Regulatory authorities in Europe may wish to reconsider the capital that banks and insurers hold against their securitisation exposures. Such a review is justified by the need for Europe to finance climate and digital transitions. Boosting investment will only be possible if the continent’s banks can create lending headroom through securitisation. This report sets out how insurer and bank securitisation capital charges could be aligned with the risk of these exposures. The report draws on three past studies: Perraudin and Qiu (2022), Duponcheele et al. (2013c), and Agarwal and Perraudin (2024). The calibrations proposed are based on data and analysis rather than representing incremental adjustments from the status quo. Past attempts by regulators to revive the European securitisation markets have taken such incremental approaches. We believe that the market will only return to a satisfactory state when capital rules are consistent with risk.
Read the full paper here.
The study was co-authored by Georges Duponcheele and William Perraudin.
