European Commission publishes legislative proposal to reform the EU Securitisation Regime

Background

The reform of the EU securitisation framework has been identified by the EU legislators as being a key element of rebuilding EU capital markets and improving EU competitiveness. 

On 17 June 2025, the European Commission (Commission) published its legislative proposal to reform the EU securitisation framework (Proposal), the first of the initiatives proposed under its Savings and Investments Union strategy. This follows a targeted consultation published by it in October 2024 (Consultation) and call for evidence published by it in February of this year. 

The Proposal adopted by the Commission comprises targeted amendments to both the Securitisation Regulation[1] and the Capital Requirements Regulation[2] (CRR). The Commission has also consulted on further amendments to the Liquidity Coverage Ratio Delegated Regulation[3] and intends to publish a consultation on proposed amendments to the Solvency II Delegated Regulation in the coming weeks. 

In this briefing, we focus on aspects of the Proposal likely to be of most interest to institutional investors (including fund management companies) who are subject to buy-side obligations under the existing Securitisation Regulation, outlining some key elements of the Proposal as well as identifying some elements of the Proposal which may be of concern to the asset management sector. 

Key Elements of the Proposal 

Adaptation of the due diligence requirements imposed on institutional investors    

As expected, the Commission has proposed a number of changes to the existing due diligence requirements currently imposed on institutional investors in order to encourage more investment in the EU securitisation market. 

(i) Simplified due diligence for EU securitisations

Under the Proposal, institutional investors will no longer need to verify certain information (including confirming compliance with the risk retention rules and transparency obligations) when the sell-side party is based and supervised in the EU. 

(ii) Less prescriptive risk assessment and risk monitoring requirements

In an acknowledgment that due diligence requirements should be proportionate to the risk profile of the relevant securitisation, the prescriptive rules set down in the existing framework relating to risk assessments prior to investing in a securitisation and monitoring risk during the life of the investment in the securitisation will be adapted to be more principles-based.

(iii) Adaptation of rules for secondary market transactions

Under the Proposal, institutional investors investing in secondary market transactions are given an extra 15 days to document their due diligence assessments and verifications.

(iv) Adaptation of rules for repeat securitisations

Simplified due diligence requirements will apply in the case of repeat transactions[4] where key risk characteristics are already well understood.

(v) Disapplication of due diligence requirements for certain types of securitisations

The Commission has proposed that the due diligence requirements should be disapplied in full for institutional investors where:

1. the securitisation position is fully guaranteed by a multilateral development bank listed in the CRR; or

2. the securitisation includes a first loss tranche that is (i) guaranteed or held by a narrowly defined list of public entities and (ii) that tranche represents at least 15% of the nominal value of the securitised exposures. According to the European Commission, these changes are expected to encourage private investment in derisked structures with a public guarantee.

Calibrated transparency regime

The Commission has proposed that the transparency obligations imposed on sell-side parties should depend on whether the securitisation in question is a “public securitisation” or a “private securitisation”.

It has proposed the introduction of a much lighter reporting regime for “private securitisations” for which a dedicated and simplified reporting template will be developed. Likely to be a disappointment for some stakeholders, the Commission has pushed ahead with a proposal that such private securitisations will need to be reported to repositories to allow basic visibility over the private market. It has proposed however that, unlike the proposed framework for public securitisations, data from private securitisations would not be publicly disclosed.

The Commission has also proposed that the reporting requirements for “public securitisations” should be reduced quite significantly[5].

A “public securitisation” has been broadly defined by the Commission as including any one of the following:

(i) a securitisation for which a prospectus has to be drawn up;

(ii) notes constituting securitisation positions are admitted to trading in specific trading venues; or

(iii) the securitisation is marketed generally to investors and the specific terms are not negotiable among the parties, meaning that the transactions is offered to investors on take-it or-leave-it basis.

A “private securitisation” under the Proposal is one that does not meet any of the aforementioned criteria.

Areas of potential concern under the Proposal

Certain elements of the Proposal may disappoint the EU asset management sector, including in particular the following:

Application of due diligence requirements to non-EU securitisations

In a report published by it in 2022, the Commission confirmed that institutional investors must verify that the sell-side parties to a securitisation transaction comply with the relevant provisions of the Regulation regardless of where such sell-side parties are located. In practice, this has meant that institutional investors have been excluded from investing in certain non-EU securitisations where the sell-side parties are not in full compliance with the detailed reporting requirements imposed on sell-side entities under the Securitisation Regulation.

In responses to the Consultation, industry advocated for the revision of the reporting obligations for non- EU securitisations to account for the fact that the securitisation frameworks in certain non-EU markets may require the same type of information and data to be reported, albeit  in a different format to the templates used under the Securitisation Regulation. Many institutional investors will therefore be disappointed to find that non-EU securitisations continue to be subject to the reporting obligations imposed on EU securitisations.

Ability of fund management companies to perform the role of sponsor under the Securitisation Regulation

In its Consultation, the Commission asked for feedback on whether EU AIFMs should be capable of performing the role of sponsor under the Securitisation Regulation. Again, certain asset management industry bodies advocated for this flexibility to be introduced into the revised framework, citing the fact that many AIFMs managing private credit funds have significant expertise in establishing and managing collateralised loan obligations for example and that such a move would increase the availability of finance to EU businesses. However, the Commission has not provided for this flexibility under its Proposal. 

Other Points of Note from the Proposal

Finally, the Commission has proposed amending the existing Securitisation Regulation to clarify that where an institutional investor such as a fund management company delegates its due diligence obligations under the framework to a third party, it remains responsible for ensuring that those due diligence requirements have been complied with notwithstanding any such delegation. This is consistent with the delegation rules set down in the UCITS and AIFMD frameworks.  

In addition, national competent authorities are given express powers to impose remedial measures and administrative sanctions on any institutional investor which does not comply with applicable due diligence requirements. 

Other relevant regulatory initiatives

As UCITS fund management companies will be aware, securitised investments (such as asset backed and mortgage-backed securities) held by UCITS funds have also been subject to regulatory spotlight as part of the Call for Evidence on the review of the UCITS Eligible Assets Directive issued by ESMA last year.[6]

In its recent targeted consultation on the integration of EU capital markets, the Commission has also sought feedback on whether the issuer limit under the UCITS framework under which a UCITS fund cannot acquire more than 10% of the debt securities of a single issuing body should be revised. 

What next?

The proposed amendments to the Securitisation Regulation and the CRR must now be considered by the European Parliament and the Council of Europe under the EU’s ordinary legislative procedure, a process which is likely to take a number of months. We may therefore see material changes to the Proposal being made by either or both institutions before the revised rules come into force.  

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Footnotes:
[1] Regulation (EU) 2017/2402 as amended
[2] Regulation 575/2013/EU as amended
[3] Commission Delegated Regulation (EU) 2015/61
[4] Repeat transactions are described in the Proposal as “investment in securitisation positions issued by the same originator, backed by the same type of underlying assets, exhibiting the same structural features and offering the same or lower level of credit risk compared to previous investments”.
[5] The recitals to the proposed amendments to the Securitisation Regulation note that “the reporting templates should be streamlined to reduce the number of mandatory data fields. The revision of the template should aim to bring a reduction of at least 35% of mandatory data fields”. The Commission also notes in the Proposal that the reporting templates should not require loan level information when the underlying exposures are highly granular and short-term (such as credit card exposures or certain consumer loans).
[6] ESMA34-1270380148-1032 Call for Evidence on the review of the UCITS Eligible Assets Directive (europa.eu)