European Commission Backs Simplification of Securitization Rules, Changes to Bank, Insurer Capital in Savings and Investment Union Plan

Relevant Document:
European Commission Release

The European Commission today revealed plans for a Savings and Investment Union today, with reform of the rules governing investments in securitization among the near-term actions to help channel a hoped for €350 billion of household savings a year into the capital markets and toward productive investments.

The Commission’s communication on the plans states that “further simplification of the [Securitisation] Framework could help in fully exploiting the benefits that securitisation can offer,” with regulatory measures “instrumental” in harnessing its potential. Specifically, the Commission said it “will make proposals in Q2 2025 focusing on simplifying due diligence and transparency, and adjusting prudential requirements for banks and insurers.”

The Commission held a consultation in 2024 on a wide-ranging review of the securitization framework and in February launched a call for evidence, which is set to close on March 26. A legislative proposal is due in the second quarter of this year.

Market participants have hoped for a material reduction in capital charges, particularly for non-STS securitizations such as CLOs under Solvency II, which have made it punitively expensive for most European insurers to invest in the sector.