ECB calls for higher UCITS fund limits on bank securitizations

The European Central Bank has recommended increasing the allowable exposure limits within UCITS funds for bank securitizations, aiming to enhance liquidity and support credit flow to the real economy. This proposal would ease regulatory constraints, potentially improving risk diversification in investment-grade fixed-income markets through greater securitization uptake. The move targets structural bottlenecks in capital markets by boosting demand for asset-backed securities, particularly those tied to consumer and SME loans. Markets most exposed include European credit funds, covered bond issuers, and banks with large securitization pipelines, as higher demand could lower their funding costs. Traders will watch the European Commission’s response to the ECB’s technical advice, with a policy proposal expected by mid-2025.

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