes implemented in SII have reduced the capital cost of investing in STS 
securitisation, in particular for senior tranches. As a result, the Framework incentivises insurers to 
invest in the simpler and more transparent part of the securitisation market. STS securitisations are 
typically more liquid and easier to trade compared to non-STS securities. This liquidity can help 
insurers manage their investment portfolios more flexibly, especially in volatile market conditions, 
by enabling easier buying or selling of assets. DG FISMA calculations suggests that STS capital 
requirements are on average 80% lower than non-STS securitisations on average. Investments in 
senior STS tranches, where demand is still perceived as low by originating banks, have increased 
by one third between 2019 and 2023 up to EUR 1.25 trillion. 

4.2.2. Costs 

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The main costs associated with the provisions of the SECR are the due diligence and transparency 
costs  explained  in  the  Effectiveness  section  above.  Investors’  due  diligence  costs  under  Art.  5 
SECR  are  primarily  recurrent,  as  each  investment  transaction  requires  a  comprehensive, 
standalone due diligence check. On the other hand, one-off costs comprise the biggest share of the 
additional transparency costs imposed by Art. 7. DG FISMA estimates these costs at around EUR 
370 million of such one-off costs. One-off costs are generally attributable to the initial financial 
outlay  associated  with  establishing  a  compliant  reporting  IT  system.  The  subsequent  annually 
recurring costs are usually moderate: approximately  EUR  120  million for all EU issuers in the 
market.  

The transparency regime has also introduced additional costs to the securitisation industry through 
the set-up of securitisation repositories. Issuers of public securitisations are obliged to report a rich 
set  of  information  to  a  securitisation  repository  to  make  this  data  available  to  investors  and 
supervisors.  While  investors  and  supervisors  can  use  the  repositories  free  of  charge,  issuers 
reporting  to  the  repository  are  required  to  pay  a  fee.  To  illustrate:  EDW,  one  of  the  main 
securitisation repositories in the EU, charges EUR 7,000-7,500 per year for non-ABCPs, and EUR 
9,000  per  year  for  master  trusts  and  ABCP  programs.  Originators  also  incur  a  one-off  deal 
initiation fee of EUR 8,000, to access some premium services187.  

In addition, the transparency regime may also keep issuers from being able to securitise certain 
pools of loans in case they are not able to collect all the necessary information or are if there are 
concerns  about  the  confidentiality  of  the  data  that  is  reported  via  securitisation  repositories. 
Therefore, the issuer may have to incur additional costs in order to be able to build up a pool of 
securitise-able assets or simply be forced to forego the opportunity to securitise.  

Moreover, issuing and investing in STS securitisations comes with additional verification costs. 
According to Article 5 of the SECR, investors are required to verify that STS transactions comply 
with STS criteria. Furthermore, issuers are subject to sanctions if they mislead investors by mis-
labelling a transaction as STS compliant. As a safeguard, therefore, most issuers avail of a Third-
Party Verifier (TPV) for STS transactions. The costs of such a service range from EUR 33,500 - 
44,000 for a traditional STS securitisation with a maturity of up to three years, and EUR 38,500 - 
46,750 for a three-year on-balance-sheet STS transaction188.  

The  costs  associated  with  the  introduction  of  the  amended  banking  prudential  framework  are 
assessed to be low (though not quantified). They mostly comprise of one-off adaptation costs to 
the new securitisation prudential framework and some undue increases in capital costs for STS 
securitisations,  considering  the  significant  non-neutrality  introduced  in  the  capital  framework 
which may be deemed excessive in light of the good credit performance of STS securitisations and 
numerous risk mitigants risks applied to STS structures.  

187 https://eurodw.eu/solutions/pricing/ 
188  Source:  https://pcsmarket.org/wp-content/uploads/Fee-Schedule.pdf  and  STS  verification  -  STS  Verification 
International GmbH 

177 

 
 
 
 
 
 
The implementation costs associated with changes in insurance prudential rules are reported to be 
very low (though not quantified) – they mainly consist of replacing the risk factors for so-called 
‘type  1’  securitisation  with  those  applicable  for  STS  securitisations.  The  lower  capital 
requirements on simple and transparent securitisation can result in some additional risk taking by 
insurers depending on how they use the capital relief. However, in view of the ongoing level of 
STS securitisations in insurers’ investment portfolios, that risk seems largely contained at EEA 
level,  without  precluding  that  it  could  be  more  significant  for  individual  insurers  with  specific 
exposures to securitisations. 

4.3. Coherence  

This section assesses coherence of the Securitisation Framework, both in terms of the degree of 
coherence  between  the  provisions  within  the  Framework  (internal  coherence)  as  well  as  its 
relationship with other pieces of legislation (external coherence). 

4.3.1. Internal coherence 

Overall,  the  Securitisation  Framework  shows  a  high  degree  of  internal  coherence.  It 
simultaneously creates a general regulatory system for European securitisations, while providing 
for harmonised prudential treatment through targeted amendments to the CRR, LCR Delegated 
Act and SII.  

The  different  provisions  in  the  SECR  follow  a  clear  logical  structure,  starting  with  generally 
applicable  horizontal  rules  (due  diligence,  transparency,  risk  retention  etc).  Additional 
requirements are specified for securitisations benefitting from the STS label. These more rigorous 
criteria  are  consistent  with  the  logic  of  differentiating  the  STS  category  and  its  associated 
prudential  benefit.  Stakeholders  have  confirmed  that  this  structure  does  not  give  rise  to 
incoherence, duplication or conflicting requirements.  

Prior to the introduction of the Framework, inconsistencies were identified between the framework 
for  banks  (CRR)  and  for  insurers  (SII).  Therefore,  the  Framework  introduced  dedicated 
preferential  prudential  treatments  for  both  senior  and  non-senior  STS  securitisation  under  both 
banking and insurance rules. 

In relation to insurance, there are still two sources of incoherence: 

• 

• 

Incoherence with banking rules: SII does not differentiate between senior and non-senior 
tranches  of  non-STS  securitisations,  unlike  in  the  banking  rules.  This  results  in  an 
inconsistency of the risk sensitivity of the prudential treatment for banks and insurers. 

Internal  incoherence  on  SII:  This  can  be  illustrated  by  looking  at  disadvantageous 
prudential treatment of securitisation, when compared to equity shares. Holders of shares 
are generally the first to absorb losses in case of insolvency (i.e. before debtholders and 
other creditors) and they are exposed to significant volatility. Compared to this, the highest-
rated senior tranches of securitisation are more protected in case of insolvency and arguably 

178 

 
 
 
 
 
 
 
less volatile than equity. However, while capital charges on unlisted equities or on equities 
from emerging markets are on average at 49%, even the most senior tranches of non-STS 
securitisation can be subject to capital charges significantly exceeding 50%. 

4.3.2. External Coherence  

The SECR presents a logical and coherent framework, uniting different legal provisions scattered 
in  various  pieces  of  legislation.  By  doing  so  it  avoids  external  inconsistencies  and  differential 
regulatory  treatment.  Feedback  from  stakeholders  confirm  that  the  approach  taken  is  the 
appropriate one. 

Some minor inconsistencies have been found between the SECR and the Alternative Investment 
Fund  Managers  Directive  (AIFMD)  as  regards  due  diligence  and  delegation  requirements.  In 
certain  instances,  this  has  led  to  duplicative  compliance  requirements.  The  EU  Securitisation 
Framework  is  coherent  with  the  securitisation  framework  for  regulatory  capital  requirements 
issued by the Basel Committee on Banking Supervision (BCBS), IOSCO's recommendations on 
securitisation,  as  well  as  the  BCBS-IOSCO  criteria  for  identifying  simple,  transparent  and 
comparable  securitisations  (called  Simple,  Transparent  and  Standardised  in  the  EU).  The  EU 
Securitisation Framework has adapted the Basel and IOSCO standards on a few aspects, such as 
the scope of application of the STS label (extended to synthetic securitisations), the hierarchy of 
the approaches and the eligibility of securitisations in the LCR. 

