Fixing Europe’s Securitization Market

Reforms suggested in a recent Oliver Wyman’s Commentary

Europe’s financial system faces a fundamental bottleneck: an inefficient securitization market that is limiting economic growth. A recent commentary by Huw van Steenis Partner and Vice Chair at Oliver Wyman highlights the challenges and potential solutions to reinvigorate this essential market.

The Problem: A Stalled Market

Securitization—the process of pooling loans and converting them into tradable securities—remains vastly underdeveloped in Europe compared to the United States. The numbers tell a striking story: since 2018, U.S. data center debt securitization has reached $35 billion, while the EU has seen none. Similarly, solar securitization in the U.S. raised $23 billion over the same period, whereas Europe’s first residential solar securitization in 2024 raised a mere €230 million.

This stagnation is not due to a lack of demand but rather excessive regulation and structural inefficiencies, preventing capital from flowing where it is needed most.

Four Key Reforms to Unclog the System

Oliver Wyman’s analysis identifies four crucial areas where reforms could make a significant impact:

1. Unlocking Life Insurers as Lenders

European insurers hold only 0.33% of their assets in securitizations compared to 17% in the U.S. This is largely due to punitive capital requirements under the EU’s Solvency II framework. Adjusting these regulations to better reflect the actual risks could unlock a vast pool of capital, lowering financing costs for businesses and infrastructure projects.

2. Reforming the STS Framework

The EU’s “Simple, Transparent, Standardized” (STS) securitization label, introduced in 2019, was meant to revive the market but has instead constrained it. The narrow criteria exclude many asset classes, particularly those in strategic sectors such as data centers and renewable energy. A broader, more flexible STS definition could encourage greater market participation.

3. Enhancing True Sale Securitization

The EU lags far behind the U.S. in “true sale securitization,” where banks sell off entire loans to free up their balance sheets for new lending. While the U.S. has approximately €2.8 trillion in such transactions, Europe lags at just €440 billion. Expanding this market could unlock over €1 trillion in additional financing.

4. Simplifying Due Diligence and Paperwork

Current securitization regulations impose excessive due diligence and reporting requirements, discouraging investment, especially in the secondary market. Streamlining these processes—without compromising investor protection—would make the market more attractive and liquid.

The Road Ahead: Will the EU Act?

The European Commission has begun reviewing securitization regulations, but past efforts have failed to deliver real change. However, with growing frustration from market participants and clear evidence of the economic benefits, there is renewed optimism that reforms could finally take shape.

As Oliver Wyman’s commentary suggests, a more flexible financial system is crucial for Europe’s long-term competitiveness. With the U.S. continuing to deregulate and attract global capital, the EU must act swiftly to ensure its businesses have the financial tools needed to thrive.

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Relevant Links:

https://www.oliverwyman.com/our-expertise/insights/2025/mar/how-to-fix-europe-securitization-market.html

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