Article 5(1)(e)

The revised language around Article 5(1)(e) in the European Parliament’s proposal, which is intended to exempt third-country securitisations from producing EU reporting templates, is problematic.

The adopted text specifies that third-country issuers should make available at least the information that would have been applicable if those entities were established within the Union. This approach is particularly problematic when compared with the language used in the Council’s General Approach, which was considerably more workable and allowed issuers to provide information that is “substantively equivalent” to the SECR’s transparency standards.

The ACC supports the language proposed in the Council’s General Approach, as it would enable EU investors to access large parts of the US securitisation market from which they are currently excluded.

Definition of public securitisation

The European Parliament has proposed expanding the definition of public securitisation to include all actively managed securitisations. This approach was rejected by the Council in its General Approach as part of its broader rejection of the European Commission’s proposed expansion. Instead, the Council favoured a simplified definition of public securitisation as one for which a prospectus must be drawn up.

The ACC supports maintaining the Council’s original position during the trilogues. The Parliament’s proposed change is problematic: it would introduce interpretive uncertainty and undermine the current functioning of the market. We would like to reiterate that the definition of public securitisation must remain grounded in marketing and distribution criteria, not management style.

The assumption that ‘active portfolio management’ equates to a public securitisation significantly distorts the meaning of ‘public’ and reflects a misunderstanding of how private credit and securitisation structures operate. Active management is not a proxy for public distribution; in the private credit and CLO markets, it is simply a tool for risk management and portfolio optimisation. Moreover, treating actively managed securitisations as public would capture a wide range of private transactions and impose full reporting burdens even where there is neither a public offer nor listed securities. It would, for example, discourage EU AIFMs from financing their fund portfolios because such financing arrangements often qualify as securitisations and are generally actively managed. This would further fragment the European private credit market and drive issuance offshore.

Sanctions

The European Parliament maintained the redundant sanctions regime introduced by the European Commission proposal. The ACC supports the Council’s approach, which removed the references to the sanctions regime for institutional investors linked to Article 5.

Article 6 changes clarifying the definition of ‘sole purpose’

The proposed changes to Article 6(7) would amend the ‘sole purpose test’. We do not think this amendment should be included in this reform package; it is not included in the Commission or Council proposals. The European Parliament’s position clarifies that an entity cannot be considered an originator if it “has been established or operates for the sole purpose of securitising exposures”. It also states that, for entities acting as originators that provide SME loans, consumer credit or residential mortgages, it should be sufficient “to demonstrate that securitising exposures is a means to finance their business, or that of an entity belonging to the same group, which is centred on the provision of goods or non-financial services.”

The final European Parliament position also removed the expansion of the sponsor definition to allow AIFMs to sponsor securitisations, which had been included in the rapporteur’s original proposal. Expanding the sponsor definition would have provided a valuable and simpler solution to address regulatory concerns around risk retention and the sole purpose test in specific parts of the European securitisation market.

Additionally, the European Parliament’s position mandates the European Banking Authority (EBA) to submit RTS specifying the criteria for the clarification of the ‘sole purpose test’ within six months of the Regulation’s entry into force. This would introduce significant transitional uncertainty for market participants seeking to apply the sole purpose test, with particular implications for non-EU deals, fund finance structures and entities that currently rely on the existing RTS safe harbour. The ACC's principal concerns with the European Parliament’s proposal are:

• Regulatory uncertainty during the transitional period. The proposal mandates new EBA RTS specifying the criteria for the sole purpose test. Until those RTS are finalised, there will be material uncertainty about how the Predominant Revenue Test should be applied in practice, creating a gap between the repeal or amendment of existing guidance and the adoption of the new standards.
• Narrow carve-out for specific entity types. The European Parliament’s position introduces a specific exemption for entities that provide SME loans, consumer credit or residential mortgages. These entities need only demonstrate that securitisation finances their broader business or that of a group entity. While helpful for those specific businesses, the SECR’s broad definition of ‘securitisation’ captures many other structures, including fund ABL transactions. If any residual retained position in a fund financing that constitutes a securitisation is treated as impermissible revenue for the purposes of the Predominant Revenue Test, it may become impossible for funds to comply. We would also argue that, more broadly, funds should be excluded from the sole purpose test because they are already subject to regulation under AIFMD and related frameworks.
• Competent authority case-by-case assessment. The proposed amended Article 6(1) provides that, where an entity does not meet the criteria in the new delegated regulation, the competent authority shall examine, on a case-by-case basis, the purpose for which the entity was established and operates to ascertain that it has real substance and is suitable to act as a retainer. Without knowing the content of the forthcoming RTS, it is difficult to assess what will fall into this residual category. This raises two further issues:
  • Non-EU originators. Where the originator is located outside the EU, there is no EU competent authority with jurisdiction over that entity. It would not appear workable for EU investors each to approach their own competent authorities to obtain an assessment of a third-country originator’s suitability. This could materially impact the ability of banks and EU institutional investors to deploy capital into non-EU-originated transactions.
  • Practical feasibility for EU entities. Even where originators are established within the EU, the feasibility of seeking individual competent authority determinations is questionable. In the fund finance context, for example, it is unclear whether each fund would need to apply to its home competent authority (e.g., the CSSF in Luxembourg) for a determination in respect of each financing it obtains.
• Loss of safe harbour status. We currently take the view that compliance with the limbs of the existing RTS constitutes a safe harbour and that, where an entity is objectively not established for the sole purpose of securitising exposures, strict compliance with all limbs of the RTS is not necessary. It is unclear whether the new delegated regulation will preserve this safe harbour approach. If it does not, entities that would clearly pass a substance-based assessment may nonetheless face compliance challenges under a more prescriptive regime.