4.4. EU added value 

This  section  considers  if  and  how  the  EU  intervention  made  a  difference.  Securitisation 
Framework has provided a clear EU-wide legal  framework by harmonising existing  provisions 
which were scattered across a large number of sectoral legal acts that applied to different market 
entities.  

The SECR has introduced a single, coherent and harmonised legal framework for original lenders, 
originators, sponsors, securitisation special purpose vehicles (SSPVs) and institutional investors 
participating in the EU securitisation market. A Directive or national-level legislation would not 
have  led  to  the  same  results.  Transposition  of  a  Directive  or  national  laws  would  have  led  to 
divergence across Member States, resulting in distortion of competition and regulatory arbitrage. 
Moreover,  most  existing  EU  provisions  in  this  area  had  been  successfully  adopted  and 
implemented in the form of Regulations.  

Securitisation products are part of EU financial markets that are open and integrated. Securitisation 
allows to link financial institutions from different Member States and non-Member States: banks 
can  originate  the  loans  that  are  securitised,  while  financial  institutions  such  as  insurers  and 
investment funds invest in these products and they can do so across European borders, but also 
globally. The securitisation market is therefore international in nature and measures at the EU level 
are the right tool for designing an adequate legal framework. The fact that originators and investors 
follow the uniform rules across the Single Market reduces the cost of issuance and investing. 

179 

 
 
 
 
 
 
 
The Regulation has facilitated further integration of the market, and the legal framework has been 
most effective with regard to the policy aim of providing a high level of investor protection through 
risk retention and information availability. The STS label has been widely accepted as a market 
standard.  It  serves  to  help  investors  identify  high-quality  structures  and  removes  the  stigma 
attached to securitisation.  

4.5. Is the intervention still relevant? 

Over  the  implementation  period  of  the  Securitisation  Framework,  its  initial  objectives  have 
remained  relevant  to  ongoing  EU  policy  goals  and  priorities.  Europe’s  investment  needs  have 
grown in size, scope, and urgency since the introduction of the Securitisation Framework, and they 
cannot be met by public financing alone. As such, the alleviation of undue obstacles to private 
financing remains a highly – and ever more - relevant objective to attain.  

The  Savings  and  Investment  Union  was  unveiled  in  2024  as  a  cornerstone  of  the  2024-2029 
Commission mandate, and securitisation has a key role to play in this regard. Securitisation allows 
lenders to package and sell the loans that they grant to capital market investors and, through this 
process,  they  free  up  capacity  that  could  be  used  for  more  lending,  for  instance  to  SMEs  and 
corporates.  

Looking  ahead,  the  needs  and  objectives  of  this  initiative  will  be  of  sustained  and  increasing 
relevance in the push for European competitiveness. The Competitiveness Compass189 highlights 
the need for the EU to meet its massive financing needs, to deliver on objectives in the areas of 
innovation, the clean, digital and tech transitions. The Savings and Investment Union is a priority 
to meet these financing needs and ensure European competitiveness in the years to come.  

From a non-prudential perspective, feedback from the targeted consultation indicates that while 
the current Framework and its subsequent amendments have gone some way to achieve the stated 
objectives, issuance and investment barriers remain high. Stakeholder feedback does indicate that 
there is sizeable investor interest in EU securitisation products, but the persistence of the barriers 
identified prior to the introduction of the current Framework, continue to impede this demand.  

In terms of prudential rules for banks, the initiative was focused on introducing a differentiated 
regulatory framework for simple, transparent and standardised securitisations. While a degree of 
risk  sensitivity  has  been  introduced  in  the  Framework  by  allowing  lower  capital  for  STS 
securitisations  compared  to  non-STS  securitisations,  it  continues  to  incorporate  a  significant 
degree of conservatism, both for STS and non-STS transactions, which results in high bank capital 
requirements  for  their  securitisation  exposures.  The  existing  prudential  requirements  are  not 
sufficiently  risk  sensitive  and  do  not  adequately  reflect  the  numerous  EU  regulatory  and 
supervisory risk mitigants that have been put in place in recent years as well as the good credit 
performance of securitisations observed in the recent past. Therefore, they discourage EU banks 

189  Commission  Communication :  « A  Competitiveness  Compass  for 
https://commission.europa.eu/document/download/10017eb1-4722-4333-add2-e0ed18105a34_en. 

the  EU » 

,  29  January  2025, 

180 

 
 
 
 
 
 
from participating more actively in the EU securitisation market. A more active role by banks in 
the EU securitisation market is essential to achieve the general objective of the initiative. 

With regard to insurance prudential rules, while capital requirements on STS securitisations have 
been significantly reduced, the framework for non-STS securitisation is characterised by a high 
level of conservatism. In fact, capital requirements on non-standard securitisation are still based 
on EIOPA’s 2013 calibrations190, i.e. in the aftermath of the Subprime and Great Financial Crises, 
and before Solvency II started to apply. Such a level of conservatism may no longer be justified in 
view  of  the  much  more  robust  legal  framework  and  requirements  applicable  to  securitisation 
investments.  Prudential  rules  on  non-STS  securitisations  remain  largely  more  capital  intensive 
than those applicable to STS securitisations, irrespective of the credit quality of the securitisation. 
In general, investments in non-STS securitisation require locking an amount of capital that is more 
than half the value of the investments. Many stakeholders provide this feedback in the context of 
the targeted consultation.   

In  addition,  prudential  rules  for  insurers  do  not  differentiate  between  senior  and  non-senior 
tranches of non-STS securitisation, and as a result the existing framework can incentivise insurers 
to invest in the riskier junior non-STS category so as to obtain a higher return with the same capital 
charge  as  the  one  applicable  to  senior  non-STS  category.  The  framework  is  therefore  biased 
towards  most  risky  non-STS  securitisations  (compared  with  less  risky  ones)  which  might  be 
detrimental  to  policyholder  protection  because  unduly  encouraging  (or  even  ‘prudentially 
rewarding’)  insurers  to  take  more  risk.  Strong  investor  demand  for  senior  tranches  would 
incentivise  more  securitisation  issuance,  as  argued  in  section  2.3,  and  therefore  contribute  to 
achieving the general objective. 

5.  What are the conclusions and lessons learned? 

The Securitisation Framework has partly met its original objectives. The intervention has not fully 
achieved the general objective of reviving the securitisation market, although it has been successful 
in ensuring safe and high-quality securitisation practices on the part of issuers and investors.  

Regarding  the  specific  objectives,  the  Framework  has  been  successful  in  supporting  the 
standardisation of processes and practices in securitisation markets and partly tackled regulatory 
inconsistencies. However,  it has  only  been partly successful in  removing the stigma associated 
with  securitisation,  and  in  removing  regulatory  disadvantages  for  simple  and  transparent 
securitisations, despite the regulatory improvements put in place. Moreover, the Framework has 
not  been  successful  in  reducing  high  operational  costs  and  in  significantly  scaling  up  the 
securitisation  market  in  the  EU.  While  the  implementation  of  the  Framework  is  considered 

190 See EIOPA’s Technical Report on Standard Formula Design and Calibration for Certain Long-Term Investments: 
https://www.eiopa.europa.eu/consultations/standard-formula-design-and-calibration-certain-long-term-
investments_en 

181 

 
 
 
 
somewhat cost-effective for the prudential aspects, its non-prudential elements have resulted in 
high costs for issuers and investors.  

