Jan 19, 2026
key takeaways
Market participants were broadly pleased with the direction of travel in the European Commission's (Commission) June 2025 legislative package to revive the EU securitisation market although it contained some problematic proposals. Some aspects of the Commission's text ran counter to its goal of burden reduction – notably an overly broad definition of 'public' securitisation and securitisation repository reporting for all deals – but generally the focus on removing overly complex, and in some cases duplicative, obligations and recalibration towards risk-based disclosure and capital requirements was welcomed.
The Council of the European Union (Council) and the European Parliament's (Parliament) Committee on Economic and Monetary Affairs (ECON) recently showed their hands on the Commission's proposals too with publication of the following in December 2025:
Council
ECON
The Council Position was formally adopted on 19 December 2025. The ECON Proposals are subject to comment by MEPs until 27 January 2026. ECON is scheduled to meet in early May 2026 to consider any amendments from MEPs and vote on adopting the ECON Proposals text as the Parliament's final negotiating position for trilogue discussions. Trilogues are expected to take place in H2 2026.
Taken together, the Council Position and ECON Proposals would recalibrate the Commission's approach to the SECR across due diligence, the public versus private boundary, transparency and STS. Several of the proposed changes would materially ease frictions introduced by the Commission's proposed text. However, there is divergence in important areas, most notably on reporting for private securitisations, pool homogeneity for STS and eligibility conditions for credit protection providers in synthetic STS structures.
In their parallel engagement on the CRR, the Council has broadly backed the Commission's proposals whereas the ECON Proposals would introduce more comprehensive changes. These differences set up a substantive prudential debate alongside the SECR reforms. In this advisory, we discuss the stances taken by the Council and the Parliament on the headline issues.
Public v private
Both co-legislators undo the Commission’s substantial broadening of 'public' securitisations. Each restores the traditional, listing on an EU regulated market test, removing the Commission's listing venue and 'non-negotiable terms' limbs. The ECON Proposals justify this stance on grounds of preventing market disruption and unintended consequences. This revision will be roundly welcomed by the European CLO market where issuers generally list their securities on an exchange-regulated market for technical reasons. These deals, which are properly considered private, would have been captured on a listing technicality under the Commission's proposals and faced the corresponding additional compliance burden and unnecessary complexity without benefit to any stakeholders.
Due diligence: administrative sanctions and liability on delegation
The Council rejected the Commission's introduction of administrative sanctions for institutional investors who infringe SECR Article 5 due diligence requirements. The Council Position would see the existing position under SECR remain in place and investors would face sanctions for non-compliance under their applicable sectoral rules rather than the potential doubling-up effect of the Commission's proposal. The ECON Proposals, acknowledging that overly harsh sanctions risk driving away new investors, take a more nuanced approach. It would retain sanctions capped at twice the amount invested and add an anti-duplication guardrail where sectoral prudential measures already exist. On a related note, both favour the status quo on responsibility for infringements of SECR Article 5 where due diligence is delegated - but subject to the delegating institutional investor having an obligation to ensure that its delegate is appropriately experienced. The Commission had sought to shift responsibility from delegate to investor.
Due diligence: streamlining
The ECON Proposals and the Council Position endorse the Commission’s move away from prescriptive, duplicative investor checks toward a more risk focused regime for due diligence. The term 'repeat transaction' is codified by both on similar terms and would limit diligence to changed elements where the investment was made in the prior 24 months (ECON) or 36 months (Council).
Due diligence: third-country securitisations
On third-country disclosures, the Council would introduce flexibility to the current rules to allow EU investors to comply with their due diligence obligations vis-à-vis third-country issuers using information that is 'substantively equivalent' to the SECR's transparency standards but not necessarily fully adherent to the disclosure templates. The ECON Proposals make no amendment to the Commission's proposal. This would see non-EU sell-side parties seeking investment from EU investors continuing to use SECR disclosure templates.
Transparency standards
The co-legislators also diverge on applicability of securitisation repository reporting. The Council aligns with the Commission's proposal to bring private securitisations into scope. The ECON Proposals on the other hand, would decouple private reporting from repositories entirely - reporting would be made only to the relevant national competent authorities (NCAs) via a simplified, private template without repository submission or publication.
STS
The Council Position would condition the Commission's proposed 70% threshold for SME STS homogeneity with requirements for EU obligors, similar underwriting approaches and similar servicing procedures, applied across SECR Articles 20(8), 24(15) and 26b(8). This would involve significant amendment of the existing Level 2 measures on homogeneity. The Parliament instead proposes to collapse the homogeneity test to a single asset‑class criterion by providing an explicit list of asset types in the Level 1 text. The latter is a more radical simplification offering broader pooling flexibility.
