Loose ends
As negotiations continue, it is worth highlighting certain technical blind-spots in the EC’s proposals:
1. Definition of ‘securitisation’ – off the table?
A striking omission from the reform package is silence on the core definition of what constitutes a ‘securitisation’ under Article 2(1) of SECR.
The proposed addition of new definitions of ‘public securitisation’ and ‘private securitisation’ is well-documented. However, it risks eclipsing the more fundamental and long-standing ambiguity around the core definition of ‘securitisation’. This has created challenges for market participants (and their advisors) when assessing whether certain financing transactions, particularly those involving tranched debt in the private space, are in- or out-of-scope of SECR. This can lead to time-consuming analysis and cautious conclusions, which risk increasing the regulatory burden disproportionately.
By leaving the baseline definition untouched while layering new public/private classifications on top of it, the reforms miss a crucial chance to deliver much-needed legal certainty. In their pre-trilogue positions, neither the Council, nor Parliament suggested changing the core definition. It seems that this effectively takes it off the negotiating table – for now at least. It will be interesting to see if the issue re-surfaces in future reform initiatives.
2. The ‘Sole purpose test’ – watch for Level 2?
Another omission stood out in the context of risk retention under Article 6(1). Market participants will recall how a 2025 Evaluation Report by the Joint Committee of the European Supervisory Authorities (ESAs) disrupted live CLO transactions by introducing a supervisory expectation that an originator must derive ‘more than 50%’ of its revenue from independent, non-securitised activities. This sudden, ad-hoc recalibration of ‘predominant source of income’ upended market consensus and created confusion.
The EC’s reform proposals are silent on the sole purpose test. However, it is raised in the Parliament’s position, which suggests that the EBA defines ‘sole purpose’ and recommends a case-by-case substance-check by supervisors if the relevant criteria are not met. It will be interesting to see how trilogues progress on this point, and whether the approach adopted strikes a workable balance between operational flexibility and supervisory friction.
Private securitisations: the simplification paradox
The policy drivers behind EU securitisation reform position it squarely under the EU’s maturing Simplification and Burden Reduction (SBR) agenda. Nevertheless, certain proposals risk amplifying rather than reducing complexity, especially in respect of reporting requirements. These will be important watch-items for those involved in private securitisation as trilogues conclude.
The ‘public’ net threat
The EC’s proposals introduce new definitions of ‘public securitisation’ and ‘private securitisation’. For private securitisations, a simplified reporting framework is proposed, promised to be ‘much lighter than the one for public securitisations’.
However, because the EC’s definition of ‘public securitisation’ includes transactions listed on Multilateral Trading Facilities (MTFs) and other trading venues, there is a risk that private, bespoke transactions will be inadvertently swept into the ‘public’ category. Consequently. those transactions would be subject to more onerous Article 7 reporting. This is at odds with the EC’s narrative around simplifying private deal reporting.
To address this, the Council suggests limiting ‘public securitisations’ to those requiring a prospectus under the Prospectus Regulation. The Parliament agrees with removing the trading venue limb; however, somewhat problematically, it proposes treating securitisations as ‘public’ if the underlying pool is ‘actively managed’. Ironically, like the abandoned trading venue limb, this added criterion also risks sweeping certain private structures into the public category.
The repository trap
Although the EC wants to simplify reporting for private deals, it also introduces a mandatory repository reporting requirement. So while the private template may be simpler than its public equivalent, reporting to repositories represents an additional burden for private securitisations.
While neither the Parliament nor the Council push back on this proposal, they do highlight the importance of ensuring the confidentiality of reported data. The conversation around how confidentiality will be secured will be an important one at both legislative and industry level.
Layered reporting
It is worth noting that the EC’s new private reporting template does not fully replace existing reporting requirements. Investor reports and underlying documentation would still be required in addition to the new template, creating a layered regime rather than a truly streamlined one. This is in spite of resounding industry concerns about compliance duplication.
Third-country securitisations
Under EC reform proposals, third-country securitisation issuers would be required to use EU disclosure templates. Both the Parliament and the Council pushed back on this proposal on the basis that it would create unnecessary barriers to investment. They propose replacing it with an obligation on EU investors to verify (as part of their due diligence) that the information provided by third-country issuers is substantively equivalent to EU transparency standards, without requiring formal compliance with EU templates. This compromise, if agreed, could prevent EU institutional investors being placed at a competitive disadvantage on the global stage.
Sanctions for due diligence failures
The EC proposes broadening the scope of sanctioning powers under Article 32 to include infringements of due diligence obligations. Institutional investors could therefore face a separate sanctioning regime for Article 5 due diligence failures, with fines of up to 10% of global turnover. Industry lobbied heavily against this proposal, arguing it is redundant in view of adequate existing sectoral and national sanctioning powers.
The Parliament’s counterproposal involves capping administrative pecuniary sanctions at ‘half of the invested amount’. The Council, meanwhile, rejected the EC’s proposed sanctioning regime outright citing existing sanctions under ‘relevant sectorial legislation’.
UK securitisation reform
Earlier this year, the UK’s Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) consulted on extensive reforms to the UK securitisation framework. Revised rules are expected to be finalised with policy statements expected in Q4 2026, and final rules taking effect in 2027. Both the EU and UK reform agendas are built from similar value systems, which prioritise simplicity, clarity, proportionality and burden reduction. Despite this, and noting that the UK indicated it did not intend to diverge unnecessarily from the EU, the outcome of UK reforms is worth monitoring carefully. More pragmatic UK reforms could give rise to competitiveness implications, and friction for mixed UK/EU deals.
Ireland for Finance
The successful conclusion of EU reform efforts carries clear domestic significance. The Irish government published its 2026 ‘Ireland for Finance Strategy’ on 25 August 2026. The strategy acknowledges Ireland’s role as a major domicile for securitisation activity serving EU and global investors. It points to the EU’s proposals to revive the sector and securitisation’s key role in delivering the SIU. Growing structured finance, especially securitisation is a core sectoral focus, with Government plans to deepen sectoral engagement, and carry out a review of the Irish SPV ‘Section 110’ regime.
Comment
The key question at this important juncture is whether a final framework can be produced that truly delivers on the policy goals driving the reform agenda post-Draghi – both for the EU and for Ireland. And secondly, can it be delivered before the Irish Presidency concludes its term on 31 December 2026? If structural clarity continues to be deferred, and true simplification is not really on offer, the reforms may ultimately fall flat. This leaves more to do at Levels 2, 3 and beyond. In fact, we could see future reform agendas retracing the steps of this exercise, digging through old ground, and recreating a sense of regulatory déjà vu.
If you have questions on the contents of this article, please contact a member of our Structured Finance & Securitisation team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
[1] Complementary amendments were also proposed to the Liquidity Coverage Ratio Delegated Act and Solvency II Delegated Regulation, forming part of a wider suite of reforms
[2] European Commission Proposal for a Regulation amending SECR, 17 June 2026