In  the  areas  of  transparency  and  due  diligence  requirements,  the  evaluation  shows  that  very 
prescriptive legal requirements result in high operational costs for issuers and investors without 
necessarily  advancing  the  policy  objectives.  A  “catch-all”  approach  may  be  unsuited  to  the 
different needs of public and private investors, and a more principles-based approach would allow 
the achievement of the objectives in a more cost-efficient manner.  

Investor  stigma  towards  securitisation  continues  to  be  observed  in  the  EU  market,  despite  the 
robust credit performance and legal framework. However, all the necessary safeguards are in place 
to mitigate investor stigma, and a further improvement in investors’ perception of securitisation in 
the EU is expected in the medium to long term. 

The  regulatory  disadvantage  for  STS  securitisations  has  been  addressed  but  the  existing  bank 
prudential and liquidity rules still unduly disincentivise banks’ participation in the securitisation 
market, both as originators and senior tranche investors for both STS and non-STS securitisations. 
Despite the strong historic performance of EU-originated securitisations and despite the safeguards 
that have been introduced in recent years, the prudential framework for banks is still insufficiently 
risk  sensitive  and  capital  ‘non-neutrality’  is  disproportionately  high  for  certain  securitisation 
transactions.  In  addition,  the  rules  governing  significant  risk  transfer  incorporate  a  number  of 
structural flaws and can lead to complex and inconsistent supervisory processes and outcomes. 
Lastly, the strictness of the eligibility rules for securitisation in the LCR has reduced bank treasury 
demand for senior tranches of publicly offered securitisations, with a knock-on negative impact on 
the market liquidity for those securitisations.  

To  address  undue  prudential  barriers  for  banks  originating  and  investing  in  securitisations,  a 
revision of the prudential treatment of securitisations is necessary. Any future amendments of the 
prudential  treatment  of  securitisation  transactions  need  to  be  effective,  proportionate  and  well-
targeted and strike a balance between safeguarding financial stability on the one hand and on the 
other  hand  supporting  market  development  and  reducing  undue  disincentives  to  banks’ 
involvement in the securitisation markets.  

The insurance prudential rules introduced under the evaluated Framework have failed to stimulate 
increased investment in STS securitisations, which continue to represent a minority of insurers' 
securitisation investments, despite their much lower capital requirements compared to non-STS 
ones. Greater investment by insurers in non-senior STS securitisations is not helped by low supply 
in current market conditions, where non-senior STS securitisations account for less than 20% of 
total outstanding placements. 

The  evaluation  of  the  Securitisation  Framework  for  insurers  has  highlighted  several  important 
lessons. First, the current framework can incentivise insurers to invest in riskier junior non-STS 
securitisations, which may undermine policyholder protection. To address this, a revision of the 
prudential treatment of non-STS securitisations is necessary. Second, the lack of differentiation 
between senior and non-senior tranches of non-STS securitisations in the SII framework creates 

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an inconsistency with banking regulations, which should be corrected for better alignment. Third, 
the  overly  conservative  calibration  of  non-STS  securitisations  under  SII,  especially  when 
compared  to  equity  investments,  indicates  the  need  for  a  more  balanced  approach  to  risk 
assessment. Lastly, enhancing the risk sensitivity of non-STS securitisations emerges as the most 
effective  solution  to  encourage  securitisation  while  ensuring  financial  stability.  This  approach, 
coupled with modest adjustments to STS securitisation capital requirements, would foster insurers' 
investments in simpler securitisations and further support the EU's STS standard. To conclude, 
burden reduction and prudential costs should be reconsidered across the board, not just for STS 
securitisations, to create a more effective and equitable framework for insurers. 

The evaluation concludes that the intervention is still relevant, but more is needed to ensure that 
securitisation can meaningfully contribute to improve the financing of the EU economy and further 
develop the Savings and Investment Union. Therefore, additional measures are needed to fulfil 
reach the general and specific objectives of the original intervention.  

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ANNEX VI:  SECURITISATION PLATFORM(S)  

Centralising securitisation issuance via a securitisation platform or platforms could offer another 
way to  lower costs for the industry and make it easier and more  attractive to  participate in  the 
securitisation market. The impact of a securitisation platform would vary depending on its scope, 
design  and  specific  features,  such  as  whether  it  includes  public  guarantees.  Various  reports 
presented different ideas191.  

From  an  issuer’s  perspective,  a  common  platform  could  centralise  securitisation  issuance  of  a 
securitisation and thus reduce the costs per transaction (structuring and legal costs, etc.). This could 
facilitate access to the securitisation market for a broader range of market participants, such as 
small regional banks or lenders from Member States without an active securitisation market, for 
whom the cost and complexity of structuring a securitisation might constitute a significant barrier 
to  entry.  For  established  securitisation  issuers,  a  common  platform  could  offer  a  way  to  lower 
structuring costs thereby allowing them to access capital markets on more competitive terms. 

From an investor’s perspective, a platform can facilitate due diligence by offering a standardized 
set  of  products,  with  common  features  and  risk  characteristics.  Thus,  due  diligence  for  repeat 
issuances  would  be  simpler  and  quicker.  In  addition,  for  a  platform  with  strict  asset  eligibility 
criteria, it is also possible to standardise elements of the credit risk analysis, which is one of the 
key elements of the due diligence process before investing in securitisation. A platform can also 
help to dispel any potential stigma against the product among market participants, in particular if 
the platform is a public or a quasi-public entity. Furthermore, a platform that offers a predictable 
issuance schedule with high volume can facilitate market liquidity. 

Although  a  securitisation  platform  would  not  change  the  applicable  rules  in  the  Securitisation 
Framework,  if  effectively  implemented,  it  could  increase  efficiency,  lower  costs,  and  improve 
investor confidence. 

A platform can work at an EU-wide level, or it can be more targeted, at a regional or national level. 
An EU level platform could help integrate EU capital markets. The securitisations issued by such 
a platform could also serve as a safe asset if the platform is able to issue a sufficiently high volume 
of low-risk securitisations with common features192. A national or regional level platform would 
be more targeted to the needs of local market players and would be easier to implement from a 
technical and political standpoint. 

Public guarantees could enhance the attractiveness of securitisation platforms by mitigating risks 
and encouraging private investment. These guarantees could be provided either at the national or 
supra-national level, targeting specific tranches within the securitisation structure, provided that 
such public support, if provided by Member States, can be structured in line with State aid rules. 
When applied to the senior tranche, guarantees act as a subsidy, ensuring that investors in the most 

191 For example, see Noyer’s and TSI-KFW reports.  
192 For more details see the Noyer’s report.  

184 

 
 
 
secure  portion  of  the  structure  face  minimal  risk.  Alternatively,  guarantees  for  the  mezzanine 
tranche  serve  a  de-risking  function,  absorbing  potential  losses  and  thereby  making  the  entire 
securitisation structure more appealing to private investors.  

Challenges that impede the establishment of such platforms include: fragmented legal frameworks 
(differences in insolvency laws, contract law, and securitisation practices across the EU Member 
States),  lack  of  standardisation  in  loan  contracts,  securitisation  structures,  and  conditions  and 
requirements that assets must meet to be included in a securitisation platform across jurisdictions. 
These differences complicate asset pooling and act as a drawback to raising investor confidence. 
Competition  with  existing  instruments  like  covered  bonds  could  also  potentially  limit  the 
platform's  utility.  Additionally,  high  initial  costs  for  infrastructure  development  and  platform 
management  and  pricing  and  valuation  disparities  for  assets  from  different  jurisdictions, 
particularly in markets without secondary trading mechanisms would also be significant challenge.  

