Machado warns against weaker securitisation safeguards
Pedro Machado, a European Central Bank (ECB) Supervisory Board member, backs reviving securitisation but warns against weakening safeguards. He opposes senior-tranche risk weight floors below 7 percent and calls for retaining regulatory backstops.
Capital relief needs real transfer
In a Bloomberg interview with Nicholas Comfort and Esteban Duarte, Machado welcomed the European Commission's securitisation proposal, provided banks genuinely transfer risk.
Synthetic transaction activity almost doubled between 2022 and end-2025; underlying exposures more than doubled.
He opposed unfunded insurance protection receiving simple, transparent and standardised (STS) treatment, citing AIG as a counterparty-risk example.
Insurance-backed repackaging emerged in late 2024 and grew in 2025.
Bank financing of these structures risks returning exposures to banks.
Supervisors see no such risks materialising yet, but complex transactions face fuller scrutiny and lose fast-track eligibility.
Machado also opposed floors below 7 percent for senior tranches.
Digital risks meet national barriers
Around 85 percent of banks already use generative AI.
Machado urged rapid security patching, with bank action plans due by end-October, and cited a 2026 underwriting review covering risks such as data-centre lending.
Banking-union lending remains 80 percent domestic; corporate cross-border lending is around 15 percent, versus almost 50 percent cross-state in the United States.
Roughly €230 billion in high-quality liquid assets remains at subsidiaries.
Incomplete deposit insurance and resolution liquidity backstops complicate liquidity waivers.
Simplification cannot replace resilience
Machado distinguishes simpler capital rules from reduced resilience.
He calls for assessing securitisation relief, Pillar 1 changes and narrower Pillar 2 Guidance together rather than separately.
He says the output floor must remain to guard against underestimated risks.
Source: Pedro Machado: Interview with Bloomberg
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