Europe is once again turning to securitization as a tool for growth. With new reforms underway, the European Commission plans to streamline disclosure rules, lower capital requirements, and re-engage investors.
After meetings in Brussels, SFA CEO Michael Bright spoke with Andrew Bryan of Clifford Chance to unpack how the EU’s complex rulemaking process works, what the latest proposals include, and what it will take to restore confidence and investment in Europe’s capital markets.
1.What’s the plan for revitalizing Europe’s securitization market?
Europe’s effort to revitalize its securitization market relies on reestablishing securitization as a trusted, mainstream funding tool that can expand credit availability and support investment without expanding risks. Policymakers acknowledge that post-2008 financial crisis stigma, not structural weakness, has held the market back. The immediate goal is to normalize securitization in Europe’s broader capital-markets union, aligning it with high underwriting standards, clear disclosure, and investor confidence. Success would mean increasing issuance from roughly €80 billion annually to a goal of a half-trillion euros.
2. How does the EU’s rule-making process work?
In the European Union, financial legislation begins with the European Commission, which proposes new laws after consulting regulators, industry, and member states. Those proposals move to the Council of the EU, which represents national governments, and the European Parliament, which represents citizens. Each body debates and amends the proposal before entering a final negotiation known as the trialogue, which is a series of meetings between representatives of the Commission, Parliament, and Council. This ensures that the final law reflects a consensus.
3. What’s in the Commission’s new securitization proposal?
The Commission’s reform package aims to revive Europe’s securitization market by reducing regulatory friction and restoring investor confidence. It focuses on the following four areas.
- Simplifying disclosure under the Securitization Regulation (SecReg), cutting redundant data fields by roughly 35 percent, and emphasizing investor-focused reporting.
- Lowering capital charges for banks and insurers to make it less costly to issue and hold securitized assets.
- Clarifying liquidity rules so senior securitization tranches can qualify as high-quality liquid assets.
- Aligning the EU’s regulatory framework for insurance companies (Solvency II) with global standards to encourage broader participation from institutional investors.
4. How does the European Parliament shape these reforms?
Parliamentary negotiations revolve around the rapporteur system, in which one member leads drafting while “shadow rapporteurs” from other political groups propose amendments. The process is inherently political but essential to forging cross-party consensus. This often means months of technical debate before a final vote.
5. If the rules improve, will investors return to the market?
Regulatory reform alone cannot revive Europe’s securitization sector. Investor participation depends on rebuilding internal expertise in insurance companies and pension funds that once anchored demand. Also important is engaging Europe’s vast pool of household savings that sit in low-yield deposits rather than productive capital markets. The EU must also attract international investors, particularly from the U.S. and Asia. Confidence will return if securitization offers clarity, consistency, and returns that compete with other asset classes.