Despite its potential, this policy option is not a preferred avenue for the short-medium term due to 
underlying challenges.  Moreover, legislative action at the EU level is unnecessary to advance this 
initiative. A market-driven approach would be better suited to explore and refine this idea. This 
approach  allows  for  flexibility  and  experimentation  without  imposing  additional  regulatory 
burdens across the EU.  

Implementation of a securitisation platform or platforms should consider the interaction with the 
Securitisation Framework, including both prudential and non-prudential requirements. 

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ANNEX VII: Competitiveness Check 

1 - Overview of impacts on competitiveness  

Dimensions of 
Competitiveness 

Impact of the initiative 

(++ / + / 0 / - / -- / n.a.) 

Cost and price competitiveness  ++ 

International competitiveness  

Capacity to innovate 

SME competitiveness 

+ 

+ 

+ 

2 - Synthetic assessment  

References to sub-sections of the main 
report or annexes 

Sections 7.1; 7.4; Annex III, Section 2  
Sections 1.3; 5.1.1.8; Annex V, Section 
3.2 
Annexes VIII, IX 
Annex  II,  Section  1;  Annex  XIII ; 
Annex VI 

The preferred option presented above has a positive impact on cost and price competitiveness, in 
that  it  entails  a  reduction  in  capital  and  compliance  costs.  The  initiative  will  help  European 
securitisation market participants to improve their cost competitiveness by addressing many of the 
identified undue barriers to securitisation issuance and investment in both the prudential and non-
prudential domains. In particular, it will reduce the costs they will have to bear in complying with 
the due diligence and transparency requirements compared to the baseline scenario. It will also 
reduce  prudential  costs  for  banks  and  insurers.  While  the  preferred  option  does  imply  some 
adjustment costs for existing issuers who may have to adapt their reporting systems, these costs 
should be limited in scale (as the new template would be significantly slimmer than the current 
set) and time duration. Moreover, any adjustment costs to the new prudential framework will be 
largely outweighed by the prudential benefits received. For instance, by lowering capital costs via 
the reduction in capital requirements, it can provide more possibilities for banks and insurers to 
invest in the real economy and offer higher returns (which could make the firm more attractive for 
investors and clients).  

The initiative will similarly have a positive impact on international competitiveness, improving 
the competitive position of EU firms issuing or investing in securitisations with respect to non-EU 
competitors. Under the baseline scenario, the high operational costs place EU issuers and investors 
in securitisations at a competitive disadvantage relative to their international counterparts who are 
not subject to the same requirements of the EU framework. EU investors are subject to the same 
rules regardless of whether they invest in EU or non-EU securitisation, whereas non-EU investors 
investing in EU securitisations are not bound by the same rigorous requirements. Similarly, the 
rigid and burdensome EU Securitisation Framework has  a knock-on indirect  impact  on market 
acceptance and pricing of European-originated securitisation instruments, which must adhere to 
EU  rules.  Adjustments  to  the  legal  framework  to  bring  these  rules  more  in  line  with  standard 
international  practice  will  bolster  the  price  competitiveness  of  EU  securitisation  products 
internationally.  In  the  same  manner,  a  more  risk-sensitive  and  less  burdensome  prudential 
framework should make EU banks and insurers more competitive internationally.  

186 

 
 
 
The initiative aims to stimulate a growing and vibrant EU securitisation market that will have a 
positive impact on the overall capacity to finance EU households and businesses. A more attractive 
securitisation market could facilitate access to risk capital and financing by freeing up additional 
lending capacity on the balance sheets of banks and other credit-granting institutions. This would 
allow economic innovators to access loans more cheaply and readily. This is particularly pertinent 
within the context of the twin green and digital transition, where billions in additional private risk 
capital are necessary to finance European innovation in pursuit of the EU’s long-term climate and 
competitiveness goals.  

The impact of the initiative will also positively impact SME competitiveness. SMEs can benefit 
from this initiative by being able to obtain loans more cheaply and readily thanks to the additional 
lending capacity on the balance sheets of banks and other credit-granting institutions facilitated by 
more securitisation activity (See Annex VIII). 

187 

 
 
 
 
 
ANNEX VIII: SME Test 

1 - Identification of SMEs affected 

The  category  of  micro,  small  and  medium-sized  enterprises  is  defined  by  the  European 
Commission as enterprises having fewer than 250 employees  having either an annual turnover not 
exceeding EUR 50 million or a balance sheet total not exceeding EUR 43 million.193 Representing 
99% of all businesses in the EU, they are often termed the backbone of the European economy, 
contributing  to  job  creation,  economic  growth,  and  innovation.194  Although  the  Securitisation 
Framework  does  not  specifically  target  SMEs,  its  measures  will  have  some  direct  and  mostly 
indirect impacts on them.  

SMEs in general are not active in the securitisation market as either issuers or investors. However, 
they may benefit from the augmented lending capacity of banks or other financial firms generated 
by increased EU securitisation activity, or from more favourable and cheaper access to funding. 
We have also seen concrete cases where innovative companies have used securitisation to roll out 
ambitious projects (see Annex IX: Examples of impactful securitisation transactions, particularly 
Example 2: ENPAL).  

SMEs constitute an important segment of business customers of credit institutions, insurance firms 
and asset managers, but SME loan exposures tend to be quite heterogeneous and higher risk than 
other  asset  classes.  As  such,  SME  loans  have  not  been  a  popular  asset  class  for  securitisation. 
However,  the  reduction  in  operational  costs  for  issuers  and  investors,  improvements  in  due 
diligence  and  transparency,  and  greater  risk  sensitivity  in  prudential  treatment  of  securitisation 
instruments  that  this  initiative  aims  to  introduce may  incentivise  greater  securitisation  across  a 
wider scope of portfolios, including SME loans, and could also lower funding costs. 195 

2 - Consultation of SME stakeholders 

During  the  consultation  procedure  all  stakeholders,  including  SMEs,  were  consulted  and  were 
given the opportunity to contribute their views on the development of this policy initiative. The 
result of all consultation activities is summarised in the Synopsis Report (Annex II). Of the 133 
respondents  to  the  targeted  public  consultation,  33  (25.2%)  identified  as  “Small”  (10  to  49 

193 Recommendation 2003/361.  
194 https://single-market-economy.ec.europa.eu/smes/sme-fundamentals/sme-definition_en   

195 Concretely, as regards the prudential treatment, the introduction of the risk sensitive floor for 
senior  tranches  allows  the  capital  requirements  for  securitisation  to  reflect  the  SME  supported 
factor, embedded in the capital requirements for the underlying SME loans. This is currently not 
possible, because the current risk weight floor for senior tranches is flat and does not reflect the 
riskiness (capital requirements) of the underlying exposures. Also the reduction of the (p) factor 
should lead to  lower capital  requirements for securitisations, including  of the securitisations of 
SME loans.  

188 

 
 
 
employees) and 17 (13%) identified as “Medium” (50 to 249 employees). The consultation also 
had a dedicated section on the topic of SMEs that inquired on how securitisation can support access 
to SME financing, and impediments to issue or invest in SME loan securitisations.  

