Beau advocates for balanced securitisation regulation reform

Denis Beau, First Deputy Governor of the Bank of France, highlighted securitisation's strategic importance within the monetary policy framework.

Asset-backed securities (ABS) represent nearly 30 percent of marketable collateral mobilised by the Eurosystem, despite being less than 5 percent of eligible assets.

To support this, the Eurosystem will broaden its acceptance of ABS from November 2026, aligning credit acceptance thresholds with other monetary policy asset classes.

Beau stressed that a liquid and transparent ABS market enhances monetary policy effectiveness by diversifying collateral and fostering confidence.

Beyond monetary policy, securitisation can transform non-marketable assets into negotiable securities, freeing up bank lending capacity for SMEs and households, and supporting investment, particularly in the green transition.

He emphasized the significant potential of green ABS, such as those backed by energy-efficient mortgages or low-emission vehicles.

Realizing this potential, however, depends on robust standardisation, reliable metrics, and credible labels like the ambitious European Green Bond label (EuGB).

Enhanced climate disclosures, including Energy Performance Certificates and physical risk metrics for real estate, are deemed foundational for investor confidence and aligning securitisation with Europe's sustainability objectives.

Beau addressed the 'goldilocks challenge' of securitisation regulation, aiming for a framework that is neither overly punitive nor underregulated.

He noted the subdued European securitisation market, contrasting it with Europe's massive financing needs for green, digital, and defence transitions.

The European Commission's proposals, published last June, are viewed positively, having drawn criticism from both supervisors and market participants, suggesting a balanced approach.

Beau outlined key priorities: simplification of transparency and due diligence requirements to reduce operational costs, proportionality and risk sensitivity in prudential rules to reflect actual risk profiles, and strong safeguards against pre-crisis excesses, including retention rules.

The objective is 'better regulation' that rewards quality and clarity.

The Bank of France supports the Commission's comprehensive blueprint, expecting co-legislators to preserve its guiding vision.

Supervisory practices, such as streamlining the SRT recognition process, are also crucial for efficient and risk-based supervision.