The Australian ABS market is enjoying a year of near record issuance. The more measured market in euros could take some valuable lessons from it.
Australian securitization volumes are at A$72.2bn up to November 2025 according to Westpac, with final issuance expected to come in just shy of the A$80bn record set in 2024.
This is a colossal level of growth given the market only hit annual volumes between A$34bn and A$52bn from 2020 to 2023.
While the euro market is also about to set a record for post-financial crisis issuance, its growth has been underwhelming compared to the Australian market.
While RMBS issuance in Australia is dominated by specialist lenders who often do not have the ability to issue covered bonds, Australia-style regulations could be used to increase volumes from European banks.
The Australian Prudential Regulatory Authority enforces an asset encumbrance policy which limits the share of funding authorised deposit-taking institutions (ADIs) can get from covered bonds to 8% of their assets.
This is prudent as it prevents banks from becoming too reliant on a small number of funding sources, thus avoiding a liquidity crisis if a shock were to hit the covered bond market.
A more equal mix of covered bonds and RMBS allows banks to raise funding from different investor bases.
RMBS would also give banks more flexibility in terms of which assets they can finance, as it opens the door for funding more specialist products like buy-to-let mortgages or bridging loans, as has happened in the Netherlands.
European banks in large countries like Germany and Italy have not issued any RMBS publicly this year, instead favouring covered bonds for funding due to their superior regulatory treatment.
Even French banks, which have issued three prime RMBS deals this year, only use it for diversification.
BPCE in one of the more active issuers in France, setting up its Olympia master trust programme this year, but the amount of mortgages which have been securitized through its RMBS programme since 2018 is still less than the bank issues through covered bonds annually.
With specialist lending less popular in mainland Europe compared to the UK or Australia, enforcing an asset encumbrance limit on banks would not only spur more securitization but would encourage borrowers to diversify their funding sources.