Capital Relief Trades
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Italian SME boost
EIB Group and Deutsche Bank close synthetic securitisation.
The EIB Group has closed its first synthetic securitisation referencing a portfolio of consumer auto loans originated by Deutsche Bank Italy. The transaction aims to support the investments of around 650,000 SMEs and mid-caps in Italy, providing them with access to new resources.
The EIF guarantee on the mezzanine tranches covers a reference portfolio of approximately €1.38bn, while a counter-guarantee (back-to-back) from the EIB .......
News 15 September 2023
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Risk transfer round-up - 14 September
The week's CRT developments and deal news
Market news
M&G Investments’ latest Insights publication explores why now could be a good moment for patient investors to consider SRT transactions and why this opportunity could be short-lived, given the current economic cycle. The firm notes that in sterling terms, it has recently seen SRT transactions pay out coupons of 10% and higher returns.“With the generally fairly .......
News 14 September 2023
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Optimistic outlook
SRT Market update
While SRT market participants generally describe a sluggish beginning to the month, further details on some of the deals in the pipeline are emerging. Overall, an optimistic outlook for Q4 prevails.
“We really have not seen many deals outside of those referencing corporate and leveraged loan portfolios,” notes one European SRT investor. “Banks appear to be focusing on hedging corporate risk and the .......
News 12 September 2023
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Latest SRTx fixings released
Index values indicate incremental widening in spreads, while...
The latest fixings for the SRTx (Significant Risk Transfer Index) have been released. Following three months of improved tone across the sub-indexes, sentiment has become more varied since August’s fixings (SCI 3 August), with incremental widening in spreads and increased negative outlook in the credit risk index.
This month’s survey responses suggest that spread estimates have .......
News 7 September 2023
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BMO back
Algonquin transaction in the market, to close next month.
Bank of Montreal is back in the market with a synthetic securitization from its well-established Algonquin platform, say market sources.
The transaction is expected to close in October and references a pool of loans worth US$2.5bn, though it can be upsized to $5bn, add sources.
The bank is selling a 0%-6.25% first loss tranche.
No other details have been forthcoming. The issuer has been .......
News 7 September 2023
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Missed opportunity
UK consultations overlook synthetic securitisations
As part of the broader post-Brexit programme to reform and replace existing EU law in the UK, the FCA and PRA recently published consultation papers setting out proposed rules for the UK securitisation market (SCI 15 August). While the period for both consultations ends on 30 October 2023, the current lack of consideration for synthetic securitisations is evident.
News Analysis 31 August 2023
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Bayview branches out into insurance AM
Market updates and sector developments
Bayview Asset Management has launched an Insurance Asset Management business, with the aim of appealing to an insurance industry that is increasingly seeking to diversify and expand beyond its traditional focus on corporate credit. The new division will be led by cio Nancy Mueller Handal, who formerly served as head of private fixed income and alternatives at MetLife, with .......
Market Moves 29 August 2023
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Capital blues
Securitisation set to become more costly for US banks
US regulators appear set to march in the opposite direction to their European counterparts with regard to the capital treatment of securitisation. The 1,087-page document released on 27 July as part of the Basel 3 Endgame by the Federal Reserve, the FDIC and the OCC (SCI 28 July) proposes increasing the so-called p-factor from 0.5 to 1.0, News Analysis 29 August 2023
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Risk transfer round-up - 24 August
The week's CRT developments and deal news
Deal news
Standard Chartered has executed the eighth synthetic securitisation from its Chakra programme. The significant risk transfer transaction – Chakra 8 – references a portfolio of global corporate revolving facilities, 30% of which are US exposures.Two tranches were offered to investors. According to market sources, the first loss tranche (0%-6.5%) priced at SOFR plus 12%, while the mezzanine tranche .......
News 24 August 2023
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Risk transfer round-up - 17 August
The week's CRT developments and deal news
Pipeline update
August is living up to its reputation as a low point of activity for the capital relief trades market and the financial markets as a whole. With no deals expected to close this month, the sector is slowly but surely getting ready for year-end.“August has been strangely calm; calmer than usual, I would say,” notes one .......
News 17 August 2023
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SCI In Conversation podcast: Jeff Krohn, Guy Carpenter
We discuss the hottest topics in securitisation today...
