© European Union 2024 – Source: PE

On Tuesday, June 17, 2025, the european Commissioner for Financial Services, the Union of Savings and investments, Maria Luis Albuquerque announced her plan to soften the regulations of the securitization market. The securitization is first of all a mechanism allowing to bring together several credits into “packets”, transformed into financial assets made available to the market. This allows lenders, often banks, to share the risk with investors in these titles but also to identify more liquidity.

Rationale Behind Current Regulations

The European Commission is considering easing securitization market regulations following the Draghi report,which highlighted the absence of a significant securitization market in Europe due to regulatory constraints and investor hesitancy. In 2023, the European securitization market reached 213 billion euros, compared to 1,300 billion euros in the United states.

The Commission aims to expand the securitization market to enhance lenders’ financing capabilities and reduce funding costs.

Securitization enables banks to remove secure assets from their balance sheets. Current banking regulations require banks to offset loan risks with equity. Removing these loans from the balance sheet frees up equity for investment in other assets and provides liquidity through the sale of these securities.

Regarding reduced financing costs, securitization allows financial institutions to create higher-rated financial securities, potentially lowering borrowing costs. As a notable example, an institution rated “AA” might secure a lower interest rate by titling an asset rated “AAA”. These securities can serve as loan guarantees for banks borrowing on financial markets, further reducing interest rates. The commission aims to facilitate economic financing, support innovation, and develop the capital market through securitization.

“The Commission’s objective is to develop the securitization market to increase lenders’ financing capacity but also to lower the funding cost.”

Proposed Reforms by the Commission

The relaxation of securitization market regulations involves several steps. Criticisms of the European securitization market have focused on the extensive administrative procedures required. The commission’s project aims to reduce due diligence and openness requirements, cutting compulsory details by approximately 35%.

The Commission also seeks to facilitate the inclusion of secured assets in banks’ liquidity cushions by simplifying regulations. this