Capital Relief Trades
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Breathing space?
EU banks benefit from Basel 3 delay
The Basel Committee's decision last week to delay implementation of the final Basel 3 rules by a year (SCI 30 March) gives banks and supervisors some breathing space to respond to the coronavirus crisis. However, the delay is expected to be more beneficial for EU banks compared to US banks.
Fitch, for one, notes that the delay .......
News 2 April 2020
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CECL delayed
EU banks await IFRS 9 relief
The US Fed, the FDIC and the OCC last week approved an extension of the new credit loss accounting standard CECL until 2022. No equivalent action has been taken for IFRS 9 on the EU side, however.
According to the US regulators’ joint statement, banking organisations that are required under US accounting standards to adopt CECL this year .......
News 31 March 2020
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Capacity constraints
Covid-19 not yet posing solvency issues
Government and central bank actions have kept both the financial system and the real economy afloat in the short-term, amid the coronavirus disruption. The severity of this crisis for company and household finances will depend on the length of the current outbreak and political will, however.
According to Rabobank credit analysts: “Covid-19 is now an imminent issue for .......
News Analysis 30 March 2020
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Closing the gap
Audentia Global investor relations head Sophia Vanco and chi...
Q: How and when did Audentia Global become involved in the capital relief trades market?
The Structured Credit Interview 26 March 2020
NM: Audentia was founded 2.5 years ago by its co-chief investment officers Fasil Nasim and Chris Newman, who had previously worked together in commodity finance at BNP Paribas, in response to the global trade finance market’s US$1.5trn funding gap (as per Asian Development Bank figures). Their .......
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Call for TALF expansion
Sector developments and company hires
BlackRock hired
Market Moves 25 March 2020
The New York Fed has retained BlackRock Financial Markets Advisory as a third-party vendor to operationalise its purchases of agency CMBS and transact with primary dealers on behalf of the SOMA. BlackRock was selected on a short-term basis to serve as an investment manager after considering its expertise in trading and analysing agency CMBS in the secondary market, .......
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CRT deals disclosed
Intesa publishes capital management strategy
Intesa Sanpaolo has released details of its capital management strategy, following the release of its 2019 annual report on Friday (20 March). The lender has revealed the details of four capital relief trades that were completed last year.
Intesa Sanpaolo’s 2018-2021 business plan includes initiatives for credit portfolio management that fall within the remit of the active credit portfolio steering .......
News 23 March 2020
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Economically efficient
Study supports reduction of PD estimates
A new study undertaken by Open Source Investor Services (OSIS) suggests that capital relief trades are a good alternative to traditional issuance of new capital in the majority (75%) of cases reviewed and in 40% of cases the instrument works well during a downturn scenario, even if investors are compensated for higher losses. The research investigates whether and when .......
News Analysis 20 March 2020
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Credit event definitions
UTP category brings less uniformity
The EBA’s guidelines on default definitions have brought less uniformity to credit event determinations in synthetic securitisations, despite the benefits of subsequent procedures such as principal adjustments for investors. However, from an issuer perspective, the key concern is maintaining protection for restructured loans.
According to David Wainer, partner at Allen & Overy: “We have observed a shift away from the relative standardisation of Article 216 of .......
News Analysis 20 March 2020
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Close relationship
CRT documentation should evidence intentions
When structuring a capital relief trade, the documentation should evidence the intentions of the parties. Given the risk-sharing nature of such transactions, investors benefit from forming a close relationship with the originating bank and being comfortable with its governance, risk management and flow of assets.
“To really share the risks of the underlying assets’ and the overall bank’s .......
News 20 March 2020
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Short-term volatility
SRTs on hold, although 2H20 rebound expected
Capital relief trade issuance has been postponed until the second half of the year due to the coronavirus crisis, as market participants expect disruption to be relatively short-lived. Nevertheless, more targeted government and central bank action towards consumers and SMEs is desired.
According to one SRT investor: “In the near term, it’s going to be very difficult to .......
News Analysis 19 March 2020
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EIB mulls SME ABS purchase plan
Sector developments and company hires
Dealer credit facility launched
Market Moves 18 March 2020
The US Fed has established a Primary Dealer Credit Facility (PDCF) available from 20 March, which will offer overnight and term funding with maturities up to 90 days. The facility will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under the facility may be .......
