Securitisation across APAC and the EU- between conservatism and (modest) ambition   

 On 17 June, the European Commission published a review of the EU’s securitisation framework as part of the EU’s Savings and Investment Union (SIU) Strategy. With the review, the European Commission seeks to revive the EU securitisation market, enhancing competitiveness and fostering strategic investment to stimulate economic growth across the EU. The EU securitisation market is significantly smaller than e.g., the US market, performing below the EU peak from before the crisis, as it never fully recovered due to onerous and restrictive regulations. In 2008, the size of the European securitisation market, including the UK, was 75% that of the US. In 2020, it was just 6% - a significant shift between the regions, despite similar private non-financial lending activities in both economies. 

To this end, the Commission has proposed reducing some operational and prudential barriers to make it easier for banks to issue securities and for global insurers and asset managers to invest in securitized assets. Yet ultimately it is a relatively modest proposal at a time of increased political interest in advancing the EU capital markets union. It is also the first proposal under the SIU strategy and will be seen as an important test of the political commitment to making it work. Meanwhile, as the securitisation market grows across jurisdictions, regulators in APAC appear to be adopting a more conservative stance. 

Key changes of the Commission’s review and potential impact on the market  

Key changes proposed by the European Commission include amending the definition of public securitisation to include any securitisation for which a prospectus is drawn up, that is admitted to be traded on a regulated market and marketed with non-negotiable terms. A private securitisation is defined as one that does not match any of the criteria. This definition captures most securitisations, meaning only private securitizations would benefit from the simplified templates. While one of the key ambitions of the Commission was to streamline due diligence procedures, this amendment seems to hinder its own goals while possibly leading to a growth in private over public securitisations. While due diligence and reporting for private securitisation will be less onerous than or public securitisations, issuers will still have to report to repositories with details to be agreed later. This may deter third-country and /or first-time securitisation issuers and limit their interest in the EU market, essentially limiting the growth of the EU’s capital market.  

Lowering capital requirements for banks by adjusting the p-factor is certainly a step in the right direction, yet many industry stakeholders advocate for going much further. The proposed changes and introduction of a new category of resilient securitisation with different capital requirements include new mandates for the ESAs to develop RTS, adding more complexity to the requirements instead of simplifying them. The Commission’s approach is aligned with relatively cautious supervisors such as the EIOPA and the ECB, who have historically voiced concerns about weakening or reducing regulatory requirements. The Commission also gives the leading role to the EBA rather than ESMA, as they see securitisation as closer to banking than the non-banking sector. Additionally, Financial Services Commissioner Marie Luis Albuquerque is very focused on the need to ensure financial stability.  

There are widespread concerns that inevitable additions from the co-legislators will end up restoring much of the complexity of the current rules, with the left-of-centre groups and NGOS warning about the danger of weakening “safeguards” to ensure banks can absorb losses in case something goes wrong. They additionally criticise that streamlined due diligence will only lead to a lack of transparency rather than better capital and investment allocation. 

APAC Securitisation Outlook: A Contrast to EU reform ambitions 

While the European Commission’s recent review of the EU securitisation framework aims to revitalise its market by reducing prudential and operational barriers, the APAC region presents a more diverse and nuanced landscape. The EU’s regulatory pivot - under the SIU Strategy - seeks to boost bank issuance and increase global investor participation, prioritising competitiveness and growth. In contrast, APAC jurisdictions remain conservative with varying levels of market maturity and regulatory direction. 

Australia leads the region with a well-established securitisation market, traditionally dominated by Residential Mortgage-Backed Securities (RMBS). However, in 2024, issuance reached its highest level relative to GDP in over a decade, driven by strong investor demand and non-bank financial institution (NBFI) participation.  Nevertheless, the non-bank FIs sector remains relatively small, representing around 7% of total credit. This has led regulators to believe that systemic risk is limited, even as higher-risk lending modestly increases. Nonetheless, financial regulators such as the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) are closely monitoring for signs of overheating or deterioration in lending standards. Meanwhile, more firms are exploring new areas such as in green securitisation, highlighting a growing interest in ESG-aligned structures. ASF 

Japan continues to demonstrate steady growth in securitisation with ABS and RMBS being key contributors. In 2024, securitisation issuance rose 6%, with institutional investors such as life insurers and pension funds driving demand. SP Global The Financial Services Agency (FSA) provides conservative standards on risk retention, credit enhancement, and transparency. With no significant reforms introduced in recent years, Japan’s securitisation regulatory framework remains stable and mature, favouring consistency over reform - a marked contrast to the EU’s proactive deregulatory stance. 

Singapore, with a smaller market, stands out through a robust regulatory framework under the Monetary Authority of Singapore (MAS). In October 2024, the MAS published a consultation paper in which the authorities proposed increasing capital charges for non-debt-based securitised exposures from 50% to 300% for investment-grade assets and from 50% to 500% for non-investment-grade assets, while maintaining a 50% charge for debt-based assets. However, the MAS stated that it was open to revising these proposals if companies could provide evidence-based feedback suggesting alternative measures. This position reflects MAS's strong focus on financial stability and risk containment, while signalling regulatory flexibility.  

Outlook and conclusions  

In summary, while the EU reforms are intended to stimulate securitisation as a growth tool, APAC markets continue to prioritise prudence, financial stability, and measured innovation, highlighting a divergence in policy stance despite shared market interests.   

With the review being the first legislative proposal to deliver on the SIU strategy, co-legislators will be under pressure to find a common position swiftly. In the legislative negotiations, France, Italy, Luxembourg, Ireland, the Netherlands, and Germany will take a leading role in the Council, though it remains to be seen how much of a priority this will be in the Council. In the European Parliament, the EPP has secured the lead (rapporteur) role on the file, but we expect significant differences between the political groups and thus lengthy discussions. In any case, it will take quite some time to see the results of the legislative negotiations. 

This blog was written by Flint Directors Lisa Keuper and Lisa Ross supported by Geoffrey Lee. Lisa Keuper advises clients on EU political and policy developments in particular areas of financial services and sustainability. Lisa Ross advises clients on policy, political and regulatory issues in financial services across the APAC region. For more information, contact us.