The European Parliament and the Council of the EU have agreed on reforms to the bloc’s securitisation market, with changes to capital rules, reporting and investor due diligence expected to ease some costs for issuers and investors. The measures could take effect around summer 2027, after the legislative text is finalised and a parliamentary vote expected in the first quarter of that year, said David Bergman, head of structured finance at Scope Ratings.
Agreement reached ahead of earlier expectations
The reform stems from Europe’s competitiveness strategy, set out in a report led by former European Central Bank president Mario Draghi and published in September 2024. The proposals then entered the legislative process, with the European Parliament and the Council—which represents member-state governments—reaching agreement on October 21.
Andrew Traynor, a partner at Walkers Global, said the two institutions began with substantial differences on some issues, making the agreement a notable step in the process. Bergman said it confirms the direction of reform, though the details will depend on the legislative text expected later this year. A timetable previously viewed as ambitious now appears achievable, he added.
Capital treatment and due diligence remain key questions
The reforms could change capital requirements for simple, transparent and standardised (STS) securitisations. For transactions meeting new “resilience” criteria, the floor for risk weights on senior tranches could be set at between 5% and 7%, Traynor said. If adopted, the change could improve the economics of using securitisation to manage capital and balance sheets.
It remains unclear how far investor due diligence requirements will be simplified. Bergman said the current process is burdensome and has encouraged issuers to favour private transactions. Whether the reforms change that preference will depend on the final rules for due diligence and reporting.
Private deals and CLOs may get streamlined reporting
The new framework will distinguish between public and private securitisations, with simplified reporting templates for private deals. Collateralised loan obligations (CLOs) may also receive separate, streamlined templates and information-access arrangements, Traynor said. Private securitisations have generally been outside the requirement to use reporting repositories; bringing them into the framework would change how information is reported and accessed.
The Council’s October 21 statement also said the agreement would establish EU-level supervision for entities meeting STS criteria and raise the investment limits for undertakings for collective investment in transferable securities (UCITS) in securitisation products. Michael Bright, chief executive of the Structured Finance Association, said changes to capital rules and due diligence, alongside greater scope for UCITS investment, could support securitisation as a source of financing for the European economy. The final legislation will determine the practical effect, particularly the capital thresholds, reporting obligations and investment limits.