US and Asia securitisation markets contribute far more to financing their economies than Europe – „Now is the time to address the gap“

AFME has released data showing that the securitization market in Europe, including the EU and UK, is significantly lagging behind other global regions in terms of its contribution to economic financing.
Indeed, over a 15-year period up to 2022, securitization issuance in the EU+UK experienced limited growth, with EU issuance equal to 0.3% of EU GDP and UK issuance equal to 0.9% of UK GDP in 2022. In contrast, other regions such as the US, Australia, and China saw substantial growth in securitization issuance, with China’s annual issuance reaching 1.8% of GDP in 2022.
AFME is urging policymakers to implement measures that enhance risk-sensitivity in the prudential framework for banks and review frameworks and requirements for non-bank investors to achieve greater proportionality. They emphasize that Europe’s financial services sector is at a disadvantage without a vibrant securitization market, particularly in the face of rising inflation, tightening monetary policy, and scarcity of capital. AFME argues that securitization can be a bridge to channel liquidity from capital markets to the real economy and help finance economic growth.
AFME also highlights the increasing reliance on bank lending in Europe for financing growth while the securitization market itself is at risk. European banks reported a significant amount of outstanding loans to non-financial corporations and households, while securitization volumes in the EU and UK experienced a decline. AFME warns that Europe needs to address this situation and utilize securitization to transform outstanding bank loans into additional lending to the real economy. By doing so, they can unlock the necessary capital to finance the green and digital transitions and compete with global peers. Reviving the EU and UK securitization markets will require policy action.