European Commission Proposes Legislative Reforms to EU Securitisation Framework

On 17 June 2025, the European Commission (the “Commission”) published a formal legislative proposal (the “Securitisation Legislative Proposal”) aimed at revising the current EU securitisation framework. This follows the Commission’s consultation on the functioning of the current securitisation framework, which concluded December 2024. The consultation invited feedback from stakeholders on the effectiveness of the existing rules and identified areas where improvements could be made. The Securitisation Legislative Proposal introduces amendments to Regulation (EU) 2017/2402 (the “EU Securitisation Regulation”) and to the simple, transparent and standardised (“STS”) framework.

These reforms are part of the Commission’s broader strategy to strengthen the EU’s capital markets and support economic growth. Notably, this legislative package marks the first initiative under the newly launched Savings and Investments Union (SIU) Strategy, which aims to better connect savings with investment opportunities across Europe. Set out below is a summary of the principal amendments proposed under the Securitisation Legislative Proposal.

Background

The EU Securitisation Framework was introduced with the aim of revitalising the European securitisation market. Its purpose was to facilitate access to finance, while ensuring that such activity did not give rise to undue risks to financial stability. Central to this framework was the adoption of the EU Securitisation Regulation, which established a harmonised set of rules governing due diligence, risk retention and transparency. It also introduced the concept of STS, intended to promote investor confidence and market integrity.

On 11 March 2024, the of EU Finance Ministers issued a statement on the Capital Markets Union, the Eurogroup Action Plan, in which it called upon the European Commission to undertake a comprehensive assessment of the factors impeding the development of the EU securitisation market. This marked a clear political signal that securitisation was once again being viewed as a potentially valuable tool for deepening capital markets and supporting access to capital.

This call to action was reinforced by the publication, on 9 September of the report entitled “The Future of European Competitiveness”, authored by former ECB President Mario Draghi. The report underscored the strategic importance of completing the Capital Markets Union and explicitly identified the need to revisit the regulatory framework governing securitisation as part of that broader agenda.

Proposed Changes

As part of its broader review of the EU securitisation framework, the European Commission has proposed a number of amendments aimed at making the regime more effective and accessible, while continuing to safeguard financial stability.

One key area of reform is simplifying due diligence and transparency requirements. Although these rules are crucial for investor protection, their complexity has made them burdensome and less effective. The proposed changes seek to ease these obligations, especially for institutional investors by streamlining required information and introducing more proportionate reporting templates, particularly for private transactions.

The proposal also introduces a clearer and more inclusive definition of what constitutes a “public securitisation.” This is intended to resolve inconsistencies in how transparency rules are applied and to ensure that similar transactions are treated consistently, regardless of how they are structured or marketed.

Changes are also being made to the framework for STS. These include adjustments to eligibility criteria and greater flexibility for certain asset classes, such as SME loans. The aim is to make the STS label more usable and relevant, without compromising its core principles.

Finally, the Commission is proposing a series of changes to the way securitisation exposures are treated under EU banking and insurance regulations. These reforms are intended to ensure that capital requirements are more closely aligned with the actual level of risk associated with such exposures, while also removing regulatory obstacles. Among the proposed amendments are revisions to the Capital Requirements Regulation, which sets out the rules for how credit institutions must calculate capital for securitisation positions. The aim is to introduce a more risk-sensitive approach, allowing capital charges to better reflect the risk profile of the underlying assets.

The Commission has also published draft amendments to the Regulation on the Liquidity Coverage Ratio (“LCR”), which are currently subject to a four-week public consultation. The LCR sets out the amount of liquid assets that a bank must have to meet its short-term liquidity needs. The proposed amendments seek to address the existing requirements that securitisations need to comply with in order to be eligible for inclusion in a banks' liquidity buffer.

Furthermore, the Commission has indicated its intention to publish draft amendments to the Solvency II Delegated Regulation. These proposals will aim to refine the treatment of securitisation exposures held by insurance undertakings, with a view to better aligning capital requirements with actual risk and removing unwarranted regulatory disincentives to investment in securitisation by insurers.

Conclusion

The Securitisation Legislative Proposal will now be submitted to the European Parliament and the Council of the European Union for consideration in accordance with the ordinary legislative procedure. It should be noted that the proposal may be subject to substantive revision and amendment during the course of the legislative process. Until such time as the proposal is formally adopted and enters into force, the EU Securitisation Regulation, as currently in effect, shall continue to apply.

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