The European Commission published its proposals for amendments to the EU Securitisation Regulation on 17 June 2025. These proposals are of significant importance for securitisation market participants.
The publication by the European Commission (the Commission) of its proposal for amendments to the EU Securitisation Regulation (the EUSR) (the EUSR Proposals) on 17 June 2025 has been keenly anticipated. It follows the publication by the Joint Committee of the European Supervisory Authorities (the Joint Committee) of its report on the implementation and functioning of the EUSR in March 2025 (the JC Report) aimed at assisting the Commission in making these proposals. The EUSR Proposals come at a critical time for the European securitisation industry, following various recent expressions of support for revitalising the securitisation market, in recognition of the benefits that it could provide to the EU economy.
The EUSR Proposals provide an explanatory memorandum setting out the reasons for the various proposals together with a draft amendment to the EUSR (the EUSR Draft Amendment). Together with the EUSR Proposals, the Commission published its proposal for amendments to the EU Capital Requirements Regulation with respect to requirements for securitisation exposures, including a draft amendment to the EU Capital Requirements Regulation (the EU CRR).
On the same day, the Commission also published a draft regulation to amend the Liquidity Coverage Ratio (LCR) Delegated Regulation. A consultation on securitisation-related amendments to the Solvency II Delegated Regulation is expected to be published in the second half of July 2025. Together, these will form a package of proposals aimed at improving the EU regulatory framework for securitisations, with the intention of making it “less burdensome and more principles-based”.
The EUSR Proposals contain a new definition of “public securitisation”. Under the current EUSR regime, certain of the transparency requirements do not apply to securitisations that do not need a prospectus in compliance with the EU Prospectus Regulation, commonly referred to as private securitisations. The intention behind the new “public securitisation” definition is to redraw the distinction between public and private securitisations and make certain requirements less onerous for private securitisations, in recognition of the different nature of those transactions.
Under the EUSR Proposals, a “public securitisation” would be a securitisation that meets any of the following criteria:
While changes that would alleviate the burden for private securitisations will certainly be welcomed, the new definition of “public securitisation” will capture a wider range of transactions. This is not unexpected in the case of widely offered securitisations, such as collateralised loan obligations (CLOs), that are currently considered to be “private” securitisations simply by virtue of where they are listed. However, paragraph (b) of the proposed definition would also bring within its scope other transactions which are typically thought of as private securitisations. For example, some market participants are concerned that transactions that only obtain a listing on an EU trading venue in order to obtain the benefit of the quoted Eurobond exemption will fall within the “public securitisation” definition.
In addition, the wording in paragraph (c) of the definition could benefit from some clarification, even if it is understood that the Commission’s intention to include transactions where the investors have no direct contact with the originator(s) or the sponsor and which are offered to investors on a “take it or leave it” basis.
Article 5 of the EUSR sets out certain due diligence and monitoring requirements which apply to EU institutional investors and certain of their affiliates (together, EU Investors). In the JC Report, the Joint Committee indicated that it was in favour of a more proportionate approach and noted that this principle is already established in the EUSR.
Article 5(1) of the EUSR requires that an investor must, prior to investing in a securitisation, verify compliance with the credit-granting and risk retention requirements, and, pursuant to Article 5(1)(e), verify that the information specified in Article 7 of the EUSR—which sets out disclosure requirements for originators, sponsors and securitisation special purpose entities (SSPEs)—will be made available to it. The Joint Committee expressed the view that lack of guidance on how to achieve adequate and proportionate due diligence may result in unduly burdensome due diligence processes. It also noted that investors find the requirements of Article 5(1)(e) disproportionate and too prescriptive in securitisations with non-EU sell-side parties. Consequently, the Joint Committee’s view in the JC Report was that investors should receive the relevant information in substance, but without having to receive it in a particular form.
It is also worth noting that in the UK Securitisation Framework (the UKSF), the equivalent investor due diligence requirements which originally derived from Article 5(1)(e) of the EUSR (and the previous UK equivalent) have been revised and delinked from the disclosure requirements. Instead, under the UKSF, an investor must obtain sufficient information to enable it independently to assess the risks of holding the securitisation position and verify that the originator, sponsor or SSPE has committed to make further information available on an ongoing basis. The UKSF sets out a list of minimum required information but does not require a UK investor to obtain the UKSF equivalent of the EUSR Article 7 reporting templates, or a transaction summary in the case of transactions without a prospectus or other offering document.
The EUSR Proposals do not go as far as the UKSF or even as far as the JC Report’s proposals, instead focusing on eliminating duplicative or overly prescriptive requirements.
The key changes are as follows:
The changes described in (1), (2) and (5) above are being proposed on the basis that an EU entity will be directly subject to the risk retention and transparency requirements and, in the case of an STS transaction, the STS requirements.