In  general,  respondents  pointed  out  that  SMEs  have  limited  access  to  capital  markets  due  to 
regulatory complexity, high costs, and poor data quality. Respondents from the industry suggested 
that simplifying the regulatory framework for securitisation could facilitate SMEs' access to capital 
markets, while others proposed more targeted changes, such as revising specific articles. However, 
consumer organisations highlighted the risk of focusing on the potential of securitisation to support 
SME  financing.  In  their  view,  promoting  securitisation  rather  than  addressing  the  crucial 
integration of EU primary debt and equity markets would only entrench the dependence of SME 
corporates  on  banks.  Increased  financing  for  SMEs  via  securitisation  might  crowd  out  equity 
financing directly from the market. Instead, these respondents advocated the expansion of existing 
programs offered by the EIF and EIB. 

3 - Impacts on SMEs 

Securitisation  can  increase  the  amount  of  funding  available  to  SMEs,  diversify  the  sources  of 
funding, and promote competition in SME lending196. 

SMEs can benefit from securitisation by better managing their liquidity by selling trade receivables 
to a programme of asset-backed commercial paper. Another example is the securitisation of pools 
of SME loans. Securitisation enables investors to invest in pools of SME loans, allowing SMEs to 
access  capital  market  funding,  and  provides  a  means  for  investors  to  gain  exposure  to  the  real 
economy.  According  to  AFME  data,  SME  securitisations  comprised  around  12%  of  the  total 
outstanding balance of securitisations in the EU in 2023 (see Table 5 below).  

Table 5: Share of outstanding volume of securitisation of SME loans in public securitisations 

Note: The calculation of ‘% of total’ excludes CLOs due to data quality issues 

Source: AFME 

Additionally, securitisation can lead to more stable funding for SMEs, as diversifying the sources 
of finance may make SMEs less vulnerable to banks’ deleveraging in downturns, as capital market 
investors can provide an alternative source of funding. Furthermore, securitisation can promote 
the entry of 'challenger banks' and non-bank financial institutions into the SME lending market, 
increasing competition and potentially leading to better terms and conditions for SMEs. Overall, a 

196 Revitalizing Securitization for Small and Medium-Sized Enterprises in Europe - Euro Area; by Shekhar Aiyar, Ali 
Al-Eyd, Bergljot Barkbu, and Andreas A. Jobst, IMF Staff Discussion Notes No. 15/07, May 7, 2015 

189 

2014201520162017201820192020202120222023SME ABS112.597.780.777.569.684.591.9110.8119.6117.4% of total9.4%8.7%7.6%7.5%6.9%8.4%9.3%11.0%12.9%12.3% 
 
 
 
well-functioning SME securitisation market can have a positive impact on SME finance and the 
broader economy197.  

At  EU  level,  the  European  Investment  Fund  has  historically  supported  the  SME  securitisation 
market,  with  a  focus  in  particular  on  the  following  asset  classes:  i)  SME  loans,  ii)  SME  loan 
guarantees, iii) small ticket lease receivables, iv) SME trade receivables, v) venture financing and 
vi) micro loans.198 

The overall distribution of potential costs and benefits of the proposal is analysed in Annex 3. It is 
impossible at this stage to quantitively estimate, with a reasonable degree of accuracy, the benefits 
accruing to the SME subgroup, due to the uncertainty as to direct and indirect benefits that would 
arise for SMEs.  

In general, increased European securitisation activity is expected to give rise to significant benefits 
for capital market participants but the extent to which they materialise will  depend on industry 
take-up  and  market  willingness  to  issue  and  invest  further  in  SME  securitisation  products.  A 
reduction  in  operational  costs  brought  about  by  the  non-prudential  simplification  measures  is 
expected to give rise to market improvements in terms of less burdensome and more cost-effective 
securitisation for all parties to the transaction, including SME credit holders and small banks.  

All  of  the  options  presented  in  the  Impact  Assessment  aim  to  reduce  barriers  to  securitisation 
issuance  and  investment  and  will  likely  have  indirect  downstream  positive  benefits  on  SMEs 
through the positive impacts presented above.  

4 - Options to mitigate any negative impacts on SMEs 

We have not identified any material negative impacts from the proposed policy options on SMEs. 

197 British Business Bank Research Report, “Small and Medium Sized Enterprise Securitisation”, May 2015.  
198 ‘SME Securitisation – at a crossroads? ’ eif_wp_31.pdf 

190 

 
 
 
 
 
Example 2: Enpal Launches Europe's First Public Residential Solar ABS Transaction, Raising 
EUR 240 Million 

In October 2024, Enpal, a German green-energy startup specialised in rooftop solar systems and 
heat  pumps,  sponsored  Europe’s  first  public  residential  solar  ABS  transaction.  The  EUR  240 
million deal is backed by a portfolio of some 8,500 loans to German residential homeowners for 
solar power systems. 

This transaction adheres to European Green Bond principles, is publicly rated, meets STS criteria 
under the Securitisation Regulation and its notes were sold to over 17 European investors. The 
transaction was led and structured and led by Citi as sole arranger, and the securitised notes were 
publicly traded and cleared on the Luxembourg Stock Exchange.  

The EIB acted as an anchor investor with EUR 50 million. The EIF provided an additional EUR 
50  embedded  guarantee  of  the  Class  A1  notes.  Investor  demand  for  the  deal  greatly  surpassed 
expectations, with tranches reportedly oversubscribed up to six times.  

The tranching and pricing of Enpal’s pioneering EUR 240m Green ABS transaction 

191 

 
 
 
 
 
Example 3: EIB-backed Santander transaction releases additional lending to Spanish SMEs and 
midcaps 

In May 2024, the EIB Group invested EUR 530 million in a Banco Santander securitisation operation. 
EUR 440 million of the EIB investment was in the senior tranche, which comprised almost 80% of the 
securitised structure. EUR 60 million was allocated to non-investment grade tranches.  

In return, Santander  agreed to  originate double the amount of the EIB Group’s original  investment 
(EUR 1.2 billion) in new loans to Spanish SMEs and mid-caps, which are vital to driving economic 
growth and innovation.  

The  European  Investment  Fund  contributed  EUR  30  million,  which  is  linked  to  the  creation  of  an 
additional EUR 60 million loan portfolio by Santander. At least 50% of the loans in this portfolio will 
go  to  Spanish  SMEs  and  mid-caps  implementing  projects  in  the  areas  of  environment  and  climate 
action,  energy  efficiency  and  women’s  entrepreneurship.    30%  of  the  new  loans  should  target 
sustainable investments and 20% should aim at “gender-balanced financing”, such as companies run 
by women entrepreneurs.  

It is estimated that over half of the final beneficiaries of the agreement are in cohesion regions, where 
per capita income is below the EU average. In this way, the operation will promote fair growth and 
convergence between EU regions, a key objective of the EIB’s lending 

192 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX X: COMPARISON OF SECURITISATION AND COVERED BONDS  

(Traditional)  securitisation  is  often  compared  with  covered  bonds,  as  they  have  some  common 
features (they use the same type of underlying assets, in particular residential mortgages, and have 
similar objectives, both being used by banks as funding instruments i.e. instrument used as a source 
of funding).  

There  are  also  some  structural  differences  resulting  in  different  risk  characteristics  of  both 
instruments and different levels of security provided to the investors.  

In particular, the covered bonds are characterised by the so-called ‘dual recourse’, i.e. two lines of 
recourse that are activated sequentially, first  toward the issuer (the bank) and second, once the 
bank has defaulted, toward the cash flows generated by the underlying assets (i.e. mortgages). The 
dual recourse feature provides better alignment of the incentives between the originator and the 
investor, compared to the more limited recourse in case of securitisations. Should the bank default 
on its obligations, investors have recourse to the pool of underlying assets, which increases the 
security for the investor and ensures a stable flow of payments to the investors. Securitisation is 
intended to be delinked from the repayment capability of the bank, and liabilities are expected to 
be met principally by the cash flows generated from the segregated underlying assets. Any losses 
beyond these are to be borne by the investors.   

