EU Securitisation Review: Provisional Agreement Eases Capital Requirements for Certain STS Securitisations
On October 26, 2026, the Luxembourg Bankers’ Association (ABBL) published its views on the provisional political agreement on the EU securitisation review, reached on October 21, 2026. The agreement covers amendments to the Capital Requirements Regulation (CRR) and the Securitisation Regulation. The ABBL welcomes the agreement as an improvement over the European Commission’s original proposal, noting that the changes could help banks diversify their funding, release balance-sheet capacity and support lending to households and businesses.
The ABBL particularly welcomes the following elements:
More favourable capital treatment: The agreement would reduce the capital requirements for certain Simple, Transparent and Standardised (STS) securitisation exposures. For STS securitisations meeting additional resilience criteria, the risk weight would be 5%, compared with the previously proposed 6%. For those not meeting these criteria, it would be 7%, rather than 8%. Lower risk weights generally translate into lower capital requirements. The agreement would also significantly reduce p-factors, which determine the capital surcharge for securitisation exposures, and restore a formula-based calculation under the External Ratings-Based Approach, which uses external credit ratings to determine capital requirements.
Funding and international transactions: The agreement would improve the treatment of STS securitisations under the Net Stable Funding Ratio, which measures whether a bank has sufficient stable funding to support its assets and activities over a one-year period. It would also ease requirements for transactions involving non-EU securitisations. The ABBL considers these changes supportive of European banks’ funding options and international competitiveness.
Supervision and sanctions: The ESMA would grant and revoke authorisations for third-party verifiers assessing whether securitisations meet the STS requirements. A Joint Committee led by the EBA would review a risk-based sample of securitisation transactions annually to check STS compliance. The agreed approach to sanctions also seeks to avoid duplication and ensure proportionality.
Nevertheless, the ABBL highlights several outstanding issues, including the treatment of project-finance exposures, unresolved changes to credit conversion factors, which determine how much of an off-balance-sheet commitment is counted when calculating capital requirements, and the interaction with the CRR output floor, which limits the capital reductions banks can obtain through internal models compared with standardised calculations. The ABBL also stresses that the new supervisory arrangements should avoid overlapping reviews, unnecessary complexity and legal uncertainty.
The agreement remains provisional, and technical work on the legal texts is ongoing. Once the final text is available, the ABBL’s Capital Markets Funding & Securitisation Working Group will assess the practical implications for Luxembourg banks and other participants in securitisation transactions.
Why it matters: Banks, asset managers and other financial market firms involved in securitisation are recommended to take note of the ABBL’s statement and monitor the final legal texts and implementation dates. Luxembourg banks should also consider submitting practical concerns about the agreement to the ABBL to support its follow-up work in this matter.