In addition, although not mentioned in the provisions of the EUSR Draft Amendment themselves, the following principles are established in the recitals to the EUSR Draft Amendment:
While the reduction in investor due diligence and monitoring requirements will likely be seen as helpful, many market participants may be disappointed that the Commission has not gone further with respect to the requirement under Article 5(1)(e) of the EUSR that EU Investors check compliance by an originator, sponsor or SSPE which is not established in the European Union with the reporting requirements under Article 7 of the EUSR. EU Investors in third-country securitisations have faced, and continue to face, challenges in obtaining the reporting templates from non-EU sell-side parties. In the Commission’s report to the European Parliament and the Council of the European Union on the functioning of the EU Securitisation Regulation in October 2022 (the October 2022 Report), the Commission acknowledged that this investor due diligence requirement would de facto exclude EU investors from investing in certain third-country securitisations if the sell-side parties did not provide the information prescribed by Article 7 of the EUSR. However, the Commission anticipated that its proposals in the October 2022 Report in relation to a review of the reporting requirements, which included the development of a dedicated reporting template for private securitisations, could help mitigate against any competitive disadvantage for EU investors.
The EUSR Proposals could mitigate the challenge EU Investors face in relation to some third-country securitisations to some extent, by making changes to the reporting templates and creating a simplified reporting template for private securitisations, as discussed further below. However, if the Commission’s approach to investor due diligence with respect to third-country securitisations is taken, EU Investors in such transactions are likely to continue to face difficulties in obtaining the reporting templates from non-EU sell-side parties, and this could continue to create challenges for EU banks carrying out their securitisation business outside the European Union.
In addition, this will be compounded by the application of the proposed “public securitisation” definition to third-country transactions. Previously, third-country transactions were almost always treated as private under the EU Securitisation Regulation regime because they did not require an EU Prospectus Regulation compliant prospectus. If certain third-country transactions were no longer to be treated as private but as public because they fell within the proposed “public securitisation” definition, then many transactions with non-EU sell-side parties would not be able to benefit from the new private reporting template after all. This would result in a higher burden for EU Investors in third-country deals compared to other investors, and may restrict their ability to invest in such deals and to diversify their portfolios.
Another important amendment proposed by the Commission is to require EU Member States to establish administrative sanctions, as well as remedial measures, to apply to EU Investors in the case of negligence or intentional infringement in relation to the investor due diligence and monitoring requirements under Article 5 of the EUSR. Previously, failure by an EU Investor to comply with such requirements was not expressly included in the provisions relating to administrative sanctions and remedial measures.
If the EUSR Proposals were to be implemented, EU Investors could face various penalties for any such breach of their Article 5 obligations, which could include fines of up to 10% of the total annual net turnover of the relevant EU Investor. This would create additional concerns for EU Investors, including as to whether they have complied with the principles-based requirements, and could deter such investors from investing in securitisation transactions.
Article 7 of the EUSR sets out various disclosure requirements for originators, sponsors and SSPEs. The EUSR Proposals set out the following changes:
The recitals to the EUSR Draft Amendment state that the reporting templates should be streamlined, and the mandatory data fields should be reduced by at least 35%, and certain fields could become voluntary.
In February 2025, the European Securities and Markets Authority (ESMA) published a consultation paper in relation to the disclosure framework for private securitisation, including a draft simplified template for private transactions. For further information, please see our LawFlash entitled ESMA Publishes Consultation Paper on a Simplified Reporting Template for Private Securitisations. ESMA stated that such template would apply only to EU securitisations whereas it appears from the EUSR Proposals (from the perspective of the investor due diligence requirements) that the scope would include third-country securitisations as well.
It is unclear whether the simplified private template will apply to ABCP transactions or whether Annexes 11 and 13 will continue to apply. Industry participants may prefer the latter approach, as the use of those templates is well-established and already allows for aggregate data to be reported. The private reporting template is expected to be based on existing templates, in particular the template put in place pursuant to the guide on the notification of securitisation transactions to the European Central Bank by “significant institutions” under the Single Supervisory Mechanism.
Market participants will certainly welcome in principle a reduction in the reporting burden. However, it is expected to take a considerable time for the existing reporting templates to be revised and for the new private reporting template to be put in place. Market participants may be disappointed by the slow pace of reform given that revision of the reporting templates and the creation of a private reporting template were anticipated in the October 2022 Report, and it may still take a couple of years before the revised reporting templates and the new private reporting template are finalised and come into effect.
It is also worth noting that the Commission has decided to move the responsibility for revising the reporting templates from ESMA to the Joint Committee under the leadership of the European Banking Authority (EBA), in cooperation with ESMA and the European Insurance and Occupational Pensions Authority (EIOPA).
