The European Commission has unveiled a package of reforms aimed at revitalising the EU securitisation market, marking a pivotal moment for issuers, originators, financial institutions and investors alike. Published on Tuesday 17 June 2025, the proposals target long-standing inefficiencies in the current framework with over 40 focused amendments. While not a complete overhaul, the changes are designed to simplify processes, reduce capital burdens and enhance market participation—raising the question: are these long-awaited reforms the breakthrough the market needs, or just another round of wishful thinking?
In our recent publication, the ALG Capital Markets – Debt team break down the key proposals and what they could mean for issuers, originators, investors and the broader financial system. While the changes proposed are wide-ranging, the Commission is proposing targeted changes rather than a “root-and-branch” reform. Some of the most notable proposed changes include:
- a new individual definition of ‘public securitisation’ involving an expanded remit
- a number of simplifications to the due diligence investors would need to conduct before investing in a securitisation, with significant changes where the issuer is EU based
- a recommendation for a specific reporting template for private securitisations to be developed, which should be much lighter than the one for public securitisations
- a recommendation that loan level information for highly granular and short-term underlying exposures (e.g. credit card exposures or certain consumer loans) shouldn’t be required for reporting templates
- a relaxation of STS criteria for SME securitisations
- allowing for unfunded credit protection in STS SRT transactions, where the risk taker is an “eligible” insurer
- a recalibration of “risk weight floors” for senior positions to make them more “risk-sensitive”, resulting in lower floors most notably for senior STS positions
- amendments to the notorious (p) factor, which would differentiate between positions (e.g. STS v. non-STS; senior v. non-senior; originator/sponsor v. investor etc.)
- the introduction of a new concept of “resilient securitisation positions” (subject to eligibility criteria), which could allow further reductions in risk weights and (p) factor
- the replacement of current “mechanical tests” under the SRT framework with a new “Principle-Based Approach” test
- the removal of AAA “ratings cliff”, WAL and asset class restrictions from eligibility conditions for inclusion of senior STS positions in liquidity cover pools
- an indication that new Solvency II proposals may introduce (i) lower capital requirements for insurers holding senior non-STS tranches and (ii) the same prudential capital treatment for senior STS positions as currently apply for covered or corporate bonds
For advice or further information on these proposed reforms, please contact Peter Walker, Partner, Ciarán Rogers, Partner, Sinéad O’Connor, Partner, Jack Sheehy, Partner, Michelle Daly, Partner, Neal Breslin, Of Counsel, Elizabeth White, Knowledge Consultant, Sarah Murray, Senior Associate, Stephen Hannigan, Senior Associate, Seán Ó’Maoldomhnaigh, Senior Associate and Adam Hanna, Senior Associate or any member of ALG’s .
Date published: 24 June 2025
