EU countries and the European Parliament have agreed new rules intended to simplify securitisation in the bloc and encourage more bank lending to households, small firms and infrastructure projects.
The provisional deal would update the EU’s securitisation framework — a system where banks and other lenders bundle loans such as mortgages or consumer credit into products that can be sold to investors — by changing how much capital banks must hold against these transactions, the Council of the EU said in a statement on Wednesday.
Banks investing in “low-risk” securitisations would face lower capital requirements under the agreement, while higher requirements would remain for riskier positions.
A new “resilient” category of securitisations would be introduced and the existing “simple, transparent and standardised” (STS) label would be strengthened.
The agreement also includes plans for EU-level supervision of independent firms that check whether securitisations meet STS standards — known as third-party verifiers — and measures to reduce administrative burdens for investors.
Changes for investors and cross-border deals
Investment limits would be raised for certain institutional investors known as UCITs — undertakings for collective investment in transferable securities, a type of EU-regulated investment fund — to support market activity, the Council said.
Targeted changes would also be made to the STS category to support cross-border market integration, enable insurers and reinsurers to participate in the synthetic securitisation market, and allow securitisations to be used to finance projects before they become operational.
The legal texts must now be finalised and formally endorsed by both the Council and the European Parliament before the changes can take effect.
The package updates two existing EU laws covering prudential requirements for securitisation and the securitisation framework regulation.
