Frankfurt: The file that was supposed to demonstrate that Europe can revive a moribund market is now in the phase where such demonstrations usually falter. Parliament fixed its position in plenary on 21 May, following a committee vote earlier that month, and the Council had settled its stance the previous December. Trilogues opened in June. The working party on financial services has been grinding through the technical text since, and the stated objective remains a deal before the year ends.
The underlying problem is easy to state and hard to solve. European securitisation issuance never recovered from the financial crisis, not because European instruments performed badly during it, but because the regulatory response treated the asset class as inherently suspect. Default rates on European securitisations were an order of magnitude below their American counterparts, and the capital charges imposed afterwards did not reflect that distinction. The result is a market a fraction of its pre-crisis size, in a bloc that now wants banks to free up balance sheet to finance a defence build-out, an energy transition and a productivity problem simultaneously.
The reform therefore matters beyond the technicians. If banks can transfer credit risk on existing loan books to institutional investors at a sensible capital cost, they can originate more without raising equity. That is the entire theory of the case, and it is why the file sits inside the savings and investments union rather than being treated as a narrow prudential matter.
Two questions have proved stubborn. The first is the boundary between public and private securitisations, which determines the disclosure regime a transaction must satisfy. Issuers argue the current templates demand loan-level data that private investors negotiating bilaterally do not need and did not ask for, imposing cost without informing anyone. Supervisors reply that the point of disclosure is not only to inform the buyer but to let authorities observe where risk has migrated, which is precisely what nobody could do in 2007.
The second is the calibration of capital requirements, and it is the one that will determine whether the reform accomplishes anything. The committee position was weakened relative to the rapporteur’s original draft, according to market participants who tracked the amendments, and the Council’s text offers targeted relief for lower-risk tranches rather than a structural recalibration. Whether the compromise lands close enough to the risk to change bank behaviour is genuinely uncertain. Targeted relief that leaves the headline floor intact produces announcements rather than issuance.
There is a credibility dimension too. Several analysts have observed, not unkindly, that the securitisation package functions partly as evidence that the Union can still complete a capital markets file at all, after a decade in which the ambition was restated more often than it was delivered. That framing is unflattering but not wrong, and it raises the stakes on the calibration: a reform adopted on time and ignored by the market would be worse for the broader project than a delay.
Technical standards and templates will follow whatever the trilogue agrees, which means the practical effect will not be visible until well into 2027. Banks will not restructure funding strategies on a political agreement; they will wait for the final capital treatment in black and white. The autumn will decide what that treatment says, in rooms with no audience and a calendar that is running out.
