Ahead of its formal adoption by EU Ambassadors in Coreper on 19 December, the Association for Financial Markets in Europe (AFME) notes the Council’s General Approach on the Commission’s proposal amending the Securitisation Regulation (SECR) and the Capital Requirements Regulation (CRR) as part of the EU securitisation review.
Shaun Baddeley, Managing Director of Securitisation at AFME, said: “The Council’s position on the Securitisation Regulation represents a balanced and constructive outcome. It addresses key concerns that could have hindered efforts to stimulate investor demand and broaden the investor base - both essential conditions to revitalising the EU securitisation market which is a core objective of the securitisation review. By appropriately resolving issues arising from the Commission’s proposal, such as delegation and sanctions, the Council has set a clear and positive direction.
“However, we have remaining concerns that the Council’s General Approach will reduce the attractiveness of the European securitisation market for domestic lenders. The compromise introduces unwarranted tightening of specific prudential requirements. Such measures are not justified by the underlying risk profile and would impede the ability of banks to provide financing to businesses efficiently, ultimately undermining Europe’s ambitions for competitiveness, growth and resilience.
“the European Parliament will now set out its own position in the coming months. The draft report published last week by Rapporteur MEP Ralf Seekatz provides an encouraging basis for the European Parliament to put forward a more ambitious position - one that refines and fine tunes both the Commission’s proposals and the Council’s position. This would help unlock capital tosupport businesses across Europe and contribute to broader EU policy objectives, including the delivery of affordable housing for EU citizens. These objectives can be achieved whilst maintaining strong macro prudential stability in the EU banking sector.”
Key areas where the Council’s position could have taken a more ambitious stance include:
In relation to the Securitisation Regulation:
- Unfunded credit protection (UFCP): The Council requires a €15 billion asset threshold for protection providers, despite previous discussions about lowering it. This narrows the pool of eligible providers and limits broader use of UFCP structures.
- Reporting to securitisation repositories: Requiring private transactions to report to securitisation repositories, even via simplified templates, adds an additional regulatory burden and runs counter to efforts to simplify the regulatory framework.
- UCITS (Undertakings for Collective Investment in Transferable Securities): Applying the 50% cap only to public securitisations fails to adequately address the constraints facing asset managers investing across the full spectrum of transactions.
In relation to the Capital Requirements Regulation:
- Risk Weight Floors: The risk weight floor calculation still lacks risk sensitivity required to boost banks’ lending capacity. As a result, credit risk transfer will remain constrained for asset classes such as residential mortgages, infrastructure, project finance and corporate loans – all crucial for investments in housing, clean energy, transport, defence and other critical infrastructure.
- P-factor: In certain scenarios, such as resilient non-STS, the level of p - key to supporting sustainable financing of the real economy - remains unchanged.
AFME stands ready to continue a constructive dialogue with EU institutions throughout the next phase of the legislative process.
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