As part of the ongoing review of the EU Securitisation Regulation, AFG has published its recommendations to support the development of the European securitisation market while safeguarding investor protection and market resilience. First and foremost, AFG considers that a change in the prudential treatment of securitisation remains the primary component for the growth of the EU securitisation market and welcomes efforts to revive this important financing channel for the European economy.
While supporting targeted measures to encourage investment in securitisation by UCITS funds, AFG stresses that the existing UCITS framework must remain balanced. In particular, AFG considers that 15%, as proposed by the EC in the MISP consultation, already represents a significant increase (by 50%) of the holding limit for securitisations. Such a level could support moderate additional investment flows without creating undue risks.
AFG reminds that UCITS funds are already “securitisation friendly”, as they can hold 100% of their AuM in securitisation issuances.
However, any increase beyond this level could lead to excessive concentration, reduced market liquidity, and diminished market resilience, leading to a reduced capacity of UCITS to invest into securitisation.
Drawing on academic research and international regulatory analyses, AFG highlights the well-documented relationship between investor concentration and liquidity. Excessive concentration of securitisation holdings among a small number of large investors could weaken secondary market liquidity, increase systemic vulnerabilities, and ultimately undermine the objectives of the reform. Without sufficient liquidity, securitisation will be off limit to UCITS investments.
AFG also expresses concerns regarding the proposed new sanction regime. The AFG believes that introducing an additional layer of sanctions alongside existing frameworks under UCITS, AIFMD and other sectoral regulations would create legal uncertainty and could discourage investors from participating in the securitisation market.
Overall, AFG supports a pragmatic and proportionate review of the Securitisation Regulation, focused on removing barriers to market development while maintaining the regulatory safeguards that underpin investor confidence and the long-term success of European securitisation markets.
