Securitisation reform – interpreting the Brussels mood music

Background

On 17 June 2025, the European Commission (Commission) published a package of proposals for the reform of the European Securitisation Framework (EU Securitisation Reform Proposals). The EU Securitisation Reform Proposals represent a broadly positive step towards revitalising the securitisation market, including some ambitious initiatives that aim to reduce regulatory burdens and expand investor participation.  The EU Securitisation Reform Proposals were met with a positive response from much of the market but with areas noted where further adjustments could be beneficial.

Where are we now?

The European Council (Council) and the European Parliament’s Committee on Economic and Monetary Affairs (ECON) deliberated on the proposals throughout October and November 2025.  On 11 November 2025, the European Central Bank (ECB), in response to requests from the Council and the European Parliament, published its opinion (ECB Opinion) on the proposed reforms to the EU Securitisation Regulation (EUSR Proposal) and related amendments to the Capital Requirements Regulation (CRR Proposal) and Liquidity Coverage Ratio Delegated Regulation¹ (LCR Proposal). On 28 November 2025, the European Commission published its position on points arising from the opinion of the European Economic and Social Committee (EESC)² that it considers essential, reinforcing the rationale and support for a number of its original proposals and cautioning against measures that would add further red tape to the framework. On 11 December 2025, ECON published draft position reports³ (ECON Position) On 19 December 2025, the Council’s final negotiating position (Council Position) was endorsed⁴.

What is the direction of travel?

The ECON Position and Council Position indicate broad support for the Commission’s proposed reforms but with targeted adjustments including some further improvements for areas where the market has expressed concerns. Some key points arising from the Council’s and ECON’s current positions, and also the ECB Opinion, are highlighted below. For a more detailed review of the proposals and current positions please see are in-depth article: Securitisation reform in focus: from policy to market reality.

EU Securitisation Regulation (EUSR) Proposal

• Public securitisation definition

  The proposed definition of “public securitisation” has been pushed back by both the Council and the ECON as a result of industry concerns. The market may be keen however to continue investigating an alternative definition or mechanism that will permit transactions with a prospectus, but are not otherwise considered “public”, to benefit from simplified private template reporting,

• Due diligence

  ECON and the Council also support delegating responsibility to managing parties with the requisite experience which allows investors to delegate due diligence without sanctions risk. The Council and ECON support reduced STS verification and reliance on third-party verifiers (TPVs). Both bodies indicate that third-country reporting to securitisation repositories is not intended. In addition, the Council proposes that as a minimum the information required under Article 7(1) of the EUSR should be provided which may mean that templated information, and reporting to repositories, will not be required. Finally, clarity is provided with proposals by each of ECON and the Council for a definition of “repeat transaction” for the purpose of reduced due diligence.

• Risk retention

  The Council and ECON have considered further adjustments to the Commission proposal for waivers for certain public entity-guaranteed transactions, including additional conditions and consideration for NPE securitisations. The Council also includes carve-outs for synthetic securitisations.

• Transparency

  As with risk retention, the Council proposes a further carve-out for certain synthetic securitisations. The Council also proposes a similar exclusion from the credit-granting standards. The Council also provides a definition “highly-granular pools of short-term exposures” as “a pool of exposures where no single exposure represents more than 0.005 % of the overall pool and every exposure has an original maturity of one year or less”; this would remove the limitation of the proposal to credit cards and consumer loans.  ECON’s drafting also amends the proposal so that credit cards are an example of highly-granular assets that could benefit from aggregated reporting.

• Investor sanctions

  In a positive move there also appears to be a willingness to reconsider investor sanctions.  The Council reverts to the status quo but ECON suggests instead introducing a penalty cap rather than rejecting the proposal outright, albeit subject to additional CRR sanctions not being applied so as to avoid duplication.

• Unfunded guarantees

  ECON and the Council address market concerns around safeguards for unfunded guarantees, which could make these proposals more viable, including a threshold that now takes into account the group level.  However, there is no support to include non-EU guarantors in scope which would continue to be a limitation.

• Transitional arrangements

  There is also some consideration by the Council for transitional arrangements for STS, though a wider question of grandfathering and transitional arrangements under the EUSR and CRR remain.

• Environmental reporting

  The ECB has highlighted that it considers environmental reporting requirements to be a necessary consideration; the Council and ECON do not include proposals on this as yet, though this could be a matter that evolves as the disclosure templates progress.