In this episode of the SCI In Conversation podcast, Guy Carpenter's md, mortgage and structured credit segment leader Jeff Krohn talks about the recent shape of events in the GSE CRT sector, from the perspective of the capital markets and reinsurance market. He also touches on the topic of recent issuance - or the lack of it - from mortgage insurers .......
News 17 August 2023
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Risk transfer round-up - 10 August
The week's CRT developments and deal news
Market news
News 10 August 2023
Western Alliance Bank has amended its WAL 2021-CL2 transaction, to collateralise the deal and reduce corporate credit risk. Principal payments on the notes are now secured by a cash collateral account equal to the full principal amount. Interest payments remain the obligation of WAB but are newly secured by a line of credit by JPMorgan for up to .......
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Green front
EIF obvious candidate to scale up SRT amid energy transition
A new paper highlights how SRT transactions could be scaled up to support Europe’s shift to the green economy. Central to the proposal is the potential for the EIF to participate as a ‘fronter’ in synthetic securitisations.
In the paper, entitled ‘A proposal for the European Green Transition via Significant Risk Transfer Securitisations’, ECB senior advisor Fernando Gonzalez .......
News Analysis 9 August 2023
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Latest SRTx fixings released
Stabilising trend continues in August index values
The latest fixings for the SRTx (Significant Risk Transfer Index) have been released. The stabilising trend seen across the sub-indexes over the last few months generally appears to have continued, albeit views are slightly mixed on certain segments.
Spreads across the SRTx Spread Indexes have stabilised to improved month-on-month, reflecting the economic backdrop. Values now stand at .......
News 3 August 2023
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Happy birthday STACR
The GSE CRT market hits 10th birthday
Last week marked the tenth anniversary of the GSE CRT market, as, on July 23, 2013, Freddie Mac priced its inaugural US$500m STACR trade.
This debut transaction, STACR 2013-DN1, matured at end of last month.
Fannie Mae got in on the act a couple of months later when it sold its debut CAS deal, dubbed CAS 2013-01, which is due to mature in .......
News 3 August 2023
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Risk transfer round-up - 3 August
The week's CRT developments and deal news
Market news
News 3 August 2023
Risk Control has received funding from the MDB Challenge Fund for two projects with the objective of helping Multilateral Development Banks (MDBs) build on the recommendations of the G20’s Independent Review of MDB Capital Adequacy Frameworks (CAF). One of the projects will deliver analysis to support MDB risk transfer, creating insights and technical tools for balance sheet optimisation .......
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Closing the gap
SRT 'unlevel playing field' called out
A reduction of the p-factor is inarguably positive for IRB banks and the significant risk transfer space in general, as these banks account for the bulk of synthetic securitisation issuance volume (SCI 25 July). However, the absence of changes positively affecting banks under the standardised approach points to an unlevel playing field across the market.
The hurdles .......
News Analysis 1 August 2023
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Get in, Granville
BNS brings much heralded SRT deal, latest Canadian to set sail
Bank of Nova Scotia (BNS) has sold its first SRT trade, a securitization of investment grade loans, in a transaction dubbed Granville USD.
The trade, which was arranged by BNP Paribas, has been rumoured for several weeks, and is the latest in a series of regulatory capital relief trades by Canadian banks.
Bank of Montreal has had a presence in this market for .......
News 28 July 2023
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Mortgage penalty
Higher risk weighting for high LTV loans boosts SRT
As had been strongly rumoured, new capital rules unveiled by the Federal Reserve today (July 27) ascribe heavier risk weightings to higher LTV mortgages.
Currently first lien mortgages are subject to a 50% risk weighting, but the proposed regulations seek to impose weightings of between 40% and 90% to larger banks. Loans with high LTVs will receive the highest risk weightings.
The adjustments, .......
News 28 July 2023
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Risk transfer round-up - 27 July
The week's CRT developments and deal news
Pipeline update
The capital relief trades market is currently seeing a lull in activity ahead of the traditional fourth-quarter spike in issuance, as banks seek to close transactions before year-end. Indeed, a significant pick-up in CRT trades is anticipated straight out of the blocks in September.“We are expecting a lot of significant risk transfer deals to .......
News 27 July 2023
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Less punitive
Halving of p-factor sparks SRT optimism
The European Council’s finalisation of the Basel 3 reforms last month has sparked renewed optimism across the European capital relief trades market, with news of an agreement to halve the punitive p-factor (SCI 28 June). The impending need to address the adverse effects of the output floor had been at the core of the regulatory debate for synthetic .......
News 25 July 2023