The European Commission yesterday published a formal legislative proposal in connection with the current EU securitisation framework (the “Securitisation Legislative Proposal”). This follows on from the targeted consultation on the functioning of the EU securitisation framework by the European Commission, which closed on 4 December 2024. The targeted consultation sought feedback from stakeholders on the EU securitisation framework and on potential areas for improvement.
The Securitisation Legislative Proposal proposes amendments to Regulation EU 2017/2402 (the “EU Securitisation Regulation”) and to the prudential legislation which forms part of the current EU securitisation framework. The Securitisation Legislative Proposal proposes to amend the rules in the EU Securitisation Regulation on due diligence and transparency to lighten the regulatory burden in this regard. Amongst other matters, it also proposes to provide for an explicit (and broad) definition of public securitisation – one of the core definitions in this legislation and which is of particular relevance to the transparency requirements. Targeted changes are also proposed to the simple, transparent and standardised (“STS”) framework. On the prudential side, for banks participating in securitisation transactions the Securitisation Legislative Proposal aims to lower capital requirements and to extend eligibility for inclusion in liquidity buffers.
Who should be interested in the Securitisation Legislative Proposal?
The Securitisation Legislative Proposal is of interest to a wide group of stakeholders, including the following:
- institutional and retail investors in securitisation transactions;
- issuers and originators of securitisation transactions; and
- sponsors and arrangers of securitisation transactions.
Context for the Securitisation Legislative Proposal
The EU securitisation framework entered into force in 2019 with the core objective of reviving an EU securitisation market by helping to finance the economy without creating risks to financial stability. Amongst other matters in this framework, the EU Securitisation Regulation introduced common rules on due diligence, risk retention and transparency, and created a category of STS securitisation products.
On 11 March 2024, the Eurogroup of EU Finance Ministers (the “Eurogroup”) issued a statement (the “Eurogroup Action Plan”) on the Capital Markets Union (“CMU”). In the context of securitisations, the Eurogroup requested that the European Commission comprehensively assess all the factors negatively impacting the development of the securitisation market in the EU.
On 9 September 2024, the European Commission published a significant report authored by Mario Draghi and entitled ‘Future of European Competitiveness’ (the “Draghi Report”). The Draghi Report called for the CMU to be completed – including by reviewing the current regulatory framework on securitisations.
On 31 March 2025, the joint committee report from the European Supervisory Authorities on the implementation and functioning of the EU Securitisation Regulation (the “Joint Committee Report”) was issued (with limited advance consultation with the market) in order to serve two objectives: firstly, to assess the extent to which the EU Securitisation Regulation has achieved its original policy objectives; and secondly, to provide legislative recommendations to the European Commission. The authors of the Joint Committee Report noted that its publication coincided with the European Commission's examination of the EU securitisation framework and identified key suggested areas for legislative amendments. These key areas included:
- clarifying the jurisdictional scope of application;
- broadening the definition of public securitisation;
- focusing investors’ due diligence requirements on risk assessment;
- introducing targeted changes to the STS framework;
- clarifying the risk retention rules in specific cases;
- making the transparency framework more fit for purpose; and
- enhancing the consistency of the European supervisory framework.
The Securitisation Legislative Proposal is the next step by the European Commission to address the ongoing requests for change, including the requests contained in the Eurogroup Action Plan, the Draghi Report and the Joint Committee Report.
What happens next?
The Securitisation Legislative Proposal will now be submitted to the European Parliament and the Council of the European Union for approval pursuant to the EU’s ordinary legislative procedure. The Securitisation Legislative Proposal could be materially revised and amended as it works its way through this legislative process. Until the Securitisation Legislative Proposal is approved by the EU and enters into force, the EU Securitisation Regulation as currently in force remains the law.
We are currently assessing the content of the Securitisation Legislative Proposal and will publish a more detailed article on its contents shortly. For further information on the Securitisation Legislative Proposal, please contact Turlough Galvin, Alan Keating, Christian Donagh, William Foot, Alan Bunbury, Vincent McConnon, Gearoid Murphy, Emily Ashford, Graham Bloomfield or your usual Matheson contact.
This article is provided for general information purposes only and does not purport to cover every aspect of the themes and subject matter discussed, nor is it intended to provide, and does not constitute or comprise, legal or any other advice on any particular matter.