Neither the Council Position nor the ECON Proposals made any changes to the proposed clarification of standardisation rules for synthetic STS to account for loss absorption in junior tranches when applying non‑sequential amortisation triggers. In relation to standardisation for traditional STS, the Parliament would remove certain early amortisation triggers to better accommodate fluctuating exposures.
Both positions support expanding eligible credit protection for synthetic STS to include unfunded guarantees by (re)insurers for on balance sheet STS subject to having Solvency II internal model approval for calculating capital on eligible guarantees. This is despite the significant concerns raised by the European Central Bank (ECB) in its November 2025 opinion. The institutions calibrate eligibility thresholds differently. The Council would impose additional requirements including a credit rating of at least Step 2 when first recognised and not falling below Step 3, significant business diversification and assets of at least EUR15 billion (down from the Commission's EUR20 billion). The ECON Proposals would allow eligibility also for EU (re)insurers authorised to underwrite credit or suretyship provided that they have a no-objection letter from their NCA(s). It would require at least Step 2 credit rating at recognition and total assets of at least EUR5 billion (or consolidated total group assets of at least EUR15 billion).
UCITS
The Council also proposes increasing the single-issuer limit to 50% for UCITS holdings in public securitisations. Industry has commented that this would move the dial only very slightly on investment assuming the existing definition of "public securitisation" is maintained — it would exclude UCITS investing in CLOs, for example.
Risk weight floors for senior positions
The Council generally adopts the Commission proposal to replace the existing two-pronged (STS versus non-STS) approach with a risk-sensitive risk weight floor formula for senior securitisation positions. Floors calculated under this formula would also be subject to a minimum level (ie their own individual floors). This would benefit better quality non-STS deals but, on the other hand, the capital requirement generated under the proposed formula for higher-risk assets such as senior CLO tranches could be greater than the current fixed floor. The ECON Proposals would apply lower, capped floors for senior tranches, distinguishing between synthetic versus traditional and easing STS calibrations. Specifically, it would cap the senior risk weight floor produced by the formula at 15% (today’s floor level). Again, this is positive for higher quality pools but the ECON's proposed caps and lower minima would go further in preventing capital increases versus today’s framework.
(p) factor
The current (p) factor is widely seen by industry as excessively high, especially under SEC-SA, potentially leading to overcapitalisation and inconsistencies with SEC-IRBA. The Commission proposed reducing (p) under both approaches for senior positions, with more favourable relief for originator/ sponsor and STS senior positions. The Council retains the Commission’s downward recalibration from 1.0 to 0.6 and adds a guardrail that non senior risk weights cannot fall below the senior tranche’s risk weight. It also retains the unnecessary distinction between originators and investors - giving the benefit of the reduction to originators only which could see bank investors lose out where they have not acted as originators. Investors would be brought into scope under the ECON Proposals on the ground that there is no economic basis for differentiating between investors and originators/ sponsors. It would further reduce (p) to 0.3.
Resilient securitisation
The Commission proposed a new 'resilient' category for senior positions meeting criteria designed to mitigate agency risks and ensure robust attachment. The Council retains this new category for both STS and non-STS transactions, applying lower floors subject to conditions. The explanatory memorandum accompanying the ECON text criticises the complexity of resilience for traditional securitisation and would remove the concept entirely for traditional senior non-STS deals such as CLOs.
Senior positions
The Commission's proposed text seeks to add to a new condition of an attachment point above KIRB or KA to the existing definition of 'senior securitisation position' for STS transactions. It does not specify whether this is a day-one only or ongoing requirement. The ECB opinion cautioned against this change, raising the potential for a cliff effect in capital treatment where securitised assets underperform. The Council Position and ECON Proposals reject the definitional change entirely, with the ECON Proposals noting that it would severely impact the European securitisation market by reclassifying many existing senior positions as non-senior and disproportionately increasing risk weights.
On the related amendments proposed to the requirements for preferential treatment of senior positions in CRR Article 243, the co-legislators would test eligibility at the origination date only rather than on a continuous basis (as proposed by the Commission). The certainty of this approach would be welcomed by issuers and investors.
Looking forward to the trilogues, key fault lines on SECR amendments will include private reporting architecture (repository versus NCA only), the delegation liability model and sanction proportionality, the design of SME homogeneity relief (process based versus asset class based) and the breadth of access to synthetic STS unfunded protection. On the prudential front, talks will focus on senior tranche risk weight floors, the scope of (p) factor relief (particularly investor treatment) and the future of the “resilient” category. These choices will interact with SECR decisions on STS, homogeneity and (re)insurer guarantees for synthetic STS. We will continue to monitor negotiations and assess operational implications for issuance, investor processes, and data/ reporting infrastructure.
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