⚠️ EGOV Critiques the EC’s SIU Communication: Tensions Ahead for EU Securitisation Market Reform?

Throughout our securitisation series, we have tracked key milestones on the path toward European market reform following the landmark Draghi report. We’ve reviewed a flurry of EU level consultations, evaluations, and workplans, emerging over recent months, alongside valuable industry feedback highlighting regime elements felt to be most deserving of priority attention.

In our latest article, we consider a new report by EGOV, part of the European Parliament’s research service, which delivers a pointed critique of the European Commission’s (EC) rendering of capital markets reform proposals in its Savings and Investment Union (SIU) communication. Could the issues raised threaten the consensus needed for EU co-legislators to deliver on a complex and multi-dimensional reform agenda?

🤹 Too many cooks?

As we highlighted in previous analysis, a key challenge on the road to reform will be navigating a complex melting pot of parallel inputs and initiatives from various EU legislative and supervisory bodies. Recent months have seen consultations on discrete aspects of the securitisation regime, proposals to reform areas of heightened priority on an accelerated basis, and a key supervisory evaluation. These multiple strands co-exist and intersect with the broader EC ‘Level 1’ review of the EU Securitisation Regulation (SECR).

Complicating matters further will be how to approach the more loosely framed ambitions of recent EU capital markets reform strategies such as the EU ‘Competitiveness Compass’, and importantly, the EC’s Savings and Investments Union (SIU). EGOV’s recent assessment of the SIU communication highlights both the potential for misalignment among these inputs and the importance of specificity in communicating reform proposals.

📢 SIU Communication – too generic?

EGOV evaluates the SIU communication by comparing it against the reform recommendations of Draghi, Letta, and Noyer. It highlights the communication’s failure to fully adopt those recommendations, its lack of concrete measures, and failure to present a ‘fully integrated vision for banking and capital markets’. According to EGOV, this lack of specificity makes it difficult to measure achievements and ensure accountability.

Regarding securitisation reform, EGOV points to generic and unclear proposals in the SIU communication, and inconsistency with certain consultation proposals and industry feedback. It finds:

• Generic content on the nature of the proposals for reviewing securitisation rules
• A lack of clarity on the nature and ambition of planned amendments to the prudential framework for banks and insurers – overhaul or targeted adjustments?
• An implicit ‘push back’ against the idea of establishing a securitisation platform backed by an EU-wide system of public guarantees, as suggested by Draghi and Noyer and supported by feedback to industry consultations, favouring instead industry-led action or national initiatives to boost standardisation. EGOV finds that this ‘cautious stance’ places the burden of reviving securitisation squarely on revising the legal framework, which has proven difficult in the past. Additionally, inviting national initiatives risks market fragmentation while only spurring growth locally.

🌩️ Trouble ahead?

While the opinions expressed in the report do not necessarily represent the official position of the European Parliament (EP), it remains to be seen whether EGOV’s criticism of the SIU communication will influence the EP’s contributions to future legislative reform. Could this foreshadow tensions ahead as the co-legislators tasked with reconciling complex, ambiguous and, at times, incongruous reform inputs, collaborate to deliver concrete change?

Time will tell.