The Big Rethink: Can Europe Turn Securitisation from Villain to Hero?
Securitisation still carries the stigma of the 2008 financial crisis, too often portrayed as the villain of global finance. But is it time to flip the script? In today’s Europe, with banks constrained by capital requirements and massive funding needs for growth, green transition, and innovation, securitisation could be a key solution, not the problem. The risk though, is that securitisation continues to get typecast as the villain. The European Commission’s latest proposals aim to simplify rules, expand the investor base, and make securitisation a safe, transparent, and scalable tool for channelling capital into the real economy. The question is whether these efforts will be enough to revive the market and close the gap with the U.S. In my latest article, I explore how Europe can turn securitisation from a misunderstood villain into a growth engine. Is this the comeback story capital markets have been waiting for?
Securitisation: Europe’s Misunderstood Hero? Can Brussels Flip the Script?
Securitisation Reimagined: From Crisis Legacy to Growth Engine
Will securitisation come from villain to potential hero? Interesting question. Since its role in the financial meltdown of 2008 (the so-called GFC), the practice of bundling together thousands of loans and selling slices of the deal rated for their risk has been subjected to waves of regulation designed to prevent future disasters. Frankly speaking, apart from car leasers, it is not popular anymore in Europe. While the American market has thrived, however, Europe’s has limped along, zombie-like, securitising about half as many loans as the USA by value in the last 5 years. This missed opportunity would be one of the reasons for EUC to want a revamping or a reboot. An example, in US life insurers put 17% of their investments into securitisation while in Europe, less than 1%. In Hollywood, every story needs a villain, and in finance, securitisation has played that role for more than a decade. Ever since the 2008 financial crisis and the cultural impact of films like “The Big Short”, the very word “securitisation” still triggers unease. For many, it conjures images of opaque structures, toxic mortgage pools, and reckless risk transfer. Yet, securitisation is not inherently a bad actor. At its core, it is a technique to transform illiquid loans into tradeable securities, freeing up bank capital and channelling liquidity back into the real economy. The problem was never the tool itself , but the misuse of it, the lack of transparency, and weak regulation. Today, in a Europe facing capital shortages, green transition needs, and underdeveloped capital markets, securitisation could become an unlikely hero. The EU’s efforts to revive the market, under the banner of the Capital Markets Union (CMU), now rebranded as the Savings and Investment Union (SIU), are an attempt to rehabilitate securitisation and harness its potential to fund growth. The question is: can Europe flip the script?
A Brief History – From Boom to Backlash
In the early 2000s, securitisation was hailed as an innovation that democratized credit. It allowed banks to offload risk, recycle capital, and provide more loans. The U.S. market grew rapidly, particularly in subprime mortgages, until cracks appeared. By 2008, poorly underwritten loans, complex collateralized debt obligations (CDOs), and misaligned incentives triggered a systemic crisis.
The backlash was swift:
Heavy regulation followed (Basel III, risk-retention rules, disclosure requirements).
Public perception soured, and European issuance collapsed.
Banks became reluctant to securitise, fearing reputational risk and high compliance costs.
Europe, in particular, saw a near-death of the market. While the U.S. securitisation market rebounded relatively quickly, Europe’s recovery has been painfully slow.
Europe’s Current Challenge – Financing Growth
Europe’s financial system is still bank-centric: around 75% of corporate funding comes from banks, compared to ~25% in the U.S. With higher capital requirements, banks cannot carry all the lending required to finance the energy transition, innovation, and scale-ups.
Brussels knows this. The Capital Markets Union (CMU), and now the SIU, aims to diversify funding sources, channel savings into investments, and make Europe’s economy more resilient. Reviving securitisation is a key plank of this agenda.
The European Commission’s June 2025 proposals aim to:
Simplify and harmonize securitisation rules.
Expand the investor base, including making it easier for insurers and pension funds to participate.
Streamline disclosure and reporting to reduce compliance burdens.
Maintain high transparency and risk-retention standards to avoid past mistakes.
The message is clear: securitisation should no longer be seen as “shadow banking,” but as a legitimate and regulated tool for financing Europe’s future.
Why Securitisation Is Still Misunderstood
Despite these efforts, securitisation remains typecast as the villain in public and political discourse. Reasons include:
Legacy stigma from 2008.
Complexity: many stakeholders still find securitisation structures too technical to understand.
Lack of investor confidence: low secondary market liquidity keeps many investors on the sidelines.
Regulatory fragmentation: uneven adoption of rules across EU member states.
This negative perception has real consequences: the European securitisation market remains far smaller than the U.S., limiting the ability to channel capital efficiently.
What Has Changed – and Why It Matters
Several factors now differentiate today’s securitisation from the pre-crisis era:
Risk retention: originators must keep “skin in the game” (typically 5%), aligning incentives.
Transparency: standardised reporting templates, loan-level data, and public repositories improve visibility.
Regulation: the EU Securitisation Regulation (2019) creates a single, harmonised framework.
Investor protections: due diligence requirements ensure buyers understand what they invest in.
These reforms aim to restore trust and prevent securitisation from being used to dump bad risks on unsuspecting investors.
Opportunities for Corporates and Investors
If Europe succeeds in reviving securitisation, the benefits could be significant:
Freeing bank capital: allowing banks to lend more to SMEs, infrastructure, and green projects.
Enlarging the investor base: giving institutional investors access to high-quality, diversified credit exposure.
Supporting ESG goals: securitisation could be a channel for green asset-backed securities, funding energy efficiency projects and sustainable mobility.
Improving risk distribution: spreading credit risk more evenly across the financial system (in line with CMU/SIU’s objectives).
For corporate treasurers, a more active securitisation market could also broaden funding options, beyond traditional bank loans and bonds.
Key Questions and Challenges Ahead
But hurdles remain. To truly revive the market, Europe must address:
Liquidity & scale: can we create deep secondary markets that attract global investors?
Regulatory simplicity: are rules still too complex for issuers to justify the effort?
Public perception: how to convince policymakers and the public that securitisation is not a repeat of 2008? How to change longstanding cultural habits and usages.
Competitiveness with the U.S.: is it realistic to expect Europe to match U.S. volumes given structural differences?
Without progress on these points, Brussels’ initiatives risk being seen as wishful thinking rather than a game changer.
Conclusion – A Missed Opportunity or a Revival Story?
With securitisation 2.0, Brussels will attempt to rewrite the script. Europe stands at a crossroads. It can let securitisation remain a “typecast villain”, a niche, overregulated market unable to scale, or it can flip the script and make it a key enabler of growth, green transition, and capital markets deepening. The European Commission’s new proposals are a step in the right direction, but success will depend on political will, investor confidence, and market adoption. If Brussels gets it right, securitisation might finally shake off its bad reputation and play a starring role in Europe’s economic story. Not as the villain of the past, but as the hero of a more resilient, better-funded future. Can Brussels restore trust in securitisation and unlock growth? We will see but it won’t be that easy…
François Masquelier, CEO of Simply Treasury – Luxembourg – September 2025