In a keynote speech, Pedro Machado, a member of the ECB’s Supervisory Board, set out European Central Bank Banking Supervision’s supervisory stance on the expanding use of synthetic risk transfers (synthetic securitisations) for bank capital relief, stressing the need for genuine risk transfer, transparency and continued scrutiny as issuance grows. He also highlighted a fast-track supervisory process for simple securitisations that has been in effect since January and shortens the ECB’s assessment period from three months to eight working days. The speech described synthetic securitisations as credit-risk protection on tranches of a loan portfolio where the loans remain on the originator’s balance sheet, with capital requirements reduced only where the supervisor is satisfied that significant risk transfer has been achieved. It cited rapid market growth, with the EU representing around half of global outstanding synthetic securitisations by end-2023 and issuance almost doubling between 2023 and 2025, including an increase of around 45% between 2024 and 2025. Machado pointed to potential financial stability and supervisory issues including disclosure gaps, rollover risk, procyclicality and interconnectedness with non-bank protection providers, alongside evidence of weaker post-transfer monitoring incentives, while noting that observed investor leverage is modest on average. ECB Banking Supervision is running a new survey of banks on synthetic risk transfer financing practices, including cases where significant banks provide funding to investors in securitisations originated by other banks, and reported that the first notifications under the fast-track process have been received but it is too early to draw conclusions.
European Central Bank - Banking Supervision 2026-03-24
European Central Bank Banking Supervision implements an eight-day fast-track process for simple securitisations and reiterates close monitoring of synthetic risk transfers
In a keynote speech, Pedro Machado of the ECB Banking Supervision outlined the supervisory stance on synthetic risk transfers for bank capital relief, emphasizing genuine risk transfer, transparency, and scrutiny amid growing issuance. He noted the fast-track supervisory process for simple securitisations, reducing the ECB's assessment period to eight working days. Machado highlighted rapid market growth and potential financial stability issues, including disclosure gaps and procyclicality, while the ECB surveys banks on synthetic risk transfer practices.