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Based on the European Central Bank (ECB) Financial Vehicle Corporations (FVC) statistics reported each quarter, the total European market volume is slightly increasing by 1.8% in Q2 2023.
Yet, Luxembourg remains one of the most favorable countries for the domiciliation of securitization vehicles, growing faster than the European market and holding a current market share of 28.9%. This makes Luxembourg the largest domicile after Ireland. While in Luxembourg the number of entities has slightly increased by 0.5% and the reported ISIN number has increased by 15.5%, the volume has dropped in Q2 2023 by 0.7%. Ireland’s total market volumes, however, have grown by 2.3% in Q2 2023 as compared to last quarter.
Based on EY Research, eliminating some ECB FVC deficiencies, the Luxembourg securitization market continues to grow in Q2 2023 by 1.4% from 1,727 (Q1 2023) to 1,751 (Q2 2023) securitization vehicles.
The vast majority of vehicles with a market share of 89.3% comprise securitization companies (+0.5% vs. Q1 2023). Important to note that the speed of the founding activity has significantly reduced by 40.0% from 35 (Q1 2023) to 21 (Q2 2023) securitization companies while the number of liquidations more than doubled from six (Q1 2023) to 13 (Q2 2023) companies.
The growth dynamic in securitization funds and related securitization management companies is higher, seeing net increases of +8.2% for funds and +10.7% for their management companies since Q1 2023. The growth rate of securitization funds and their management companies has started to increase significantly during the recent quarters, showing the increasing demand for securitization funds and their management companies compared to traditional securitization companies most likely due a more favorable tax regime offered by securitization funds. On the net basis, there were eight additional securitization funds and eight management companies created during the Q2 2023 as compared to eight securitization companies created during the same quarter.
Another interesting fact from the recent data is the legal form used for the creation of securitization companies. We observed S.à r.l. and S.A. as common legal form for securitization vehicles in Luxembourg with SCA’s and SCOSA’s as being selected rarely. S.à r.l.’s remained by far the most opted legal form for securitization companies. However, since the modernized Luxembourg securitization law has introduced the partnerships in 2022, we see the SCSp and SCS being slightly used by the market with two SCS and SCSp (Q2 2023) after two SCS and SCSp in Q1 2023. The first movers utilizing these newly introduced partnerships are there and the next quarters will show how effectively they will be used.
The Association for Financial Markets in Europe (AFME) publishes quarterly statistics on securitization issuances in accordance with the European securitization regulation 2017/2402 as amended. Based on these statistics the issuance in Q2 2023 was Euro 95.4 billion which is 165.7% higher than the issuance volume in Q1 2023 (Euro 35.9 billion). Overall, the issuance volumes until Q2 2023 are 33.4% higher (EUR 131,3 billion) compared to the issuance volume of the same period in the previous year (Euro 98.4 billion).
Summary
Based on the European Central Bank (ECB) Financial Vehicle Corporations (FVC) statistics reported each quarter, the total European market volume is slightly increasing by 1.8% in Q2 2023. Yet, Luxembourg remains one of the most favorable countries for domiciliation of securitization vehicles, growing faster than the European market and holding a current market share of 28.9%.