The Commission has added a provision stating that in relation to transactions involving sell-side entities under the remit of competent authorities from more than one EU Member State, following the notification of the relevant information to competent authorities under Article 7(1), the competent authorities of the sell-side entities in the transaction should appoint a lead supervisor. The aim is to streamline supervision and ensure consistency and better coordination between different competent authorities.
Under the current EUSR, only transactions which require a prospectus in compliance with the EU Prospectus Regulation are required to make Article 7 information available via a repository. The EUSR Proposals amend the current requirements as regards availability of data in a repository, stating that direct and immediate access should be provided free of charge to the various supervisory bodies and competent authorities, and, in the case of public securitisations, investors and potential investors.
In the explanatory memorandum to the EUSR Proposals, the Commission acknowledges the different nature of public securitisations from that of private securitisations, and states that “[r]estricting the access of investors and potential investors to private securitisations is meant to protect the confidentiality of information in those securitisations”.
There are no specific provisions in the EUSR Proposals as to how information that relates to private securitisations and that is reported to a repository should be dealt with. However, there is a recital indicating that the simplified template for private securitisations would need to be reported to a repository, with the purpose of “allow[ing] for basic visibility for supervisors over the private market”, and it also states that “to maintain the confidentiality of private transactions, data from those transactions should not be publicly disclosed”.
Participants in private securitisations are generally unlikely to welcome this proposed requirement to report to a repository and may consider it unnecessary, given that it will create an additional burden and may incur additional costs. In addition, transaction parties may have concerns about reporting confidential information to a repository. If this requirement applies in the case of third-country transactions, by virtue of the investor due diligence requirements, it would also represent an additional challenge for EU Investors and non-EU sell-side parties in those transactions.
There are limited proposed changes for “traditional” STS transactions, the main one being that a pool of underlying exposures can be deemed to be homogeneous where at least 70% of the exposures at origination are exposures to SMEs.
For on-balance-sheet (synthetic) securitisations, there are a number of proposed changes, including the possibility of using unfunded guarantees by insurance or reinsurance undertakings that meet certain requirements as credit protection.
Risk Retention
The risk retention regime remains fundamentally the same.
There is no clarification of the interpretation of the sole purpose test given by the Joint Committee in the JC Report. Article 6 of the EUSR includes what is commonly referred to as the “sole purpose test”, whereby an entity will not be considered to be an originator if it has been established or operates for the sole purpose of securitising exposures, and therefore will not be eligible to retain a material net economic interest of at least 5% in the securitisation.
The regulatory technical standards in relation to risk retention (the RTS) contain further wording in relation to the sole purpose test, including that the relevant entity should not rely on the exposures to be securitised, on any interests retained or proposed to be retained in accordance with Article 6 of the EUSR, or on any corresponding income from such exposures and interests, as its sole or predominant source of revenue.
The Joint Committee expressed the view that the word “predominant” should be interpreted to mean a threshold of more than 50%—in other words, that the proposed originator’s revenues deriving from the exposures to be securitised, retained interests or proposed retained interests should not be more than 50% of its total revenues for the relevant entity to pass the sole purpose test. The Joint Committee stated that it was its view that, going forward, this interpretation should be applied to new issuances and that it should also be used by supervisors when assessing whether an entity has been established or operates for the sole purpose of securitising exposures. The Joint Committee invited the Commission to clarify the term “sole purpose” in the EUSR, and said that, alternatively, the meaning of the term “predominant” could be clarified by the EBA by revising the RTS.
The Joint Committee was primarily focused on certain third-party origination vehicles in some CLO transactions, but its interpretation may apply to other securitisations. The views expressed by the Joint Committee on the sole purpose test have led to some disruption, uncertainty and differences of approach in the market. For further information, please see our LawFlash, Joint Committee of the European Supervisory Authorities Publishes Report on the EU Securitisation Regulation.
Although the Commission did not say anything about the Joint Committee’s interpretation of the sole purpose test in the EUSR Proposals, and even though the Joint Committee’s mandate for the JC Report was to provide a report on certain aspects of the EUSR, including the risk retention requirements, rather than to provide clarifications or interpretations of the RTS or the sole purpose test, the lack of clarification or discussion of this issue by the Commission leaves some uncertainty regarding how the sole purpose test and the related wording in the RTS should be interpreted. Consequently, we anticipate that the interpretation of the sole purpose test and the related wording in the RTS will continue to cause some difficulties in certain transactions. It remains unclear whether any clarification will be provided on this important point.
Sponsor Definition
In connection with its interpretation of the sole purpose test, the Joint Committee suggested in the JC Report that the Commission could explore the option of broadening the definition of “sponsor” in the EUSR, to allow regulated entities other than credit institutions and EU investment firms to hold the risk retention as sponsors. However, the Commission has not proposed any changes based on this suggestion.
