Reviving the EU Securitisation Market: It's Time to Listen to Investors

Europe’s Missed Opportunity

Securitisation should be one of Europe’s most powerful financial tools. The benefits are clear: liquidity creation, risk transfer, capital relief, funding diversification, tailored risk-return profiles, and deeper, more efficient markets. And yet, securitisation remains regretfully underused in the EU—constrained by regulatory choices that continue to suffocate a market with enormous untapped potential.

While other global markets such as the US race ahead, the EU is bogged down by well-meaning but ill-fitting rules that ignore the needs of the very people expected to invest. If policymakers want to unlock growth, fuel innovation, and make EU capital markets globally competitive, securitisation reform must be treated as a strategic imperative supported by meaningful and comprehensive policy action.

Where Are the Investors in this Conversation?

The European Commission’s recent legislative proposal includes some promising elements. But let’s be frank: it still misses the mark. The most glaring omission? The perspective of EU investors.

Institutional investors are the fuel that powers securitisation. Yet current reforms treat them more like afterthoughts than partners. Rules continue to presume investor unreliability, layering on redundant requirements that neither protect markets nor promote growth. As a result, capital is flowing elsewhere.

If the EU is serious about the success of the Savings and Investment Union, it cannot afford to sideline the very actors who will determine its success. Without meaningful investor participation, securitisation will remain a marginal feature of Europe’s financial landscape. And without a thriving securitisation market, the EU’s ambition to deepen and enhance its capital markets for the benefit of all Europeans will fall flat.

Global Momentum, European Paralysis

Securitisation globally is thriving, with a market worth approximately €4 trillion. But Europe is barely contributing to that momentum. Compared to its international peers, EU issuance is anemic, liquidity is shallow, and secondary market activity is scarce. The problem is not lack of investor interest or poor asset quality. It’s regulatory architecture.

Current EU rules make it nearly impossible for institutional investors to participate in global securitisation markets. The due diligence regime is a prime example: a rigid, duplicative framework that imposes form over function. While the Commission’s proposal attempts to simplify these requirements, it does so only for EU-originated deals, leaving EU investors burdened with impossible-to-meet requirements for third-country transactions.

Worse still, the Commission has proposed new penalties for non-compliance—punishing even prudent investors for technical failings, regardless of their actual risk management or investment practices. These rules do not enhance investor protection. They erode confidence and drive capital away.

A Market Starved of Demand

What happens when investors are locked out? Markets dry up. Liquidity disappears. New issuance slows. And a potentially dynamic source of financing and risk transfer is reduced to a regulatory relic. Without robust investor demand, there is no pipeline of deals. Without deals, the market cannot scale. It’s a vicious cycle and Europe is trapped in it.

This isn’t just a theoretical concern. The chilling effect of the current regime is already visible. EU capital markets are losing ground to more agile jurisdictions, and the securitisation market is becoming a case study in regulatory overreach rather than a key tool to foster competitiveness and growth.

A Practical Path Forward

Policymakers have a choice to make. They can continue to tinker around the edges, clinging to a framework that no longer reflects market reality, or they can act decisively and reframe securitisation policy around real-world investor behavior and global competitiveness.

That means:

• Recognising that EU institutional investors already operate under robust, cross-cutting due diligence frameworks like UCITS, AIFMD, and Solvency II.
• Eliminating duplicative and prescriptive disclosures that add cost but no clarity.
• Ending the double standard for third-country securitisations that effectively wall off EU investors from global markets.
• Prioritising proportionality and material risk oversight over technical compliance checklists.

Reforms that reflect these principles won’t weaken investor protection—they will instead strengthen market function. They won’t dilute transparency, but make disclosures more usable. Most important, they will allow the EU to compete on the global stage, revitalising a key channel for funding, innovation, and growth.

Conclusion: Delivering on promises

The EU cannot afford to let securitisation continue to languish. The problem is not a lack of interest. It’s a system that treats investors like liabilities rather than market participants.

Now is the time for a different approach: one that treats investors as essential partners, clears a path for securitisation to thrive, and one that finally delivers the competitive, dynamic, and globally connected capital markets the EU has long promised but not yet delivered.