Synthetic securitisations raise bank dividends far more than loans
European Central Bank analysis shows that synthetic securitisation increases bank dividend payouts by 0.07 percent for every one percent in issuance, compared with a 0.02 percent rise in corporate loans. Outstanding SME synthetics reached €480 billion at the end of 2025.
Threefold expansion, minimal lending impact
European synthetic securitisation volumes have tripled since 2021, becoming the primary vehicle for banks to transfer corporate credit risk.
By the end of 2025, outstanding synthetic instruments backed by small and medium-sized enterprise loans reached €480 billion, exceeding traditional securitisations at €380 billion.
While banks issuing securitisations recorded average corporate loan growth of 5 percent between 2018 and 2025 versus 1 percent for non-issuers, controlled econometric modelling reveals a modest impact.
A 1 percent rise in synthetic issuance generates a 0.02 percent increase in corporate loan growth, falling far short of closing the annual €750 billion to €800 billion investment gap.
Dividends absorb capital relief
Rather than deploying regulatory capital relief into real economy lending, banks primarily distribute freed-up resources to shareholders.
The ECB analysis finds that a 1 percent rise in synthetic issuance increases bank dividend payouts by 0.07 percent, more than triple the effect on corporate loans.
Dividend distributions increased visibly across active issuers in 2024 and 2025.
This payout practice raises structural balance sheet leverage and heightens vulnerability to unfunded protection defaults or counterparties failing to renew contracts during market stress.
Private payouts instead of public growth
Securitisation reform will not fix Europe's investment deficit if freed capital merely funds dividend distributions.
Relying on bank balance sheets misplaces priorities that require deep, integrated equity markets.
Supervisors must ensure synthetic relief genuinely transfers risk rather than multiplying systemic leverage.