Machado: Synthetic securitisation grows, data quality concerns
Pedro Machado, Member of the Supervisory Board of the ECB, highlighted the rapid growth of synthetic securitisation and the need for proactive supervisory oversight. Speaking in Lisbon, he detailed associated risks and called for improved data quality.
Synthetic securitisation surges 90 percent
Synthetic securitisation issuances reached €258 billion in 2025, marking a 47% year-on-year increase and 90% growth between 2022 and 2025.
The stock of underlying exposures rose from €223 billion at end-2022 to €570 billion by end-2025.
Traditional securitisations now represent a fraction of synthetic issuances, concentrated among a few banks, contrasting with new entrants in the synthetic market.
The ECB supports a well-structured securitisation framework for economic growth, provided banks channel capital relief to the real economy.
The 2021 framework for simple, transparent, and standardised securitisations proved effective, and further legislative changes recalibrating capital requirements could further fuel growth.
However, structural factors like the leverage ratio, banks' risk appetite, and market absorbency might limit future expansion.
The average cost of protection for significant institutions steadily decreased between 2020 and 2025, facilitating this market expansion.
Supervisory grip on emerging risks
Early 2026 saw a downward trend in synthetic securitisation issuances, attributed to the geopolitical environment and rising protection costs.
In January 2026, the ECB introduced fast-track procedures for standardized significant risk transfer securitisations, drastically reducing assessment times from months to eight working days.
Only two transactions utilized this fast-track in the first four months, though volumes are expected to rise.
Supervisors intensified activities to assess key risks: rollover risk (inability to renew capital benefit), counterparty credit risk (protection provider default), and flowback risk (increased capital requirements on retained senior tranches).
Risk amplifiers, including investor concentration and interlinkages with non-bank financial institutions, are also under scrutiny.
Growth outpaces data quality
Securitisation risks are manageable, yet rapid growth and deepening non-bank linkages demand closer scrutiny.
Data quality issues persist, hindering a full assessment of spillover risks to the banking system.
Proactive supervision, improved data, and clear standards are crucial to manage these evolving challenges.