European banks could eventually hold less capital against low-risk mortgage portfolios, freeing up funds for new lending. The European Parliament’s economic committee backed a securitisation reform by a thin margin that would link capital requirements to the actual risk of underlying assets. But the key number that will make or break the reform remains unresolved.
“Reviving the securitisation market is particularly important in the current challenging geopolitical and economic environment, in order to channel much-needed financing into the real economy,” said MEP Ralf Seekatz (EPP/DEU), in a statement following the vote.
Seekatz is responsible for steering the securitisation package through Parliament. He proposed a 4 per cent floor for the highest-quality securitisations during the drafting process. This was more ambitious than the Council’s 6 per cent. Industry groups say 2–3 per cent is the minimum needed to unlock large-scale mortgage securitisation. The proposal still fell short of that.
What ECON put forward
MEPs have now adopted a position backing a more risk-sensitive approach to capital requirements. Under the current rules, banks face a fixed minimum regardless of how safe the underlying loans are.
ECON says it wants to replace that with a formula that rewards safer asset classes with lower requirements. Doing so would not penalise banks holding bundles of low-risk mortgages in the same way as those holding riskier assets.
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The Committee also asserts it has simplified the checks investors must carry out before buying securitised products. It has also eased reporting requirements for privately placed deals, and made it easier for non-EU issuers to sell into European markets.
Sceptical industry
The Investment Company Institute, representing fund managers on both sides of the Atlantic, welcomed the steps. It warned, however, that “key barriers that have constrained the market for much of the past decade will remain largely in place.” On due diligence obligations and the sanctions regime, the ICI said, the practical impact of the position will be limited without further changes.
The core problem is the capital floor. One number will determine the outcome: how low the capital floor is set. That will decide whether European banks can free up capital tied to low-risk mortgage portfolios. That capital could then be redeployed as new lending. The EP has moved further than the Commission, but the question remains whether it has moved enough.
With 5 or 6 per cent for the minimum floor, there will be no big mobilisation of low-risk mortgages, which make the biggest portfolio in European banks.
— Gonzalo Gasos, Senior Director of Prudential Policy and Supervision, European Banking Federation
“With 5 or 6 per cent for the minimum floor, there will be no big mobilisation of low-risk mortgages, which make the biggest portfolio in European banks,” said Gonzalo Gasos, Senior Director of Prudential Policy and Supervision at the European Banking Federation, when speaking to EU Perspectives last month.
That gap will now be tested in the trilogue. Negotiations are expected in the second half of 2026.