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Pandemic response
DNB lowers bank buffers amid outbreak
Dutch central bank DNB has lowered the capital buffers for Dutch banks and postponed the introduction of the risk weight floor for mortgages, following ECB action on the Coronavirus crisis. Combined, these measures will free up €8bn in capital and will allow banks to continue their lending activities in the face of rising losses.
According to a DNB .......
News 18 March 2020
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SCI Start the Week - 16 March
A review of securitisation activity over the past seven days
SCI NPL Securitisation Awards 2020
News 16 March 2020
As a result of COVID-19, the SCI NPL Securitisation seminar has unfortunately had to be postponed and along with it the inaugural SCI NPL Securitisation Awards ceremony. Nominations remain open and a revised deadline for them will be announced in due course. Further information and details of how to pitch can be found here.
This week's stories
AMC .......
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Multi-tranching?
Investor diversification raises triple-tranche prospects
Seer Capital sees a future for triple tranche structures in significant risk transfer transactions. One driver is the market’s need to further diversify the investor base.
According to Richard d’Albert, co-cio and cro at Seer Capital: “We are going to see more dual- and multi-tranche structures. It’s just a more efficient way for banks to execute thicker hedges .......
News Analysis 13 March 2020
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Definition debate
Call for coalescence around ESG standards
Impact is still being defined in the capital markets, both at a conceptual level and in terms of general product development. The terms ‘ethical’, ‘ESG’, ‘impact’ and ‘responsible’ mean different things to different participants. To avoid fragmentation and misunderstandings, the securitisation industry therefore needs to coalesce around specific ESG definitions and performance standards.
Amitji Odedra, associate director at .......
News Analysis 12 March 2020
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Regulatory events
Standard Chartered amends Gongga SRT terms
Standard Chartered has amended the regulatory event definitions for the class A notes of a corporate SRT dubbed Gongga that was finalised last year (SCI 2 August 2019). The amendments exclude any reference to any requirement to disclose information about the underlying borrowers as per ESMA’s securitisation disclosure requirements, where doing so would be impossible or result .......
News 12 March 2020
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Opaqueness premium
Regulatory RWA variability highlighted
In its latest Working Paper, the BIS unveils a new measure of risk-weighted asset variability – the variability ratio (VR) - that utilises market data to determine a market-implied estimate of a bank’s RWAs. Using this measure, the bank finds considerable variability in regulatory RWAs - both across banks and jurisdictions - and that market-implied RWA estimates are persistently .......
News 4 March 2020
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Bulgarian micro loan guarantees inked
Sector developments and company hires
Bulgarian guarantees
Market Moves 4 March 2020
The EIF has signed new guarantee agreements with Unicredit Bulbank, United Bulgarian Bank and ProCredit Bank (Bulgaria) to support the fast-growing documentary finance activity in Bulgaria. Under these agreements, the three EIF partner banks will finance Bulgarian small enterprises and small mid-caps with documentary credit lines, such as letters of credit, payment guarantees, advance payment guarantees and performance .......
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Green light
OCC gives regulatory approval to JPM CRT
JP Morgan Chase has won favourable regulatory treatment from the Office of the Comptroller of the Currency (OCC) for its innovatory CRT transaction priced in October, say well-placed sources.
“The OCC blessed the deal and JP Morgan received the capital treatment it desired. There are multiple independent confirmations that it got green lit by the OCC,” says a .......
News Analysis 3 March 2020
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Provisioning hedge
Landmark Italian SRT inked
AmTrust International has completed its inaugural capital relief trade, which references a €1bn seasoned low-LTV residential mortgage portfolio originated by an undisclosed leading Italian bank. The transaction is believed to be a first for the European market in that the SRT mechanism is via an insurance policy, rather than a financial guarantee.
“The solution highlights the increasing role .......
News 2 March 2020
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Risk transfer round-up - 28 February
CRT sector developments and deal news
Banca Monte dei Paschi di Siena is rumoured to be readying an SME SRT for next month, with the counterparty allegedly already selected. The transaction would be the bank’s first synthetic securitisation and it was reportedly scheduled initially for 4Q19.
...... News 28 February 2020Premium Content