In a speech to the European Parliament’s Committee on Economic and Monetary Affairs, the European Systemic Risk Board set out its views on the European Commission’s proposal to review the EU securitisation framework. The ESRB supported efforts to simplify and make the regime more proportionate as part of the savings and investments union, while calling for targeted changes and reiterating a financial stability concern about allowing insurers to provide unfunded guarantees under the simple, transparent and standardised (STS) framework. The remarks were framed by a market described as small and concentrated, with EU securitisation issuance around 0.5% of GDP, more than 80% of the outstanding amount backed by loans from five countries, and the ten largest originator banking groups accounting for about 70% of the market. Traditional true-sale securitisation was characterised as largely stagnant, while synthetic securitisation has grown rapidly, with synthetic transactions by significant institutions up 24% between 2022 and 2024 and increasing by over 85% in the first half of 2025, mainly driven by significant risk transfer deals that generate regulatory capital relief; a large share of true-sale deals is retained on banks’ balance sheets and the investor base remains limited, even as the overall quality of EU securitisations was described as high (over 90% of Moody’s-rated securities investment grade). The ESRB welcomed better alignment between risk and capital requirements, a more proportionate approach to due diligence and streamlined non-essential disclosures, and the inclusion of its long-standing request to require reporting of private securitisations to securitisation repositories. It argued that introducing a new concept of “resilient transaction” would add unnecessary complexity and that reforms should not incentivise banks to remain investors, and it warned that making (re)insurers eligible to provide unfunded STS guarantees would raise concentration and counterparty risks and amplify contagion channels between banking and insurance compared with the current requirement for funded protection backed by high-quality collateral. On capital treatment assessment, the ESRB pointed to a forthcoming European Central Bank opinion for further detail and referenced a 25 July 2025 letter to the European Parliament and the Council Working Party setting out its concerns on unfunded insurance guarantees.
European Systemic Risk Board 2025-10-13
European Systemic Risk Board backs simpler EU securitisation rules but warns on insurers’ unfunded STS guarantees
The European Systemic Risk Board, in a speech to the European Parliament’s Committee on Economic and Monetary Affairs, set out its views on the European Commission’s review of the EU securitisation framework, supporting simplification, greater proportionality and enhanced reporting of private securitisations. It cautioned against a new “resilient transaction” category and warned that allowing (re)insurers to provide unfunded guarantees under the simple, transparent and standardised framework would increase concentration and counterparty risks and strengthen contagion channels between banking and insurance.