Synthetic securitisation can free up bank capital, but the European Central Bank’s analysis finds that banks issuing these transactions lend only marginally more to firms and also tend to pay higher dividends. The review of Europe’s regulatory framework reflects the expectation that securitisation can strengthen banks’ lending capacity and support economic growth. However, revitalising the market could also create risks, including weaker borrower monitoring and greater links between banks and non-bank financial entities.
Securitisation involves packaging pools of loans, such as mortgages or corporate loans, into tradeable securities divided into tranches with different risk profiles. Losses on underlying loans are borne by investors holding the relevant securities, reducing the originating bank’s credit risk and potentially freeing capital. In traditional securitisation, loans are transferred to a separate entity, while synthetic securitisation leaves loans on the bank’s balance sheet and transfers default risk through credit derivatives .
The European securitisation market has experienced a modest revival, with synthetic transactions driving much of the growth. Synthetic securitisations have almost tripled in volume since 2021, while traditional securitisation volumes have remained stable. At the end of 2025, outstanding synthetic securitisations backed by small and medium-sized enterprise loans were worth around €480 billion, compared with €380 billion for traditional securitisations. Banks that issued securitisations recorded average corporate loan growth of around 5% between 2018 and 2025, versus around 1% for non-issuers.
After controlling for bank size, capital levels and broader economic conditions, a 1% increase in synthetic issuance was associated with a roughly 0.02% increase in corporate loan growth. The effect is too small to create a meaningful economic impact, while dividend payouts increased by 0.07% for the same issuance increase. Banks may retain released regulatory capital , use it for lending or distribute it to owners, but retaining capital can obscure rollover and counterparty risks if protection sellers cannot renew protection or absorb losses. The ECB concludes that synthetic securitisation can support diversification and risk mitigation, but its benefits to the real economy should not be overstated.