EESC urges caution in review of EU securitisation rules

The European Economic and Social Committee (EESC) has adopted an opinion on the European Commission’s proposals to amend the EU Securitisation Regulation and prudential rules for banks. While supporting efforts to revive the securitisation market as a way of channelling more finance to Europe’s economy, the Committee warns against repeating mistakes of the past and calls for strict safeguards to protect households, small businesses and financial stability.

With this new set of recommendations, the EESC acknowledges that securitisation, the pooling of loans that are then sold on to investors, can help free up bank capital and support the EU’s strategic priorities, such as the green, digital and social transitions. It also backs proposals to improve transparency by including standardised environmental, social and governance (ESG) reporting in securitisation templates.

However, the Committee stresses that there is no guarantee banks will use the additional capital for affordable lending to households and SMEs, and calls for a fast-track monitoring system so supervisors can check whether freed-up capital is directed towards the real economy rather than returned to shareholders.

Avoiding risks to financial stability

The opinion underlines the need to strike a balance between reducing barriers to securitisation and preserving the strong safeguards introduced after the global financial crisis. The EESC points out that poorly regulated securitisation of sub-prime mortgages fuelled the 2008 crisis and insists that investor protection, prudential standards and supervisory oversight must not be weakened.

The Committee warns against allowing loopholes or deviating from international standards, which could increase systemic risks. It also opposes granting automatic exemptions when securitisation tranches are guaranteed by public entities, arguing this could expose taxpayers to unnecessary risks.

Strengthening supervision and transparency

Given the cross-border nature of many securitisation transactions, the EESC supports the Commission’s proposal for more consistent EU-level supervision, with sufficient resources for European supervisory authorities. It also urges full transparency at every stage of the securitisation process, from loan origination to servicing and restructuring, to ensure borrowers’ rights are safeguarded and lending relationships are preserved.

The Committee cautions against shifting loan origination to lightly regulated non-bank lenders or moving securitisation structures to jurisdictions that enable aggressive tax planning. It calls for greater cooperation between supervisors and tax authorities in order to close data gaps and prevent regulatory arbitrage.

Fine-tuning needed

While broadly backing the Commission’s approach, the EESC proposes technical adjustments to avoid calibration inconsistencies and ensure fair treatment between large banks using internal models and smaller banks using standard approaches. It also calls for further analysis of the impact on insurance investors and for adjustments to ensure securitisation can benefit a wider range of institutions, including smaller banks.

Financing Europe’s future with safeguards

The EESC concludes that securitisation can play a useful role in financing Europe’s economy, but only if it is transparent, properly regulated and aligned with the EU’s broader goals. Reviving the market must not come at the expense of financial stability or the protection of households and small businesses.