Key Takeaways from EDW’s New Report on AI in Securitisation

AI is rapidly becoming a powerful enabler across financial markets, and securitisation is no exception. As the industry continues to evolve in response to regulatory shifts, data complexity, and investor demand for transparency, AI offers new ways to analyse risk, enhance efficiency, and unlock deeper insights from data.

In our latest report, “The Use of Artificial Intelligence in Securitisation: Leveraging Loan-Level Data from European DataWarehouse” (EDW), we examine how AI is already being applied across the securitisation lifecycle, from risk assessment and fraud detection to pricing, portfolio management, and regulatory compliance.

The report also explores the practical challenges of AI adoption, including data privacy, model transparency, and regulatory alignment, within the context of EDW’s role at the centre of the European securitisation market.

Granular, standardised loan-level data is the foundation of effective AI adoption in securitisation. It enables more accurate risk assessment, stronger due diligence, and greater transparency for investors and regulators alike. As Europe’s first securitisation repository, EDW plays a central role in providing this trusted data infrastructure to the market.

The report highlights how access to consistent, high-quality data is essential for AI models to deliver meaningful and reliable insights, whether for analysing portfolio performance, identifying anomalies, or supporting regulatory compliance.

The report examines how AI can be applied across multiple stages of the securitisation process, including:

• Credit risk assessment and stress testing, using advanced models to identify patterns and predict performance.
• Fraud detection and compliance monitoring, through real-time anomaly detection and automated checks.
• Pricing and valuation, incorporating a broader range of data points and scenarios.
• Portfolio management and optimisation, enabling more informed structuring and asset selection.
• Investor reporting and transparency, making complex data more accessible and actionable.

While AI presents significant opportunities, its adoption also introduces important challenges. Data privacy and security are central concerns, particularly under regulatory frameworks such as the General Data Protection Regulation (GDPR). EDW’s loan-level data has been designed with privacy in mind, containing no personal borrower information, which helps mitigate these risks.

Model transparency and bias also remain key issues. Complex AI models can be difficult to interpret, raising concerns for investors and regulators in a market where explainability is essential. In addition, regulatory expectations are evolving rapidly, with initiatives such as the EU AI Act placing greater governance and oversight requirements on high-risk AI applications in finance. Addressing these challenges requires robust governance frameworks, explainable AI approaches, and ongoing regulatory alignment.

The report also explains how EDW is already applying AI in practice. Through its proprietary large language model, EDWARD, EDW enables investors to interact with loan-level data more efficiently by generating SQL queries from natural language inputs. This allows users to analyse data and conduct due diligence without needing to integrate new systems, significantly reducing time and operational complexity while improving productivity.

Looking ahead, the report highlights how emerging technologies could further transform securitisation. Generative AI, including large language models, offers the potential to analyse unstructured data, automate reporting, and make complex loan-level insights more accessible to a wider range of stakeholders.

The integration of AI with complementary technologies such as blockchain and regulatory technology (regtech) could further enhance data integrity, security, and compliance automation. Together, these innovations point towards a more resilient, efficient, and transparent securitisation market.

The integration of artificial intelligence with EDW’s standardised loan-level data represents a significant step forward for securitisation. AI enables more accurate risk assessment, enhanced transparency, improved pricing and portfolio management, and stronger regulatory compliance, helping to rebuild and maintain confidence in the market.