The Economic Governance and EMU Scrutiny Unit (EGOV) of the European Parliament published the report “How to achieve CMU, after all?” on 10 January.
The EGOV paper analyses the recommendations on the Capital Markets Union (CMU) and emphasises the central role of securitisations in releasing capital and strengthening the supply of financing. Therefore, it draws on three reports from 2024 (Draghi, Letta, Noyer), which argue for regulatory reforms to promote the European securitisation market. The focus lies on the following aspects:
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Prudential adjustments and regulation:
A simplification of due diligence and transparency obligations as well as a reduction in capital requirements for simple, transparent and standardised (STS) securitisations are called for in order to create a more competitive regulation. In particular, the adjustment of the so-called “p-factor” is emphasised as essential.
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Public securitisation platforms:
Both, Draghi and Noyer propose the establishment of a securitisation platform, possibly supported by EU guarantees for senior tranches. The aim is to promote standardisation and cost efficiency and to facilitate access to the market for smaller banks.
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Role of green securitisations:
The Letta report refers to the opportunity of promoting green securitisations but remains vague on whether this should be done through the use of proceeds approach or through the underlying assets.
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Capital requirements for insurance companies and banks:
Noyer emphasises that a relaxation of capital requirements is necessary, particularly for institutional investors, to ensure greater participation in the market. He points out that several insurance companies have withdrawn from the investor market due to the current regulations.
Assessment: Focus on reforms – securitisation platform at best a second step
As outlined in the German task force report by the Association of German Banks and TSI, the first step must be to implement the urgently needed reforms to strengthen the European securitisation markets, including in particular the adjustment of capital requirements for banks and insurers. In this regard, we can look forward to the corresponding proposals from the European Commission in the second quarter of 2025.
Afterwards, in a second step, it can be evaluated whether and how a pan-European securitisation platform makes sense. For the standardisation, which is to be welcomed in principle, it is essential to distinguish between the level of the securitisation transactions and the level of the underlying receivables portfolios. It is clear that, in order to broaden the range of issuers and investors in securitisations, such a platform must be market-driven and focused on the funding objectives being pursued. The securitisation platform established by EIF and EIB represents a good and proven approach.
To the EGOV paper:
How to achieve CMU, after all? An analysis of the recommendations for Capital Markets Union in the Draghi, Letta and Noyer reports | Think Tank | European Parliament