ECB: Synthetic securitisation provides only limited support for corporate lending
Cypriot Cyprus Mail reported that the European Central Bank concluded that synthetic securitisation provides only a limited stimulus to lending to companies. The ECB noted that this instrument alone is unlikely to provide the scale of loans needed to significantly accelerate Europe’s economic growth.
Limited effect on lending
Synthetic securitisation allows banks to keep loans on their balance sheets while transferring the risk of borrowers’ default to investors, usually through credit derivatives. Such a mechanism can reduce the risk of losses for a bank and free up regulatory capital for new loans.
According to the ECB’s analysis, banks that used securitisation increased corporate lending by an average of about 5% in 2018–2025, while banks without such transactions increased it by about 1%. However, after accounting for banks’ size, capital levels and macroeconomic conditions, the effect proved significantly smaller: a 1% increase in synthetic securitisation issuance was associated with only a 0.02% rise in corporate lending.
The ECB considers this result too small to have a noticeable economic impact, especially given Europe’s annual investment gap of €750 billion to €800 billion identified in the Draghi report. The regulator also suggested that this instrument’s contribution to lending may have been limited by the significant amount of liquidity available to banks in recent years.
More current news is available on the UA.News Telegram channel Telegram.
Capital and dividends
The analysis also showed that banks may not direct the released capital towards business lending, but instead retain it or pay it out to shareholders. The impact of synthetic securitisations on dividends was three times greater than on corporate loans: a 1% increase in issuance was associated with a 0.07% increase in dividend payments.
The volume of synthetic securitisations has nearly tripled since 2021, while volumes of traditional securitisation have generally remained stable. At the end of 2025, synthetic securitisations backed by loans to small and medium-sized businesses were estimated at about €480 billion, compared with €380 billion for traditional securitisations.
Risks to financial stability
The ECB acknowledged that synthetic securitisation can be useful for capital management and for reducing and diversifying credit risks. At the same time, holding less capital or increasing leverage may weaken banks’ ability to absorb future shocks. Additional risks are possible if investors providing credit protection do not renew it or are unable to cover losses.
