Leasing a major asset class for STS securitisations, and potentially for green securitisations too
March 2022
The European Commission is currently re-evaluating the existing securitisation regulation and its prudential treatment to provide incentives for STS securitisations (which are considered the highest quality in Europe) in order to boost this form of financing in Europe and is also developing a European green securitisation’s market, where leasing has great potential.
Securitisation regulation under review
In order to scale-up the securitisation market in the EU, the Commission has consulted stakeholders with the view of producing a comprehensive report on the EU securitisation framework for both simple transparent and standardised (STS) and non-STS securitisation. The report will be published during 2022. The outcome of this report may trigger some legislative adjustments as part of the European Commission’s review of the functioning of the EU Securitisation Regulation (SECR) and of the Capital Markets Union.
Regulation still too complex
In our response to the Commission’s consultation on the SECR review, Leaseurope highlighted the remaining regulatory barriers to the further development of securitisation markets in Europe. We emphasise that the securitisation regulation is very detailed, prescriptive and complex, which has increased the compliance cost of financing through securitisation and has impeded growth of the market at the desired levels. To attract more investors and issuers into the STS markets, we propose better capital charges for banks and insurers investing in securitisation, an improved LCR treatment of securitisation exposures for banks and a simplification of the current STS rules.
ESA’s report places leasing as key asset class for high quality STS securitisations
In the interim, the Joint Committee of the European Supervisory Authorities (ESAs) published a report assessing the functioning of the SECR and recommending changes to address ongoing issues and improve the regime in future, especially in light of the post Covid-19 recovery. The European Commission will take the findings of this report into account during their own review. The report shows quantitative analysis of the STS securitisation market in Europe by asset class, country and more. Captive finance, automotive loans/leases and other type of leases account for more than 30% of the STS securitisation market in Europe, which confirms the success of our advocacy work during the negotiations of the securitisation regulation and the importance of this form of financing for our sector.
Leasing could become a major asset class for European green securitisations
These past two years, sustainability has stepped to the fore of the EU securitisation market thanks to a number of innovative securitisations. Nonetheless, given that the EU taxonomy does not apply directly to securitisation transactions and that financial instruments issued within securitisation transactions are not considered as ‘financial products’ as per the Sustainable Finance Disclosure Regulation (SFDR), further clarification appears to be needed on the application of sustainability requirements in securitisation.
In view of this, the EBA has been mandated to prepare a report on a framework for sustainable securitisation. Together with the Securitisation Regulation review and subject to the EBA report outcome, the European Commission will submit a report to the European Parliament and the Council on the creation of a specific sustainable securitisation framework. If deemed appropriate, the report may be accompanied with a legislative proposal.
Leaseurope welcomes this initiative as the EU sustainable securitisation market is growing and there is an increasing demand for sustainable securitisation products from many institutional investors, which have raised their commitments to invest in sustainable assets in line with their internal policy objectives. The development of this market will support the strong commitment of European leasing companies to finance greener assets and to support the green transition towards a low carbon emission economy.