{"id":"publication:2010001","publicationId":2010001,"storyId":2280001,"slug":"eu-strikes-first-siu-deal-on-securitisation","canonicalUrl":"https://www.thelastdaily.com/article/eu-strikes-first-siu-deal-on-securitisation","machineReadableUrl":"https://www.thelastdaily.com/api/public/articles/eu-strikes-first-siu-deal-on-securitisation.json","headline":"EU Strikes First SIU Deal on Securitisation","dek":"The first legislative result of the Savings and Investments Union seeks to cut friction in a subdued credit market while keeping EU oversight over the safety labels that unlock lighter capital treatment.","bodyMarkdown":"European Union negotiators have reached a provisional deal to rewrite the bloc’s securitisation rules, lowering capital requirements for some safer transactions while keeping a new layer of European supervision over the labels meant to identify them. The agreement, struck late on October 21 and welcomed by the European Commission the following day, is the first legislative deliverable under the EU’s Savings and Investments Union. Its immediate purpose is technical: make it less burdensome for banks and other market participants to package loans into securities and sell them to investors.\n\nIts larger ambition is economic: revive a market that policymakers see as a route for private savings to finance lending to companies and households. That makes the compromise an early test of whether the Savings and Investments Union can turn a familiar Brussels diagnosis — that Europe has ample savings but shallow capital markets — into a change in how credit is funded.\n\n> “This first agreement demonstrates that we can turn our ambitions into concrete results. And we must keep up the momentum,” Maria Luís Albuquerque, the commissioner for financial services, said on October 22.\n\n## A lower capital charge for safer deals\n\nSecuritisation allows a lender to pool loans, such as mortgages or corporate credit, and issue securities backed by the cash flows. In principle, the lender can transfer part of the risk and free balance-sheet capacity for new loans. In practice, the EU market has remained restrained since the financial crisis, when opaque and poorly structured products became synonymous with systemic risk.\n\nThe political agreement is intended to loosen that restraint without abandoning the framework built after 2008. The Commission said the reform will reduce operational burdens and streamline due-diligence and transparency requirements in the Securitisation Regulation. The accompanying changes to the Capital Requirements Regulation are central to the bargain.\n\nParliament’s negotiators said they secured a 5% risk-weight floor for safer asset classes. Lower risk weights mean banks need to hold less capital against qualifying exposures, reducing a cost that industry participants have long argued makes European securitisations uneconomic even where the underlying loans are relatively straightforward. The change does not mean that every packaged loan will receive lighter treatment.\n\nIt applies to lower-risk transactions, and the framework continues to rely on the EU’s Simple, Transparent and Standardised — or STS — criteria. The distinction matters politically. Supporters want a market capable of recycling bank credit; critics of deregulation will look for evidence that the lower capital charges remain confined to deals whose structure and risks can be understood.\n\n## Supervision remains part of the trade-off\n\nThe agreement also gives the European Securities and Markets Authority responsibility for overseeing third-party verifiers that assess whether transactions meet STS criteria. ESMA will be able to withdraw a verifier’s authorisation where it does not comply. That power addresses a vulnerable point in any label-based regime.\n\nBanks and investors may depend on independent assessments when judging whether a securitisation qualifies for preferential treatment. Bringing the verifiers under EU-level oversight is designed to make the STS label more than a private compliance exercise — although its effectiveness will depend on how actively the authority uses its new mandate. For the Commission, the reform is a flagship component of the Savings and Investments Union, its programme to mobilise more household and institutional savings for the real economy.\n\nThe policy case is particularly direct in bank-dependent Europe: if lenders can move part of their existing loan risk to long-term investors, they may have more room to lend again. But the sequence between regulatory relief and productive investment is not automatic. A bank that benefits from lower capital charges may expand lending, retain more liquidity or adjust its portfolio in other ways.\n\nNor does a simpler reporting regime by itself create investors willing to buy the securities. The deal removes some regulatory friction; it does not compel banks to finance small companies, clean-energy projects or other politically favoured sectors.\n\n## A milestone, not yet a law The\n\nCommission proposed the review in June 2025. More than a year later, the agreement gives the Savings and Investments Union its first tangible legislative result, at a moment when the wider project still faces harder questions about integrating national markets and strengthening cross-border supervision. The compromise is not yet law.\n\nIt must undergo technical finalisation and receive formal approval from both the European Parliament and the Council. Only then will the amendments be published in the EU’s Official Journal and enter into force. That remaining process is procedural, but it is not trivial.\n\nThe final text will determine how closely the capital relief is tied to the characteristics of the underlying assets, and how much practical simplification firms receive from the revised due-diligence and reporting rules.","bodyHtml":"

