As the European Commission prepares to revise the securitisation framework, Danmarks Nationalbank has taken proactive steps to deepen its understanding of securitisation from a practitioner’s perspective. In preparation for Denmark’s EU Council Presidency in the second half of 2025, the central bank has engaged with Revel Partners to discuss the evolving regulatory landscape and securitisation’s role in fostering a more efficient and competitive European capital market.
Denmark has a long-standing tradition of covered bond issuance, but securitisation has historically played a limited role in its financial sector. However, the broader European focus on capital efficiency and funding diversification is making securitisation increasingly relevant. The discussion underscored the importance of balancing financial stability with the development of robust capital markets, where securitisation can play a pivotal role in enabling efficient risk transfer, enhancing lending capacity, and fostering deeper integration within European financial markets.
Building a more competitive Europe through prudent securitisation
Revel Partners advocates for a securitisation framework that strengthens Europe’s capital markets while maintaining prudent regulatory safeguards. A well-functioning securitisation market can act as a catalyst for improved financial intermediation by allowing banks to reallocate capital more efficiently and expand lending to SMEs, infrastructure projects, and green initiatives. The continued development of Significant Risk Transfer (SRT) transactions is particularly relevant, as these structures enable banks to reduce regulatory capital constraints while ensuring risks remain appropriately managed within the financial system. A key policy priority should be to align capital requirements for SRT transactions more closely with the actual risk profile of the securitised exposures. Today’s framework applies a one-size-fits-all capital treatment that does not sufficiently distinguish between low-risk and high-risk assets, leading to inefficiencies that discourage broader use of securitisation. A more dynamic, risk-sensitive approach would improve both market efficiency and capital allocation.
Market liquidity remains another critical area for improvement. European securitisation markets have long been characterised by limited secondary market activity, making it difficult for investors to trade positions freely. In contrast to the highly liquid US securitisation market, where secondary trading is well-established, European transactions suffer from fragmentation and a lack of standardised platforms. Developing an EU-wide securitisation exchange, possibly in collaboration with the European Investment Bank (EIB), could help address this challenge. A central market infrastructure would enhance price discovery, improve transparency, and increase investor participation, strengthening securitisation as a viable funding tool across European jurisdictions.
A closely related issue is the impact of Solvency II regulations on institutional investor participation. Under the current framework, insurance companies and pension funds face disproportionate capital charges when investing in securitised products, even when those products are of high credit quality. This regulatory asymmetry discourages long-term investors from allocating capital to securitisation markets, limiting overall demand and contributing to weak liquidity conditions. Addressing this imbalance by recalibrating Solvency II risk weights for senior and high-credit-quality mezzanine tranches would create a more attractive investment landscape. A revised framework should ensure that securitised credit exposures are treated in a risk-sensitive manner, comparable to covered bonds, reflecting their actual credit and liquidity profiles.
Beyond addressing regulatory inefficiencies, targeted measures should also be introduced to expand securitisation into underdeveloped sectors such as SME lending and green finance. While securitisation has played a significant role in supporting consumer lending and mortgage markets, its use in sustainable finance and SME credit remains limited. One approach could be to introduce preferential capital treatment for securitised SME loans and green assets, similar to regulatory incentives seen in the US and UK markets. Additionally, the absence of standardised sustainability criteria for green securitisation remains a barrier to wider adoption. Establishing a harmonised EU-wide sustainability framework for securitised green loans would enhance investor confidence in climate-aligned transactions and drive greater capital mobilisation towards the green transition.
While securitisation holds immense potential, one of the fundamental obstacles to its development in Europe remains regulatory fragmentation. Different interpretations of the securitisation framework across EU jurisdictions have led to inconsistencies in market practices, discouraging cross-border transactions and limiting investor participation. A more unified approach would improve market confidence, reduce regulatory arbitrage, and encourage broader participation from both issuers and investors. One way to achieve this would be to create a single EU-wide approval mechanism for STS (Simple, Transparent, and Standardised) securitisations, reducing administrative bottlenecks and ensuring a smoother, more predictable issuance process.
A forward-looking approach to European securitisation
Looking ahead, securitisation must be seen as a fundamental pillar of a more competitive European financial system. A regulatory framework that appropriately differentiates between high- and low-risk structures would allow securitisation to fulfil its potential as a safe, scalable, and efficient financing tool. The need for capital market integration has never been greater, and securitisation stands as one of the most effective instruments for achieving this goal.
Revel Partners strongly supports initiatives aimed at fostering liquidity, improving regulatory consistency, and aligning capital treatment with economic risk, all of which are crucial to unlocking the full potential of the European securitisation market. Establishing a more structured secondary market, reassessing capital requirements, and enhancing SME and green securitisation frameworks should be key priorities as policymakers shape the next phase of securitisation reform.
As Denmark assumes a pivotal role in shaping Europe’s securitisation framework in 2025, Revel Partners looks forward to contributing further insights to ensure that securitisation serves as a prudent yet powerful tool for economic growth and financial resilience. By refining the regulatory landscape and addressing structural inefficiencies, securitisation can transition from a niche funding tool to a mainstream mechanism for efficient capital allocation, reinforcing the strength and stability of Europe’s financial system.
