Europe’s structured finance market is heading into 2026 on solid footing, according to the latest European Structured Finance Sector Outlook from Kroll Bond Rating Agency (KBRA). The report strikes a tone of measured confidence: credit fundamentals are sound, issuance is holding strong, and macroeconomic conditions—while not exuberant—remain steady enough to support growth.

In short, despite persistent geopolitical jitters, Europe’s securitization engine is still running smoothly.

Issuance Expected to Rise—But Tempered by Sectoral Divergence

KBRA forecasts issuance volumes to reach roughly €287 billion in 2026, up about 4.4% from the record levels expected at the close of 2025. That would mark another high point for post–Global Financial Crisis (GFC) activity, following 2025’s estimated €275 billion total—a 9% year-over-year increase through October.

The momentum is not evenly distributed, however. Asset-backed securities (ABS) remain the star performer, bolstered by new demand for renewables-linked and data centre securitisations—a sign of structural diversification spreading across European markets.

Meanwhile, UK residential mortgage-backed securities (RMBS) are expected to rebound, while EU RMBS could soften slightly. Collateralised loan obligations (CLOs) and commercial mortgage-backed securities (CMBS) may see issuance plateau or decline after 2025’s record-setting activity.

KBRA notes that this mild cooling is more normalization than retreat, reflecting an industry settling into a sustainable rhythm after several years of intense issuance.

Macro Fundamentals: Stable, Not Spectacular

On the macro side, KBRA describes Europe’s environment as “modestly durable.” Inflation has largely eased into a manageable range, while policy rates in the euro area are expected to hold steady and ease modestly in the UK.

Healthy labour markets, low unemployment, and firm household incomes continue to support borrower performance—giving issuers and investors alike some breathing room.

That said, the outlook acknowledges lingering geopolitical risks and trade uncertainties that could tighten funding conditions if tensions escalate.

Credit Performance: Solid, With a Few Cracks

Credit performance is expected to remain broadly resilient across structured finance sectors. Consumer arrears could tick slightly higher in some categories, but KBRA expects them to stay “within historical norms.”

CMBS continues to be a mixed story: prime assets—especially logistics and multifamily properties—show stability, but office exposures face continued refinancing stress as occupancy and valuations adjust to hybrid work realities.

Structured credit collateral, meanwhile, should hold firm thanks to steady portfolio quality and low default rates.

Surveillance and Ratings Stability

On the ratings front, KBRA’s surveillance activity reflects an overall tone of sectoral steadiness. As of October 31, the agency had reviewed 377 securities across 81 transactions, resulting in:

• 307 affirmations (81%)
• 44 upgrades (12%)
• 26 downgrades (7%)

That distribution points to a market characterized by resilience and conservative underwriting rather than exuberance. KBRA expects European structured finance ratings to remain broadly stable in 2026.

The Takeaway: A Market Settling Into Its Stride

If 2025 was a year of records, 2026 looks set to be a year of recalibration. The European structured finance market is shifting from expansion to endurance mode—supported by stable funding conditions, robust investor appetite, and a growing array of asset classes entering the securitization pipeline.

In other words, not a boom, not a bust—just steady momentum from a market that’s found its balance.