Synthetic securitisation offers limited boost to corporate lending, says ECB

The European Central Bank (ECB) has found that synthetic securitisation provides only a marginal boost to corporate lending , raising questions about how far the growing market can contribute to European economic growth. An ECB blog analysis by Johanne Evrard, Wagner Eduardo Schuster, Fabian Wassmann and Michael Wedow examined whether banks use the capital freed through synthetic securitisation to extend more loans to companies. Synthetic securitisation is a process in which a bank keeps loans on its balance sheet but transfers the risk of borrowers defaulting to investors , usually through financial contracts known as credit derivatives. The arrangement can reduce the bank’s exposure to losses and free regulatory capital, potentially allowing it to issue additional loans.

The ECB analysis found that banks issuing synthetic securitisations did lend marginally more, but they also tended to return more capital to shareholders through dividends . Securitisation more broadly involves banks grouping loans, such as mortgages or business loans, and turning them into tradeable securities with different levels of risk. In traditional securitisation, the loans are transferred to a separate entity and removed from the bank’s balance sheet, whereas synthetic securitisation leaves the loans with the bank while transferring the associated credit risk. The European securitisation market has revived modestly in recent years, with synthetic transactions driving much of the growth. The volume of synthetic securitisations has almost tripled since 2021 , while traditional securitisation volumes have remained broadly stable. By the end of 2025, synthetic securitisations backed by loans to small and medium-sized enterprises were worth about €480 billion , compared with €380 billion for…