Review of the EU securitisation framework

Speech by Francesco Mazzaferro, Head of the ESRB Secretariat, at the Exchange of views of the Committee on Economic and Monetary Affairs of the European Parliament

Brussels, 13 October 2025

Thank you for inviting me to this public hearing on the review of the EU securitisation framework.

Europe urgently needs to channel savings into productive and innovative investment to enhance the strength and competitiveness of its economy. This was a key message of the Draghi Report.

A well-functioning EU securitisation market can be an important component of the savings and investments union (SIU). Commissioner Albuquerque rightly noted in her confirmation hearing that “… we should not confuse instruments with the misuse that they have had in the past.” That is why the European Systemic Risk Board (ESRB) supports the aim of the European Commission's proposal to make the EU securitisation framework simpler and more fit for purpose.

The Commissioner also made two other important points concerning securitisation. First, “… there is no one instrument which will be the miracle to unlock everything …”. And second, “… everything will have to be tested against financial stability concerns”.

I will come back to these two points in my remarks.

What can securitisation do for the SIU?

First, securitisation can increase the availability of credit in the economy. Through securitisation, banks can transfer risk off their balance sheets to other investors. And this frees up balance sheet capacity for new lending.

Second, it can help boost the size of the EU’s financial markets, particularly its debt markets, and attract new investors to these markets. Scaling up EU financial markets is essential to enhancing the EU’s competitiveness.

Third, securitisation can strengthen the financial system’s resilience by transferring risk from originator banks to a more diverse group of investors. These investors may be better prepared to manage or absorb those risks if they materialise.

What can securitisation not do for the SIU?

First, securitisation is not designed to channel capital towards highly innovative start-ups or groundbreaking innovations.

Second, it is not designed to mobilise household savings for productive investment in the real economy.

Finally, it will not address the fragmentation of the EU’s capital markets or contribute to the development and strengthening of its equity markets.

So, mindful of what securitisation can and can’t do, I will now briefly describe the state of the securitisation market in the European Union and how we can promote its secure and sustainable growth in the future.

The EU securitisation market is currently:

• A small market: In both absolute and relative terms, the EU securitisation market is small when compared with similar markets in other jurisdictions. In recent years, securitisation issuance in the European Union has remained at around 0.5% of GDP. In the United States, even when excluding “government-supported entities”, securitisation issuance exceeds 2%. In the United Kingdom, it stands at approximately 1.5%.^[1] However, it is also important to emphasise that other jurisdictions do not rely as heavily as the European Union on covered bonds as a source of funding.
• A highly concentrated market: Market activity is concentrated in a small number of countries and banks. More than 80% of the total outstanding amount is backed by loans originating from just five countries, while the ten largest originator banking groups account for approximately 70% of the market.
• A market with divergent dynamics: Traditional "true-sale" securitisation has largely stagnated, whereas synthetic securitisation is experiencing significant growth. Between 2022 and 2024, synthetic securitisations issued by significant institutions grew by 24%. In the first half of 2025 alone, the increase was even bigger, with growth of over 85%.^[2] This surge has been driven primarily by significant risk transfer (SRT) transactions, which provide banks with significant regulatory capital relief.
• Closed-loop market: A large proportion of traditional true-sale securitisations are retained on banks’ balance sheets rather than being placed on the market with external investors. The investor base also remains rather limited and concentrated among a few non-bank financial institutions.
• A high-quality market: The quality of EU securitisations is high. More than 90% of the securities rated by Moody's in Europe hold an investment grade rating, in contrast to just over 60% in the United States.^[3]

Turning to the European Commission's proposal, the ESRB welcomes certain aspects, we see opportunities for improvement in others and we have financial stability concerns regarding one specific element.

To elaborate, we welcome the following aspects.

• First, as a general principle, a better alignment between risk and capital requirements. Micro-supervisors are better equipped than the ESRB to evaluate whether this alignment is adequately addressed in the current proposal. I will therefore defer to the forthcoming ECB opinion for a more detailed assessment of the proposals in due course.
• Second, the efforts to adopt a more proportionate approach to due diligence requirements and to simplify non-essential disclosure requirements.
• Third, the reporting of private securitisations to securitisation repositories. We are pleased that this long-standing ESRB request has been incorporated into the Commission's proposal.

There are, however, areas where the Commission's proposal could be improved.

• All EU securitisations should be resilient. The simple, transparent and standardised (STS) framework was introduced after the global financial crisis for that very purpose. The proposal of a new concept of "resilient transaction" is a misnomer and creates unnecessary complexity. The focus should remain on strengthening the STS.
• Regulatory changes should not incentivise banks to remain in the securitisation market as investors, as this runs counter to the goal of transferring risk outside the banking sector and fostering a more diverse and dynamic market.

Allow me to come back to the Commissioner’s point that everything will have to be tested against financial stability concerns.

The ESRB has already expressed one such concern. It is the proposal to make insurers eligible to provide unfunded guarantees under the STS framework.

That proposal would increase both concentration risk and counterparty risk.

Concentration risk would be greater because the proposed amendment would give (re)insurance companies a significant competitive advantage over other private investors. Such an unlevel playing field might result in (re)insurers becoming a key provider of credit protection for STS synthetic securitisations, as is already the case in the non-STS segment.

Counterparty risk would expand because the proposed amendments would amplify existing channels of contagion between the banking and insurance sectors, while creating new ones.

The proposal would also increase the risk of adverse developments in the insurance sector – such as rating downgrades or bankruptcies – spilling over into the banking system. Such spillovers could severely undermine banks’ ability to extend credit to the real economy, particularly during economic downturns when access to credit is most vital.

Under the current regulation, this risk is mitigated by requiring credit protection provided by private entities to be funded – in other words, backed by high-quality collateral.

This concern was set out in detail in the letter I sent to the European Parliament and the Council Working Party on 25 July 2025.