Covered bond is a pure funding tool and does not allow to transfer the risk out of the balance sheet 
of the issuer (while securitisation allows this, thereby freeing up banks’ balance sheet capacity). 
Covered bonds are no substitute for securitisation in this regard as the credit risk of the loan pool 
covered  by  a  covered  bond  remains  on  issuing  bank’s  balance  sheet,  and  hence,  no  additional 
capacity  to  make  new  loans  is  generated.  Covered  bonds  are  therefore  only  comparable  with 
traditional securitisation (the funding function of it), and not with synthetic securitisation (which 
has no funding function). Covered bonds are also more easily structured than securitisation.  

While covered bonds play an important role in bank funding, an over-reliance on them leads to 
higher asset encumbrance and restricts further the banks’ flexibility to manage their balance sheets. 
Instead, encouraging a more balanced funding mix, including securitisation, would help improve 
capital efficiency and support a deeper and more integrated European capital market.  

In terms of market and regulatory developments, covered bonds have been historically preferred 
by both regulators and market participants. Banks often favour the use of covered bonds for their 
funding purposes, which are generally subject to less stringent regulatory requirements in terms of 
disclosure, due diligence, capital, resolution and liquidity. For example, covered bonds are subject 
to much less stringent regulatory disclosure and due diligence requirements (e.g. only portfolio 
level  disclosure  is  required  for  covered  bonds,  in  contrast  to  loan  level  disclosure  required  for 
securitisations). Also, covered bonds are exempted from the scope of the bail-in instrument in the 
resolution framework (securitisations are not) and are eligible under Level 1, 2A and 2B of liquid 
assets in the LCR (securitisations are eligible under Level 2B liquid assets). In terms of capital 
requirements, the bank investor in premium covered bonds treated as CQS1 (AAA and AA) can 
apply a risk weight of 10% to their covered bonds investment under the Standardised Approach, 
which  is  comparable  to  the  risk  weights  applied  to  an  exposure  to  a  senior  tranche  of  a  STS 

193 

 
 
 
securitisation under the Standardised Approach (where the framework allows the 10% risk weight 
floor). ‘Real’ risk weights for senior tranches can be higher than the risk weight floors. Also, the 
minimum risk weight for senior tranches for non-STS securitisations are 15% or higher (e.g. can 
also reach 75%). The risk weights for mezzanine tranches are significantly higher (for example 
they can be around 800% higher). The risk weight for a first loss tranche is normally 1250% (i.e. 
full capitalisation).    

As shown in the figure 1 below, covered bonds issuance has been increasing, while issuance of 
RMBS (traditional securitisation using residential mortgages as underlying assets) is substantially 
lower  than  in  pre-GFC  period.  Overall,  between  end-2007  and  end  2023,  the  RMBS  issuance 
decreased  by  half  from  EUR  199  bn  to  EUR  97  bn,  while  the  issuance  of  covered  bonds  has 
increased from EUR 296 bn to EUR 334 bn during the same period.  

Figure 1: Issuance of Euro-area traditional and synthetic securitisation, and of covered bonds 
(EUR bn notional) 

Source: JP Morgan, Bloomberg Finance L.P., ECB Banking Supervision, European Covered Bond Council and ECB 
calculations.  Notes:  CLO  issuance  refers  to  EU  ex  United  Kingdom.  Synthetic  securitisation  issuance  refers  to 
issuance by significant institutions supervised by the ECB; available data start in 2018. 

Securitisation  and  covered  bonds  are  used  by  banks  as  complementary  tools.  Currently,  as 
mentioned  above,  banks  use  covered  bonds  for  secured  funding,  while  they  use  synthetic 
securitisations for risk transfer and regulatory capital relief. Traditional securitisation has ceded 
the place to synthetic securitisation as tool for risk transfer.  

All in all, any comparison between these two instruments should therefore take into account both 
the similarities as well as structural differences of both instruments, among other considerations. 
It is difficult to assess the impact of the proposed changes to the securitisation framework on the 
covered bonds market (and is also outside of the scope of this exercise). Removal of regulatory 
barriers for securitisation is expected to raise the attractiveness of the securitisation instrument for 
194 

 
 
 
both issuers and investors; however concrete impact on the issuer and investor preferences and 
final issuance and investment volumes is difficult to predict. The issuance of securitisation also 
does  not  need  to  happen  necessarily  at  the  expense  of  covered  bonds,  as  these  are  just  two 
instruments out of several that banks can use for their funding purposes. Finally, it should be noted 
that  an  assessment  of  the  EU  covered  bond  framework  is  subject  to  a  separate  exercise;  the 
Commission addressed a call for advice to the EBA to assess the performance of the EU covered 
bond framework and invited the EBA to provide its response in June 2025. 

195 

 
 
 
 
 
ANNEX XI: FURTHER DETAILS ON THE ASSESSMENT OF IMPACT OF INSURANCE OPTIONS 

1 - Detailed assessment of stakeholder impact 

In all three options for insurance, the direct beneficiaries would be insurance companies, as they 
would be subject to less demanding capital requirements. The extent of such a benefit depends on 
the level of alleviation of capital requirements. The most favourable scenario for insurers would 
be Option 3.3, which would result in both the highest decrease in capital requirements (compared 
with  the  current  rules)  and  the  widest  scope  of  securitisations  concerned  (all  of  them).  The 
difference between Options 3.1 and 3.2 is more difficult to quantify as according to EIOPA, there 
is no available data on the split between senior and non-senior non-STS holdings by insurers that 
could further substantiate the analysis.  

• 

• 

If insurers mainly hold senior non-STS securitisations, then Option 3.2 is more favourable than 
Option 3.1 (as the capital relief on such investments is more significant); 

If insurers mainly hold non-senior non-STS securitisations, then Option 3.1 is more favourable 
than  Option  3.2  (as  there  would  be  lower  capital  requirements  on  such  investments  under 
Option 3.1, whereas there would not be any under Option 3.2.). 

Depending on the way they use this ‘capital relief’, there might be additional beneficiaries: 

• 

• 

If insurers decide to leverage on the capital relief by increasing investments in securitisation, 
this would be likely based on the expectations of higher return on investments. Banks would 
also enjoy a more significant investor base (demand) for their supply of securitisation. This 
would  mean  more  opportunities  to  transfer  credit  risk  to  markets  through  origination  of 
securitisation, and ultimately stronger ability to provide financing mainly to households and 
businesses.  This  would  achieve  the  second  specific  objectives  of  this  initiative  and  could 
stimulate loan origination. Under Options 3.1 and 3.2 (focused on non-STS investments), loan 
origination would likely benefit mainly corporate borrowers whereas under Option 3.3 (which 
covers  both  STS  and  non-STS  investments),  loan  origination  would  also  benefit  household 
borrowers199. 

If insurers use the capital relief to invest in other assets than securitisation, depending on the 
asset class concerned, this might also support the long-term financing of the economy (e.g. 
more equity investments). Therefore, businesses may eventually benefit from any of the three 
options even if insurers do not increase their investments in securitisation. If insurers decide to 
opportunistically proceed to ad-hoc dividend distributions as an outcome of any of the three 
options, shareholders of insurance companies (very diverse) would be ultimately benefiting 
from any of the Options. There would be no contribution to reviving securitisation and insurers 
would  be  less  financially  robust  (due  to  the  depletion  of  capital),  implying  greater  risk  (of 

199  The  underlying  assets  of  STS  securitisations  include  indeed  residential  mortgage  loans,  credit  card  and  auto 
receivables. The underlying assets of non-STS securitisations include mainly corporate-type assets. 

