Asset managers and insurers are calling for sweeping reforms to Europe’s struggling debt securitisation market, arguing that much-needed changes could unlock hundreds of billions of euros in financing for businesses and households. Industry leaders, including bond giant Pimco and insurance giant Generali, are urging EU policymakers to ease regulation that they believe has stifled growth and investment in the sector.
Securitisation involves pooling together debt such as corporate loans, car finance, and mortgages, which can then be packaged into debt securities and sold to investors. Supporters of reform argue that Europe’s approach to securitisation is too stringent compared to the US, where the market is booming. Some $1.5 trillion of securitised debt was issued in the US last year, dwarfing the €245 billion securitised in Europe, including the UK, in 2024.
A key catalyst for change is a report from former Italian Prime Minister Mario Draghi, which suggested that a larger market for securitised lending could act as a substitute for Europe’s lack of capital market integration, helping to foster growth and more accessible financing. Industry executives argue that Europe’s regulatory approach—designed to prevent a repeat of the 2008 financial crisis—has become overbearing, preventing the region from capitalising on the potential of securitised debt.
One of the main issues is the EU’s “simple, transparent, standardised” (STS) framework, which limits which debt products can benefit from lower capital charges. Market participants argue that the STS definitions are too narrow, excluding many assets that would be difficult to standardise, such as aviation loans and music royalties, which have been thriving in the US market. These restrictions, coupled with tough capital requirements, have left Europe’s securitisation market far behind its American counterpart.
Insurance Europe, a trade group, has highlighted the disproportionate capital charges on securitisation investments compared to other financial instruments with similar credit risks, such as corporate bonds. This has led to a lack of investment from European insurers, who hold a mere 1% of their assets in securitisations, compared to their US counterparts who hold 17%.
Several key players in the industry are optimistic that a shift in policy could bring substantial benefits. Apollo, a private capital group, estimates that tackling these regulatory challenges could unlock over €1 trillion in financing for the EU economy. Pimco, too, has called the EU’s current securitisation market “unequivocally failed” as an alternative credit channel for the broader economy.
Despite concerns about financial stability in the event of a crisis, regulators are considering changes to ease the burden on insurers and other investors. In the UK, regulators have already made changes to rules on due diligence, and the European Commission is currently consulting on how to make capital charges for securitised debt more proportionate.
“Changes are long overdue,” said Alex Batchvarov, an international structured finance strategist at Bank of America. He pointed out that the market’s apparent growth—based on issuance value—doesn’t account for the fact that net figures, which subtract maturing securities, show much slower growth. The continued regulatory obstacles in Europe have left the market stagnating, while the US has thrived with more flexible rules.
As the European Commission consults on potential reforms, the securitisation market’s overhaul could ultimately enable the EU to tap into much-needed capital for economic growth, offering investors and businesses more opportunities to fuel innovation and development across the region.
