The EU Securitisation Regulation

For the first time, Regulation (EU) 2017/2402 of 12 December 2017 created an EU-wide, sector-neutral framework for the regulatory treatment of securitisations. It replaced a patchwork of definitions spread across the CRR, Solvency II and the AIFMD and introduced a common quality label — the STS label — for simple, transparent and standardised transactions.

What the Regulation covers

In securitisation-law terms, "securitisation" means the issuance of debt instruments whose repayment depends on the cash flows of a pool of receivables and whose losses are tranched into senior, mezzanine and junior positions. The Regulation builds on this core idea and expressly regulates four structures:

• Traditional securitisation — true sale of assets to a securitisation special purpose entity (SSPE).
• Synthetic securitisation — risk transfer through a protection agreement without sale of the assets.
• ABCP — asset-backed commercial paper issued through bank-sponsored programmes.
• NPE securitisations — securitisations backed by non-performing exposures, added in 2021.

Why it matters economically

Banks are the classic intermediaries for corporate funding in Europe — more so than in the United States, where capital markets play a larger role. The rules governing how banks can manage and transfer credit risk therefore have a direct effect on the liquidity available to the real economy.

Supervisors and policymakers increasingly acknowledge that securitisation is a key instrument in the European capital-markets toolkit: it frees up regulatory capital, creates tradable credit exposures for institutional investors and, in turn, supports bank lending. Against the backdrop of the Green Deal and digital-infrastructure financing needs, sustainable securitisation is expected to play an important role in mobilising private capital.

The regulatory architecture

The Securitisation Regulation is, in a certain sense, a "breathing" rulebook that operates on four levels in line with the Lamfalussy architecture:

• Level 1 — the Regulation itself, adopted by the European Parliament and the Council.
• Level 2 — delegated and implementing acts adopted by the Commission, based on draft Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) prepared by EBA, ESMA or the ESAs' Joint Committee.
• Level 3 — guidelines, recommendations and Q&As issued by EBA and ESMA. Not legally binding as such, but in practice applied by national competent authorities and therefore quasi-normative.
• Level 4 — enforcement and review by the Commission, based on reports from Member States.

Several Level 2 measures were finalised years after the Level 1 text took effect; others are still in consultation. Anyone working on a deal has to read Level 1 together with the applicable RTS, ITS and EBA/ESMA guidelines — and keep an eye on pending drafts that may cut across current market practice.

National implementation

The Regulation is directly applicable in all Member States and does not as such need transposition. Germany, however, has adjusted related laws — in particular the Kreditwesengesetz (KWG) — and allocated supervisory responsibilities. BaFin circulars complement the European framework and are part of the day-to-day practice of German-law securitisations.

The ECB dimension

The ECB's eligibility rules for monetary-policy collateral are not part of the Securitisation Regulation, but they matter commercially: whether an ABS issuance can be posted as collateral in Eurosystem operations strongly influences its marketability. The ECB also applies an informal set of criteria for securitisations it acquires under its purchase programmes.