196 

 
 
 
 
 
insolvency) for policyholders and higher financial stability risks, though moderate in view of 
the current very low level of insurers’ holdings of securitisation investments200. 

Regarding  policyholders,  if  insurers  use  the  capital  relief  to  either  remunerate  shareholders  or 
increase investments in securitisation, this would imply a lower level of protection for the same or 
higher level of risk taken by insurance companies (i.e. higher risk of insurance failure – though 
remaining moderate). This risk would be all the more likely when the capital relief is significant 
(i.e.  more  significant  under  Option  3.3).  Note  that  Option  3.2  is  the  option  with  the  fewest 
downsides for policyholder protection. Indeed, by only decreasing capital requirements for senior 
tranches (i.e. the tranches with lower risks), Option 3.2 would remove the existing incentive for 
‘excessive’  risk  taking  by  insurers  (current  rules  apply  the  same  capital  requirements  for  both 
senior  and  non-senior  non-STS  securitisations,  which  can  incentivise  insurers  to  invest  in  the 
lower-ranking tranches as they would likely provide higher returns for the same level of capital 
requirements).  In  the  specific  case  of  life  insurers,  the  higher  risk  taking  may  eventually  also 
benefit  policyholders,  as  any  higher  return  on  insurers’  investment  portfolio  would  have  to  be 
(partly)  shared  with  policyholders  (so-called  ‘profit  participation’).  In  other  terms,  life 
policyholders, while being exposed to some higher risk of insolvency of their insurer, could also 
get better return on their savings. 

The effect of the options on supervisors depends on the extent of capital relief, and the robustness 
of the technical basis supporting the changes implied by each of the three options.  Indeed, any 
lowering of capital requirements for the same level of actual risks which is not sufficiently backed 
by  strong  technical  basis  means  that  supervisors’  ability  to  exercise  their  prerogatives  in 
accordance with their mandate would be more constrained (i.e. lower ability to intervene timely in 
case of deteriorating financial position) – all else equal201. The next sub-sections will illustrate that 
supervisors would be the worst off under Option 3.3. On the contrary they would be less affected 
under Option 3.2 where changes are driven by improvements to risk sensitivity. 

2 - Detailed discussion of implementation costs 

As explained above, Option 3.1 is very simple to implement. Options 3.2 and 3.3 require some 
additional updates to IT systems.  

•  Option 3.2 would require introducing additional inputs to calculate capital requirements which 
would also have to be reported to supervisors, as insurers would be required to differentiate 
between senior and non-senior tranches of non-STS securitisations. 

200  NB:  there  is  no  general  provision  in  SII  allowing  supervisors  to  block  dividend  distributions  where  capital 
requirements are met. Such powers are only available under exceptional sector-wide shocks (like the Covid-19 crisis) 
to protect policyholders of companies which present a vulnerable risk profile 
201 A simple example can make it more concrete. Assume that under current rules, the solvency capital requirement 
of a company is 100. This means that where insurers’ own funds fall below this value, supervisors can take supervisory 
measures so that insurers restore compliance with capital requirements and avoid insolvency. If, as an outcome of 
Option 1, the solvency capital requirement becomes 95, this means that a supervisor would not be able to require an 
increase of own funds where their value falls down to e.g. 97.  Under Option 1, supervisors would only be able to 
intervene one own funds fall below 95, i.e. a situation where the depletion of own funds is more severe than now. 

197 

 
 
 
•  Option  3.3 would require changing  the  classification of capital requirements  securitisations 
from market risk to counterparty default risk, but the type of change implied is expected to be 
relatively seamless (and therefore not costly). 

For this reason, the one-off administrative (implementation) costs are expected to be limited for 
all  three  options.  Option  3.2  would  generate  an  additional  permanent  administrative  cost  as 
insurers would have to consistently monitor and differentiate their exposures to senior and non-
senior tranches of non-STS securitisations. However, this information is actually expected to be 
already monitored by insurers as part of their own investment management policies and strategies. 

Similarly, the digital supervisory tools used by national authorities would have to be adapted to 
reflect the described changes. Those costs are expected to be negligible in the long-term. 

Therefore,  overall,  implementation  costs  for  all  three  options  would  be  moderate  (Option  3.1 
would be the least costly and Option 3.2 the costliest) and would likely be expressed in million or 
tens of million euros for the whole market, which would be significantly lower than the capital 
benefit (lower capital requirements) which is of several billion euros. Therefore, such costs do not 
appear  to  be  the  decisive  factor  when  assessing  the  preferred  option  and  this  is  confirmed  by 
stakeholders as part of the Commission services’ consultation activities. 

198 

 
 
 
 
ANNEX XII: COMPARISON OF DUE DILIGENCE AND TRANSPARENCY REQUIREMENTS  

Table 1: Comparison of due diligence requirements for selected entities when investing in selected 
products 

Due Diligence Requirements for AIFMs 

Verification 
requirements  

Other instruments (covered bonds, funds of 
funds, high yield bonds, etc.) 
No  explicit  verification  requirements  for 
issuer compliance with  sectoral  legislation 
of the issuer. 

Legal  basis:  Article  15(2)  and  (3)  of 
AIFMD. Complemented by delegated acts: 
Art. 18, 19 of AIFMR 

Other verification requirements do apply on 
market risk, liquidity risk, operational risk. 
They also ensure that investment decisions 
on  behalf  of  the  AIFs  are  carried  out  in 
compliance  with 
the 
investment strategy and, where applicable, 
the risk limits of the AIF. 

the  objectives, 

Assessment  of  the 
risks involved 

Legal  basis:  Article  15  AIFMD,  and 
Articles 18 and 45 AIFMR 

required 

required. 

  Effective 
Risk  assessment 
arrangements 
that 
investment decisions on behalf of the AIFs 
are  carried  out  in  compliance  with  the 
objectives,  the  investment  strategy  and, 
where applicable, the risk limits of the AIF 

to  ensure 

AIFMs  must  identify,  measure,  manage, 
and  monitor  risks  to  which  their  AIFs  are 
exposed.,  and  ensure  compliance  with 
limits.  

Establish 
appropriate  written 
procedures 

Legal basis: Article 12(1)(c) AIFMD 

199 

Securitisation 

Legal  basis:  Article  5(1)  and 
5(3) SECR 

Detailed  provisions  which 
require investors to ensure that 
securitisation 
are 
complied with regard to credit 
retention, 
granting, 
risk 
disclosure 
STS 
compliance 

rules 

and 

Legal  basis:  In  addition  to 
Article  15  AIFMD,  Article 
5(3),  and  Article  18  AIFMR 
SECR also applies 

the 

assess 

(including 

assessment 

required 
Risk 
(detailed). Investors are asked 
to 
risk 
characteristics  and  structural 
the 
features 
priorities 
contractual 
of 
payment 
and  priority  of 
triggers, 
related 
payment 
credit enhancements, liquidity 
enhancements,  market  value 
triggers, 
transaction-
specific definitions of default). 
Legal  basis:  In  addition  to 
Article  12(1)(c  )  AIFMD, 

and 

 
 
 
 
 
 
 
 
AIFMs  shall  have  detailed  procedures  to 
cover  all  of  their  activities,  including  due 
diligence. 

