Open Markets or Closed Doors: Europe’s Securitisation Choice
Securitisation has become a revealing test of Europe’s capital markets ambitions. Both the EU and the UK are revisiting their securitisation frameworks in the name of growth, competitiveness, and better‑functioning markets. That focus is well placed: a healthy securitisation market is a critical mechanism for freeing up bank balance sheets, supporting lending, and mobilising long‑term capital.
Reform should reopen the door for UK and EU institutional investors that have been effectively locked out of global securitisation markets for years. But direction matters. The UK and EU are now pursuing markedly different paths—one moving decisively to widen investor access and reconnect with global markets, the other hesitating at the threshold.
The UK is proposing a more open, outward-facing model that offers broader investor access, including for non-UK securitisations, and aligns with the global norm. The EU’s proposal, while constructive in some respects, remains notably more restrictive with respect to non-EU securitisations. This is not a technical difference. It is a strategic one. It will determine whether securitisation helps Europe build globally competitive capital markets or leaves Europe shut out of the opportunities these investments can offer.
Where the approaches diverge
Securitisation markets, which depend heavily on robust investor participation, deepen when investors participate at scale. This participation depends on three conditions: access to a sufficiently broad pool of assets, the ability to assess risk without disproportionate cost or operational burden, and a framework that allows capital to move across jurisdictions with ease. It is across these three conditions that the EU and UK proposals diverge most clearly.
Investor due diligence
Due diligence rules are there to ensure investors understand what they are buying. However, existing EU and UK rules have constrained investors’ ability to participate in securitisations, particularly in global markets. The UK’s proposal simplifies the framework for both UK and non-UK securitisations, giving investors broader access to global opportunities. The EU’s proposed reforms, in contrast, focus mainly on EU securitisations and leave many of the obstacles for non-EU securitisations in place, continuing to restrict EU investors’ access to global market opportunities.
The EU framework also places a much heavier burden on investors by expecting them to verify that other parties in the transaction have met the EU’s regulatory requirements. If EU investors fail to act as "compliance gatekeepers” they face sanctions. The UK does not impose this burden, recognizing that investors already undertake rigorous due diligence as part of their own risk management. By effectively outsourcing compliance to investors, the EU proposal risks discouraging broader investor participation rather than enabling it. The result is likely to be less liquid, efficient, and ultimately a less resilient EU securitisation market.
Risk retention
Risk retention rules dictate whether investors can participate in securitisations originated outside their jurisdiction on workable terms. Rather than retain a rigid five percent originator retention requirement for investment in non-UK securitisations, the UK is prepared to allow investors to demonstrate the originator’s alignment of interest in other ways.
The EU, by contrast, proposes to maintain a more rigid risk retention framework with limited flexibility for non-EU securitisations.
Disclosures
Disclosure rules determine how readily investors can assess risk and allocate capital. The UK is moving toward a more flexible, principles-based approach. The EU’s proposal introduces some streamlining but retains an excessively prescriptive regime that is operational burdensome, particularly for non-EU securitisations.
The issue is not whether investors receive information. It is whether the form and volume of that information enables or deters participation.
Taken together, these elements determine how attractive and accessible the market is for investors. Whether the EU’s securitisation market ultimately deepens or remains stalled will depend on whether the proposed approach translates into participation at scale.
Why this matters
Securitisation markets compete for capital, with investors allocating across jurisdictions based on relative accessibility, clarity, and opportunity. Where a framework restricts access, capital will move elsewhere.
For the EU, securitisation reform is tied directly to the credibility of the Savings and Investments Union (SIU). If securitisation is to support lending, mobilise capital, and strengthen European capital markets, the framework must reflect how investors actually allocate capital in practice.
The EU’s reform effort is important and welcome. It reflects a recognition that the current framework has not delivered the depth or dynamism Europe needs. But recognition alone is not enough. The outcome will depend on how the reforms are calibrated.
Openness to the global securitisation market is a critical factor in determining whether a domestic market can attract sustained investor participation and build scale over time.
The road ahead
The UK has taken a clear step toward a more open and globally competitive framework. The EU still has the opportunity to do the same. But, on its current path, the EU’s securitisation reforms are likely to fall short of their objectives and to constrain rather than strengthen market development. The result will not just be underperformance, but a persistent and widening competitive disadvantage.
If securitisation is to play a meaningful role in the EU’s capital markets, the regulatory framework must recognise that investor access across jurisdictions is essential to building scale, liquidity, and resilience. The approach must support and encourage investor participation, not dampen it through unnecessary complexity and higher costs.
Global capital will not wait for the EU to open the door. It will move to markets that are more accessible, less burdensome, and more workable for investors. Hesitation carries a clear cost: investment will flow elsewhere, competitiveness will erode, and potential will go unrealised. For a policy initiative as ambitious as the SIU, Europe must pair that ambition with a framework capable of delivering deeper, more mature and liquid securitisation markets.
The choices made today will determine whether Europe opens the door to growth and competitiveness in the years ahead or leaves the door closed.