In its 2024 report, Paris Europlace underscores the critical need to remove regulatory obstacles that have hindered the growth of Europe’s securitisation market. This report builds on the increasing momentum following Mario Draghi’s recent insights, which emphasized securitisation as essential for unlocking capital and improving risk-sharing, both vital for the success of the Capital Markets Union (CMU). Draghi’s report stresses that a robust securitisation market is crucial to sustaining Europe’s economic growth and financial stability.
Revel Partners shares this perspective and advocates for reforms to the Significant Risk Transfer (SRT) process, which we see as key to scaling securitisation across Europe. In a recent interview with Structured Credit Investor, Revel Partners' CEO Jonas Bäcklund highlighted that addressing regulatory barriers is essential for allowing securitisation to play a pivotal role in supporting EU banks and unlocking capital for new investments. Both Draghi and Bäcklund agree that regulatory changes are urgently needed to fully leverage securitisation’s potential in Europe.
The Paris Europlace report provides several targeted recommendations to achieve this:
1. Reduce regulatory barriers: Current capital charges, particularly on senior tranches, make securitization unattractive for banks. Adjusting the p-factor and risk-weight floors is a technical yet essential detail to make securitisation economically viable.
2. Streamline the SRT process: Simplifying and speeding up the SRT approval process would enable banks to achieve the necessary capital relief more efficiently.
3. Expand insurer participation: Recalibrating Solvency II capital charges and allowing insurers to provide credit protection in on balance sheet STS transactions would expand the investor base and deepen the market.
4. Enhance market liquidity: Addressing Liquidity Coverage Ratio (LCR) treatment for securitised products and reducing administrative burdens would encourage greater participation from banks and institutional investors.
Paris Europlace calls for a “quick-win” package of reforms that could have an immediate impact, ensuring that securitisation plays a larger role in Europe’s financial system and supports its strategic economic goals.
At Revel Partners, we are encouraged by the growing consensus and alignment on the importance of securitisation but firmly believe it is time to move beyond discussions and into real, concrete action. We look forward to seeing regulators and market participants take decisive steps to implement these much-needed reforms. The securitisation market’s potential won’t be realised through conversation alone—it’s the tangible changes in policy and regulation that will drive real progress and strengthen the European financial system. We welcome swift and bold actions to turn these recommendations into reality.