The Joint Committee separately suggested in the JC Report that it should be clarified when a credit institution or investment firm will be considered to be acting as a “sponsor” of a securitisation transaction. This was intended to address the question of whether a sponsor of an ABCP programme, which in many cases would not be identified as a sponsor at transaction level, would be required to comply with certain requirements. The Commission did not follow up on this suggestion.
Jurisdictional Scope of Application
The Joint Committee recommended that the jurisdictional scope of the EUSR be clarified, such that it would be expressed to apply where at least one party to the securitisation, whether on the sell-side or the buy-side, is established in the European Union. The Commission has not made any changes in this respect. This is unlikely to be of concern, as the intended jurisdictional scope of the EUSR is generally understood among market participants.
Definition of Securitisation
No changes have been proposed. Accordingly, the requirements of the EUSR will continue to apply to many transactions that the financial markets would not previously have considered to be securitisations, in the everyday sense of the term, and which are still not considered to be securitisations in many non-European jurisdictions.
STS
No proposals have been made with a view to making it easier to designate an ABCP programme as STS.
The Commission has not included any proposals with respect to an STS equivalence regime to allow securitisations that meet the UK STS requirements or the Basel simple, transparent and comparable (STC) criteria to be considered as equivalent to EU STS.
Grandfathering
There are no specific grandfathering provisions in the EUSR Proposals. Market participants may find it helpful if some transitional provisions could be included for transactions which are already in place at the time when the new rules take effect—and if grandfathering provisions are includes, it may be helpful if parties in such transactions could have the option to opt in to the new regime if they wish, once it comes into effect.
The EUSR and UKSF are different regimes, but of course in many transactions there may need to be compliance by various parties with certain elements of both regimes, either because an entity is directly subject to the applicable rules or because it contractually agrees to comply with the relevant rules to satisfy the requirements of EU and/or UK investors. It is therefore worth noting that there are a number of points where the EUSR, and the EUSR Proposals, are not aligned with the UKSF, and some of the changes made to the UK securitisation regime under the new UK rules that came into effect on 1 November 2024 are not reflected in the EUSR Proposals.
For further details of the UKSF, please see our report entitled New UK Securitisation Rules Published. A further consultation on the UKSF is expected later in 2025 and this may include consideration of the distinction between public and private securitisations, whether the UK reporting templates could be made more proportionate for private securitisations, and whether the reporting templates could be adjusted for public transactions, as well as other matters.
The CRR Proposals include the following key points:
The Commission has published a draft delegated regulation amending Delegated Regulation (EU) 2015/61 as regards the eligibility conditions for securitisations in the liquidity buffer of credit institutions (the Draft LCR Regulation). The LCR requirement is part of the Basel III framework and sets out the amount and characteristics of liquid assets which EU credit institutions may hold in order to meet their short-term liquidity requirements. Senior tranches of STS securitisations are eligible as part of EU credit institutions’ liquidity buffers as Level 2B high quality liquid assets (HQLA).
The Draft LCR Regulation proposes a number of changes that would broaden the eligibility of senior STS securitisation positions for those liquidity buffers and enhance the treatment of certain senior STS securitisation positions. The Draft LCR Regulation does not provide for an upgrade of the relevant senior STS securitisation positions to Level 2A or for the inclusion of non-STS securitisation positions, but nonetheless, we anticipate that the proposed changes are likely to be seen as positive. The feedback period lasts until 15 July 2025.
The Commission is expected to publish draft amendments to the Solvency II Delegated Regulation, which sets out the prudential framework for EU insurance and reinsurance firms, later in the summer. This is expected to include changes to the prudential treatment of securitisations. New and lower capital requirements are expected to be put in place for senior tranches of non-STS securitisations and the prudential treatment of senior STS tranches is expected to be aligned more closely with that of covered bonds or corporate bonds. It is hoped that by making these changes, insurance and reinsurance companies will be incentivised to invest in securitisations.
We expect that it is likely that many of the changes set out in the EUSR Proposals will be seen as positive. However, market participants may consider that in some respects, some further modifications would be helpful.
It is important to note that the EUSR Proposals are only proposals at this stage, and they will have to go through the rest of the EU legislative process, which will take some time, and further changes may be made to the Draft EUSR Amendment in the course of that process.
It will also likely be some time before the revisions to the reporting templates and the simplified private reporting template are finalised.
What is clear, however, is that this package of amendments to the EU securitisation regime is highly significant and likely to constitute the most substantial amendments to the regime for a number of years.
We expect to be closely monitoring further developments in relation to the EU securitisation regime and the UKSF and we frequently advise our clients on the implications of the EUSR and the UKSF for their transactions. We stand ready to assist market participants in navigating this evolving landscape.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following: