Europe is holding itself back in the global financial game. Its securitisation market—once a powerful tool for funding businesses and spreading financial risk—has shriveled to just 17% of the size of the U.S. market, contributing less than 0.3% to European GDP. At the same time, nearly 90% of Europe’s debt financing relies on banks, a risky setup that leaves the economy exposed to serious trouble when banks face crises. This dependency isn’t just outdated—it’s a liability.
The problem isn’t just a lack of interest; it’s the heavy weight of European regulations. Complex transparency rules, redundant checks, and steep capital requirements have made securitisation overly expensive and unattractive for issuers and investors. For example, CLO managers must spend tens of thousands of euros annually on data reporting that investors rarely even use. Instead of fostering innovation, these regulations create roadblocks that slow the market down.
Securitisation could transform Europe’s economy by freeing up bank capital, opening up funding for small businesses, green energy, and infrastructure, and offering investors more ways to diversify. But restrictive policies, like the 10% single-issuer cap under UCITS, prevent funds from fully benefiting from securitisation’s built-in diversification. Worse, Europe’s market is effectively locked off from much of the global system. U.S. issuers, for example, often skip the EU’s complex compliance requirements because they can easily sell their securities at home. This leaves European investors cut off from a €2.5 trillion slice of the global market, while European issuers struggle with limited liquidity and reduced appeal to international investors.
Europe needs to rethink its approach. It’s not about loosening standards recklessly—it’s about striking a better balance. Simplify the rules, cut unnecessary costs, and make it easier for international players to join. The U.S. has shown that securitisation can thrive with smart reforms, and Europe has a chance to do the same. Without bold action, businesses, consumers, and investors will keep paying the price for hesitation, and Europe will risk falling even further behind in the global financial race.
Details: https://cdn.pficdn.com/cms1/pgim-fixed-income/sites/default/files/Reviving%20European%20Securitisation%20-%20Translating%20Ambition%20into%20Reality.pdf