CRR Proposal

These proposals mark a pivotal moment in the regulatory landscape for securitisation. It is encouraging to see the Council and ECON broadly support the Commission’s framework for resilient securitisation positions (RSP), significant risk transfer, and the recalibration of risk weight (RW) floors and p-factors; each introduces targeted amendments to refine these measures. A clear trend is the increasing allocation of preferential treatment to senior STS and RSP tranches, though the approaches diverge and are likely to be a focal point for debate as the legislative process advances. The ECB’s recent opinion, highlighting concerns around complexity and risk calibration, may also influence the direction of the final rules, especially as trilogue negotiations begin. Perhaps reflecting divergent views of Member States, the Council adopts a more conservative approach overall compared to ECON. Some key points include:

• RW Floor

  The Council maintains conservative stance; although the multiplier is often reduced, the Council raises minimum RW floors for senior positions, for example, increasing the floor for senior non-STS tranches from 10–12% under the Commission to 13%, and for senior STS tranches from 5% to 6–8%. No cap for the formulaic RW floor is introduced for senior positions however (with the exception of some modifications in SEC-ERBA) which means potentially higher capital charges for higher risk assets.

  In contrast, ECON harmonises and generally lowers capital requirements for all holders of senior tranches, applying the same (lower) p-factor and RW floor to originators, sponsors, and investors. ECON frequently introduces caps to set upper limits on capital charges, including for the formulaic RW floor for senior positions; this makes requirements more predictable and market-friendly. ECON also includes lower floors within the RW floor formulae and reduced multipliers in the formulae.  Senior STS and RSP positions, in particular, benefit from these lower and capped RW floors, while non-STS positions also see harmonised treatment amongst investors, originators and sponsors.

  Furthermore, ECON proposes that the RSP concept should apply only to synthetic transactions, recommending that the STS framework be reinforced for traditional deals and that all STS senior tranches of traditional securitisations be treated as ‘resilient’.

• P-factors:

  The Council’s approach is more conservative than the Commission’s, raising minimum p-factors and harmonising treatment for market participants though mostly at a higher level. Unfortunately, the Council has not removed the distinction between investors and originators/sponsors for the SEC-SA p-factor.

  ECON, by contrast, arguably may offer the most harmonised and market-friendly stance, lowering p-factors for all holders of senior tranches whilst introducing caps for predictability. Notably for the SEC-SA p-factor, ECON proposes a significant reduction in the p-factor of 0.3 (for a senior RSP synthetic securitisation or a traditional securitisation), 0.5 for other synthetic senior securitisation positions and 1 for all other securitisation positions

  All three approaches recalibrate the SEC-ERBA tables to align with their respective approaches to p-factor and RW floor adjustments.

• Senior securitisation definition

  The ECB Opinion expressed concerns about the possible cliff effects introduced with this definition. ECON proposes removing the definition of “senior securitisation”.  Similarly, the Council has made some adjustments to ensure that determination of a senior position is determined at the outset and not adjusting over time; this will provide clarity and certainty that will provide more predictability for issuers and investors. This is a positive development as the Commission’s proposed definition creates a minimum attachment point which could result in many positions being reclassified as non-senior over time and disproportionately increasing RWs.

• Exposure value of undrawn portion of cash advance facilities for off-balance sheet securitisations

  The Council also proposes that, to determine the exposure value of the undrawn portion of the cash advance facilities, a conversion factor of 10% (instead of 0%) may be applied to the nominal amount of a liquidity facility.

• Covered bonds

Beyond securitisation, ECON proposes halving the RW for the highest quality covered bonds under SEC-SA from 10% to 5%, aiming to maintain their competitiveness in the context of broader capital recalibrations, including with RSPs.

Other points of interest

• Extension of transitional arrangements for central bank exposures

  To address ongoing financing requirements arising from COVID-19 and the Ukraine war, the Council proposes that transitional arrangements for exposures to central governments and central banks of non-euro Member States, where denominated and funded in euro, should be extended.

• UCITS

The Council and ECON support expanding UCITS investment limits in public securitisation.

• Securitisation platform

  Notably, ECON retains the prospect of a future securitisation platform as a longer-term consideration.

• Transitional arrangements

Finally, while the Council includes some proposals for STS transitional arrangements in the EUSR, further clarity will be needed on transitional arrangements for both the EUSR and the CRR - an area the market will be watching closely as the reforms progress.