European Union negotiators have reached a provisional deal to rewrite the bloc’s securitisation rules, lowering capital requirements for some safer transactions while keeping a new layer of European supervision over the labels meant to identify them. The agreement, struck late on October 21 and welcomed by the European Commission the following day, is the first legislative deliverable under the EU’s Savings and Investments Union. Its immediate purpose is technical: make it less burdensome for banks and other market participants to package loans into securities and sell them to investors.

\n

Its larger ambition is economic: revive a market that policymakers see as a route for private savings to finance lending to companies and households. That makes the compromise an early test of whether the Savings and Investments Union can turn a familiar Brussels diagnosis — that Europe has ample savings but shallow capital markets — into a change in how credit is funded.

\n
“This first agreement demonstrates that we can turn our ambitions into concrete results. And we must keep up the momentum,” Maria Luís Albuquerque, the commissioner for financial services, said on October 22.
\n

A lower capital charge for safer deals

\n

Securitisation allows a lender to pool loans, such as mortgages or corporate credit, and issue securities backed by the cash flows. In principle, the lender can transfer part of the risk and free balance-sheet capacity for new loans. In practice, the EU market has remained restrained since the financial crisis, when opaque and poorly structured products became synonymous with systemic risk.

\n

The political agreement is intended to loosen that restraint without abandoning the framework built after 2008. The Commission said the reform will reduce operational burdens and streamline due-diligence and transparency requirements in the Securitisation Regulation. The accompanying changes to the Capital Requirements Regulation are central to the bargain.

\n

Parliament’s negotiators said they secured a 5% risk-weight floor for safer asset classes. Lower risk weights mean banks need to hold less capital against qualifying exposures, reducing a cost that industry participants have long argued makes European securitisations uneconomic even where the underlying loans are relatively straightforward. The change does not mean that every packaged loan will receive lighter treatment.

\n

It applies to lower-risk transactions, and the framework continues to rely on the EU’s Simple, Transparent and Standardised — or STS — criteria. The distinction matters politically. Supporters want a market capable of recycling bank credit; critics of deregulation will look for evidence that the lower capital charges remain confined to deals whose structure and risks can be understood.

\n

Supervision remains part of the trade-off

\n

The agreement also gives the European Securities and Markets Authority responsibility for overseeing third-party verifiers that assess whether transactions meet STS criteria. ESMA will be able to withdraw a verifier’s authorisation where it does not comply. That power addresses a vulnerable point in any label-based regime.

\n

Banks and investors may depend on independent assessments when judging whether a securitisation qualifies for preferential treatment. Bringing the verifiers under EU-level oversight is designed to make the STS label more than a private compliance exercise — although its effectiveness will depend on how actively the authority uses its new mandate. For the Commission, the reform is a flagship component of the Savings and Investments Union, its programme to mobilise more household and institutional savings for the real economy.

\n

The policy case is particularly direct in bank-dependent Europe: if lenders can move part of their existing loan risk to long-term investors, they may have more room to lend again. But the sequence between regulatory relief and productive investment is not automatic. A bank that benefits from lower capital charges may expand lending, retain more liquidity or adjust its portfolio in other ways.

\n

Nor does a simpler reporting regime by itself create investors willing to buy the securities. The deal removes some regulatory friction; it does not compel banks to finance small companies, clean-energy projects or other politically favoured sectors.

\n

A milestone, not yet a law The

\n

Commission proposed the review in June 2025. More than a year later, the agreement gives the Savings and Investments Union its first tangible legislative result, at a moment when the wider project still faces harder questions about integrating national markets and strengthening cross-border supervision. The compromise is not yet law.

\n

It must undergo technical finalisation and receive formal approval from both the European Parliament and the Council. Only then will the amendments be published in the EU’s Official Journal and enter into force. That remaining process is procedural, but it is not trivial.

\n

The final text will determine how closely the capital relief is tied to the characteristics of the underlying assets, and how much practical simplification firms receive from the revised due-diligence and reporting rules.

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