Building a Bridge to Europe’s Financial Stability

On 17 June 2025, the European Commission (EC) released its proposals for amendments to the EU securitisation framework¹, aiming to facilitate securitisation activity in Europe, as part of the Savings and Investment Union (SIU) strategy². With the proposals now before the European Parliament and the EU Council, and an ambitious year-end timeline set, we revisit key aspects, from the perspective of a European investor in ‘Credit Risk Sharing’ (CRS), which is the name PGGM uses for our investments in private, on-balance-sheet securitisations³.

While the EC’s move towards a more principles-based and less burdensome framework is positive, several notable challenges remain that could hinder the SIU’s goal. This four-part series will outline the main issues in the proposals—overly prescriptive due diligence, unnecessary sanctions, and missed opportunities in the Simple, Transparent and Standardised (STS) standards—beginning with an introduction on the importance of securitisation and the need for reform.

The Strategic Bridge 
Securitisation is far more than a technical mechanism within the European financial architecture; it is a strategic bridge that enables the mobilisation of substantial private capital to help the EU deepen its capital markets and move to a climate-neutral economy. This bridge is particularly vital in the current economic and geopolitical environment where Europe requires vast amounts of investment . Banks play a pivotal role in financing real economic activity and facilitating the green transition, yet their lending capacity is inherently limited by regulatory and market constraints. By transferring credit risk through mechanisms such as CRS⁵ , banks free up capital and risk limits and can thereby expand their lending capacity. Securitisation, therefore, acts as a bridge — enabling banks to tap into deep pools of institutional capital, while simultaneously providing investors with access to diversified portfolios and attractive risk-adjusted returns. 

Repainting the Bridge: Why EU Securitisation Framework Needs Reforms
For this bridge to play a constructive role in the financial system, it needs to function well -allowing seamless flow of capital and efficient supervision. However, the current EU regulatory ‘constitution’ for securitisation is overly conservative and complex, acting like barriers that slow or restrict traffic. To fully unlock the benefits of securitisation, a shift towards a more proportionate and risk-based regulatory framework is necessary. This is why there has been a shared expectation that the EC’s long-awaited review would deliver a streamlined and less onerous securitisation framework.

Proposed Changes and Their Impact in a Nutshell 
The proposed measures indeed seek to strengthen the bridge and bring several positive changes, such as reduction of fields in the reporting templates, simplification of the due diligence requirements for EU transactions, (overall) lower capital risk-weights and new, principles-based SRT tests. These reinforcements are expected to ease the regulatory burden for issuers and investors, allowing the capital ‘traffic’ to flow more freely. On the other hand, the EC seems to be compensating for the flexibility it has provided by imposing restrictions on non-EU securitisations and by adding sanctions for investors. In addition, the proposals fall short on fortifying the STS securitisation standards. In a nutshell, this approach does not strike the right balance and Europe’s bridge toward growth and sustainability remains partially obstructed.

Next Steps
As the European Parliament and Council consider the EC’s proposals, the final form of the framework is yet to be determined. Striking a balance between the needs of regulators, issuers, and investors will be crucial to the success of this initiative, so ‘capital’ traffic can flow openly, and Europe can continue its journey towards prosperity and a greener future. By highlighting the most pressing issues, we hope to contribute to achieving this balance. In our next blog we explore in greater detail the proposals for the due diligence requirements. Stay tuned! 

4. According to the EC’s own estimates: to meet the goals of the Green Deal and RepowerEU, additional investments exceeding EUR 620 billion annually between 2023 and 2030 will be required, most of which must originate from private sources.