Will strong European Securitisation momentum continue? A Societe Generale perspective

What are the implications of the recent EU securitisation propositions? 

The proposed amendments to the securitisation regulations focus on increasing the amount of financing to the real economy, which is a critical objective for the European Union in the current economic and geopolitical context. In effect, when investing in securitisation, the capital requirement for banks and insurers will be amended to better reflect the actual risks of such investment and remove undue costs while maintaining an effective framework for financing stability. The proposed new rules also aim to reduce operational costs for issuers and investors.

These propositions should mobilise issuers to grow their presence in the securitisation capital markets and encourage investors to increase their allocation to securitisation issuance. This will enhance the ability to use securitisation as an efficient financing tool for the economy. As financing needs emerge, it’s vital to boost and transform our economy with the diversification of funding sources and the creation of new pockets of liquidity will remain a key goal in our financial system.

What are you seeing in the primary securitisation market?

This year delivered a very good level of activity in the securitisation market across Europe, with growing volumes of issuance and new issuers entering the market for the first time. Last year we had close to EUR 190bn in total volume of securitised products placed in the market across a record year, and we are on track to beat that level in 2025 and reach EUR 200bn.

Alongside traditional asset classes placed in the capital markets such as collateralised loan obligations (CLO) and residential mortgage backed securities (RMBS), we observed strong issuance levels in various asset backed securities (ABS) with exposure to large and diversified portfolio of auto loans, consumer loans, loans to small and medium companies, equipment finance loans. There was also more volume on the UK and European commercial mortgage backed securities (CMBS) market.

It is certainly very diverse in terms of sectors, and as always in securitisation deals, investors have the opportunity to select the level of risk they want to invest in line with their risk profile, by considering either bonds in the high investment grade category (up to AAA rated), or mezzanine bonds rated A or BBB.

The securitisation market is also increasingly being used to help with financing the digital revolution, with new asset classes emerging in Europe such as datacentre ABS. Exploring this new type of issuance helps the market to broaden the institutional investor base for the financing of datacentres, additive to the financing provided already by banks.

Why is ABS increasing in popularity?

We have observed strong investor confidence in this market throughout the year and despite post-tariff volatility episodes. Asset-backed securities are providing exposure to diversified portfolio of assets, usually showing very stable credit performance and low correlation to other asset classes. The credit quality has remained very solid for ABS portfolios, with limited arrears and defaults uptick, confirming the positive response from investors. 

This has translated into further demand for the asset class and continuous tightening of spreads during 2025, in line with the credit markets overall.  In the coming year, we expect to see the continuation of higher volume supply and growing demand from investors to benefit from the interesting risk/reward profile of securitised products asset class.