The European Commission’s proposal is currently undergoing the ordinary EU legislative process.  The European Parliament's ECON Committe and the Council of the EU have revised the the legislative file and proposed their own amendments.

Trilogues started in June 2026. The Irish Presidency of the Council is seeking to finalise the file by the end of 2026.  

Market participants will not be impacted by any changes before late 2027, as the new regulation is expected to enter into force in early 2027, with a delayed applicability until late 2027 or early 2028. 

In June 2024, the ACC published its position paper on ‘Reviving the EU’s securitisation market’, which outlined the key priorities for reform from a private credit perspective:

• Introduce differentiated and proportionate due diligence and transparency requirements for sophisticated investors and issuers of securitisations: The detailed due diligence obligations for institutional investors add little value, yet the associated compliance risks are a significant barrier to their investment in securitisation products. Certain requirements for the most sophisticated investor groups, such as Alternative Investment Fund Managers (“AIFMs”) should be relaxed and there should also be more proportionate transparency and disclosure rules for issuers and managers of securitisations.

• More risk-based capital and liquidity requirements for prudentially regulated investors: Solvency II and other requirements on insurers have significantly reduced the incentives for insurers to invest via securitisations, despite the fact that the asset profile of many securitised products is a natural fit for insurance liabilities. Similarly, the disproportionate capital treatment of securitisation for banks also actively discourages them from investing in securitisations over other assets which may display similar risks. Improving the capital treatment for insurance companies and banks investing in securitisations is one way in which this imbalance can be redressed.

• Permit sophisticated investors to invest in non-EU securitisation markets: Due to differences between the US and EU implementation of globally agreed securitisation reforms, EU investors are prohibited from investing in some of the largest and most liquid US securitisation products, specifically US open-market CLOs. This restricts EU investors and those captured under the definition of institutional investor from investing in the full range of global securitisation products, hampering their competitiveness in relation to their global peers. Given the high levels of investor protection which already exist within the existing regulatory framework, we believe this prohibition should be amended.

• Broaden the population of financial institutions participating in the production and distribution of securitisations: AIFMs and the AIFs they manage now play a much larger role financing the corporate sector but are prohibited from acting as sponsors of securitisations under the SR which envisaged this only being performed by a credit institution or a MiFID licensed entity. Recent updates to the AIFMD confirm that AIFMs and the entities they manage are permitted to originate loans on behalf of the AIFs they manage while also requiring AIFs to retain 5% of any loans originated then sold. These latter provisions were modelled on the retention provisions of the SR which should now be updated to reflect the new AIFMD rules.

• Simplify and broaden the scope of the STS labels: Some of the most common securitisation structures like CLOs are currently considered ineligible under the Simple, Transparent and Standardised (“STS”) criteria due to the ‘actively managed’ nature of these vehicles. This is despite the actively managed nature of CLOs encouraging a strong alignment of interest between the CLO managers and their investors. CLOs also have a strong track record, showing good performance and lower default rates when compared to other securitisation products. Actively managed CLOs should be permitted to qualify as STS.

• Narrow the scope of the SR to enable the green and digital transitions: Any type of transaction that involves the tranching of risk, however simple, might fall within the scope of the SR. Inevitably, this has captured transactions that should otherwise not be considered as securitisations, either because they are simple products or because they play a strategic role in mobilising private capital for EU social, economic and political objectives. This acts as a barrier for investors in blended finance strategies or those looking to finance public infrastructure investments alongside sovereigns or national and multilateral development banks. Therefore, the scope of the SR should be narrowed to exclude well-defined types of simple transactions that might involve risk sharing or tranching.