Regularly  perform 
stress tests 

the 

that 

Legal  basis:  Article  15(3)(b)  provides  that 
risks 
AIFMs  should  ensure 
associated with each investment position of 
the AIF and their overall effect on the AIF’s 
identified, 
portfolio  can  be  properly 
measured,  managed  and  monitored  on  an 
ongoing basis, including through the use of 
appropriate stress testing procedures. 

Article  5(4a)  SECR  also 
applies 

of 

due, 

default 

performance 

Written  procedures  required. 
procedures 
These  written 
include detailed monitoring of 
the 
the 
underlying  exposures  and  the 
securitisation 
position 
(monitoring  of  the  exposure 
type,  the  percentage  of  loans 
more than 30, 60 and 90 days 
past 
rates, 
prepayment  rates,  loans  in 
foreclosure,  recovery  rates, 
loan 
repurchases, 
modifications, 
payment 
holidays,  collateral  type  and 
frequency 
occupancy,  and 
distribution of credit scores or 
other  measures  of  credit 
worthiness  across  underlying 
and 
exposures, 
geographical  diversification, 
frequency distribution of loan 
to  value  ratios  with  band 
widths that facilitate adequate 
sensitivity analysis). 
Legal  basis:  In  addition  to 
Article  15  AIFMD,  Article 
5(4b) SECR also applies 

industry 

Required 
securitisations. 

for 

all 

Internal reporting to 
management  body 
the 
so 
that 
is 
management 
aware 
the 
of 
material risks posed 
by  the  investment 
position 

Legal  basis:  Art.  7(2)(a),  15  of  AIFMD, 
complemented  by  Art.  38  to  45  and  60  of 
AIFMR. 

Legal basis: In addition to the 
general  provisions  under  the 
AIFMD,  Article  5(4d)  SECR 
also applies. 

Ultimately,  the  management  body  of  the 
AIFM is responsible and validate the set of 
limits, within which AIFs will be managed. 
They  designate  the  persons  in  charge  of 

Required. 

200 

 
 
 
 
conducting  the  activity.  On  a  day-to-day 
basis,  decisions  are  taken  in  line  with  the 
limits sets by the management body. There 
is  also  an  independent  oversight  by  the 
depositary of the fund and the compliance 
function. 
Legal basis: Art. 7, 8, 18 and 46 of AIFMD, 
21(a), 
complemented  Article 
47(1)(d) in AIFMR 

18(2), 

General authorisation provisions apply. 

Demonstrate 
of 
understanding 
risks  and  processes 
to  NCAs 
(upon 
request) 

authorisation 

Legal basis: In addition to the 
and 
general 
monitoring  provisions  under 
the AIFMD, Article 5(4d and 
f) SECR also applies. 

NCAs monitor compliance with AIFMD on 
an  ongoing  manner  (they  can  ask  for  any 
relevant piece of evidence/information). 

Required. 

Due Diligence Requirements for Insurers 
Verification 
requirements 

None 

Assessment  of  the 
risks involved 

Legal  basis:  Article  132  Solvency  II 
Directive  and  Article  275a  Solvency  II 
Delegated Act 

Risk assessment required (principles based) 

Establish 
appropriate  written 
procedures 

Legal  basis:  Articles  41(3)  and  44(2) 
Solvency II Directive 

Written  procedures  for  risk  management 
(which includes investment) are required. 

Legal  basis:  Article  5(1)  and 
5(3) SECR 

For  credit  granting, 
risk 
retention,  disclosure  and  STS 
compliance. 
Legal  basis:  In  addition  to 
Article  132  Solvency 
II, 
Article 5(3) SECR also applies 

the 

assess 

(including 

assessment 

Risk 
required 
(detailed). Investors are asked 
to 
risk 
characteristics  and  structural 
the 
features 
priorities 
contractual 
of 
and  priority  of 
payment 
payment 
triggers, 
related 
credit enhancements, liquidity 
enhancements,  market  value 
transaction-
triggers, 
specific definitions of default). 
Legal  basis:  In  addition  to 
and  44(2) 
Article  41(3) 
Solvency II Directive, Article 
5(4a) SECR also applies. 

and 

The  establishment  of  specific 
written procedures to carry out 

201 

 
 
 
is 

of 

due, 

default 

diligence 

performance 

for 
due 
required. 
securitisations 
These  written 
procedures 
include detailed monitoring of 
the 
the 
underlying  exposures  and  the 
securitisation 
position 
(monitoring  of  the  exposure 
type,  the  percentage  of  loans 
more than 30, 60 and 90 days 
past 
rates, 
prepayment  rates,  loans  in 
foreclosure,  recovery  rates, 
loan 
repurchases, 
payment 
modifications, 
holidays,  collateral  type  and 
occupancy,  and 
frequency 
distribution of credit scores or 
other  measures  of  credit 
worthiness  across  underlying 
exposures, 
and 
geographical  diversification, 
frequency distribution of loan 
to  value  ratios  with  band 
widths that facilitate adequate 
sensitivity analysis). 
Legal  basis:  In  addition  to 
Article 
II 
Directive, Article 5(4b) SECR 
also applies 

45  Solvency 

industry 

Stress tests must be performed 
regularly for all securitisations  

Legal basis: Article 5(4d) 

Required. 

Regularly  perform 
stress tests 

Legal  basis:  Article  45  Solvency 
Directive 

II 

General  requirement  under  the  Own  Risk 
and Solvency Assessment Applies (ORSA) 
but there is no specific requirement for any 
asset  categories.  The  stress  test  is  for  the 
balance  sheet  as  a  whole,  not  a  specific 
portfolio of instruments. 
None 

Internal reporting to 
management  body 
the 
so 
that 
is 
management 
aware 
the 
of 
material risks posed 
by  the  investment 
position 

202 

 
 
Demonstrate 
understanding 
of 
risks  and  processes 
to  NCAs 
(upon 
request) 

Legal  basis:  Article  35-36  Solvency  II 
Directive. 

Requirement  is  part  of  the  general  powers 
of supervision but not specific for any asset 
classes. 

Legal  basis:  Article  35-36  of 
Solvency 
In  addition, 
Article 5(4d and f) SECR also 
applies. 

II. 

Required. 

Table 2: Comparison of disclosure requirements for structured finance products for funding 

Covered bonds 
Article 14 of the Covered Bonds Directive 
(Directive  (EU)  2019/2162)  -  follows  a 
principle-based approach to disclosure 
No,  only  portfolio  level  information  is 
required, with an aggregate view on the pool 
of the underlying exposures 
No underlying documentation is required to 
be disclosed.  

At least on a quarterly basis 

No prescribed format. The Directive sets out 
in  the  Article  14  a  high-level  list  of 
areas/types  of  information  that  need  to  be 
provided to investors.  
The  information  needs  to  be  published  on 
the website of the credit institution issuing 
the covered bond.  

Legal basis 

on 

Information 
underlying 
exposures 
Underlying 
documentation 

Updates 

Format 

Securitisation 
7 
Article 
Commission 
Regulation 2020/1224 
Yes 

SECR 

and 
Delegated 

All underlying documentation, 
including  where  relevant  the 
STS notification; 

If  no  prospectus  has  been 
i.e.  for  private 
drawn  up, 
securitisations – a summary of 
the main features. 
Quarterly 
(monthly 
ABCPs); 

reports 
short-term 

investor 
for 

Quarterly  inside  information 
reports (monthly for short-term 
ABCPs); 
Prescribed  templates  in  .xlm 
a  Commission 
in 
format 
Delegated Regulation. 

Method 
disclosure 

of 

For public securitisations – via 
securitisation repositories. 

prescribed 
for 

No 
method 
securitisations. 

disclosure 
private 

203