Securitisation has been singled out in various EU strategic papers, including the Letta Report, as one of the key priorities in financial markets policy to deepen the Capital Markets Union (“CMU”).¹ It is encouraging to see that there is a broad political consensus in the EU on the need to reform the securitisation framework in order to ensure the success of the CMU, as outlined recently in the Eurogroup statement and European Council conclusions on CMU.²

More specifically, the Noyer Report and ESMA’s Position Paper on the CMU have highlighted the importance of reforming the regulatory framework to revive the market and ensure that securitisation plays a more significant role in financing the real economy.³ We agree with the reports’ conclusions and with EU policymakers on the urgency and importance of reforming the EU securitisation regulatory framework. We believe this is a prerequisite for the European economy to be able to mobilise private capital to achieve key EU policy goals. The scope of the reform must go beyond policymakers’ past focus on sell-side issues, considering that asset managers and insurers are playing an increasingly prominent role in European credit markets. Improving the regulatory framework for securitisation instruments like Collateralised Loan Obligations (“CLOs”) and allowing asset managers to sponsor securitisations is a necessary condition for the success of any reform.

Securitisation is undoubtedly the key instrument to channel investments into strategic areas like infrastructure, energy, defence and climate transition, as well as to finance the growth of SMEs and the real economy. This has been recognised by Enrico Letta and key policymakers like Banque de France Governor François Villeroy de Galhau.⁴ In its current formulation, the EU Securitisation Regulation (“EU SR” or “SR”) and related legislation like Solvency II are the main obstacles that have impeded the EU economy from fully benefitting from securitisation. The growth of the European securitisation market since the Great Financial Crisis has been underwhelming due to the disproportionate, unwarranted and punitive regulatory framework imposed on the market in its aftermath. It is welcome to finally see policymakers come to this realisation. This position paper presents a clear analysis of the key regulatory barriers that restrict the market, particularly from the perspective of asset managers, and identifies the crucial reforms needed to revive the EU securitisation market. As with all financial products, there are inherent risks to securitisation structures and markets. The key goal for policymakers must therefore be to identify appropriate and proportional disciplines around risk management that are consistent with other financial markets, products and jurisdictions, as well as with wider regulatory frameworks like AIFMD. Legislators and regulators have a policy window during the upcoming EU legislative cycle and should not miss the opportunity to finally achieve a functional and productive securitisation regulatory framework.

1 https://www.consilium.europa.eu/media/ny3j24sm/much-more-than-a-market-report-by-enrico-letta.pdf
2 https://www.consilium.europa.eu/es/press/press-releases/2024/03/11/statement-of-the-eurogroup-in-inclusive-format-on-the-future-of-capital-markets-union/
https://www.consilium.europa.eu/media/m5jlwe0p/euco-conclusions-20240417-18-en.pdf
3 https://www.esma.europa.eu/sites/default/files/2024-05/ESMA24-450544452-2130_Position_paper_Building_more_effective_and_attractive_capital_
markets_in_the_EU.pdf and https://www.tresor.economie.gouv.fr/Articles/2024/04/25/developing-european-capital-markets-to-finance-the-future
4 https://www.banque-france.fr/en/governors-interventions/capital-markets-union-genuine-financing-union-transition