Capital Relief Trades
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Synthetic RMBS debut
Non-GSE CRT deal prepped
JPMorgan Chase Bank (JPMCB) is marketing what is believed to be the first rated synthetic mortgage risk transfer transaction originated by a US bank – Chase Mortgage Reference Notes 2019-CL1. The deal utilises tranched CDS documentation to transfer credit risk to noteholders, with principal payments based on the actual payments received from a reference pool consisting of 979 prime-quality .......
News 10 October 2019
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Rating challenges
Limited appetite for rated senior mezz
Issuers have typically refrained from seeking ratings on the senior mezzanine tranches of dual-tranche capital relief trades, due to stricter eligibility criteria, cost considerations and the fact that most SRT investors don’t need ratings. Nevertheless, rating senior mezzanine tranches is one way of attracting new investors to the sector (SCI 26 January 2018), thereby helping to expand the .......
News Analysis 7 October 2019
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Risk transfer round-up - 4 October
Capital relief trade sector developments and deal news
HSBC is rumoured to be readying a corporate capital relief trade for 4Q19. According to SCI data, the lender’s last risk transfer transaction was completed in December 2015 and was dubbed Metrix Portfolio Distribution (see SCI’s capital relief trades database).
...... News 4 October 2019Premium Content
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Spanish SRT finalised
Santander completes full-stack auto ABS
Santander has priced a €555.5m true sale significant risk transfer transaction dubbed Santander Consumer Spain Auto 2019-1. The full-stack deal has been driven by new regulatory guidelines on excess spread and adds to this year’s healthy flow of full-stack SRT issuance (SCI passim).
The transaction consists of €440m class A notes (which priced at 45bp), €57.7m class B notes (85bp), .......
News 4 October 2019
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Nascent stages
CRT mezz investor base needs time to develop
The pace of growth of the risk transfer market is likely to be tied to the development of the synthetic mezzanine risk market, which is currently at a nascent stage (SCI 9 August). Traditional capital relief trade investors have limited appetite for mezz, as absolute returns are low, even though the risk/reward proposition is compelling.
“There is .......
News 3 October 2019
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Portfolio-based cover opportunities eyed
New reinsurance platform to harness synthetic ABS overlap opportunities
BPL Global is to launch a new reinsurance platform and has hired Gregory King-Underwood as director to spearhead the firm’s growth strategy. This is driven by increased demand for portfolio-based risk weighted asset (RWA) solutions from financial institutions, which the firm hopes can be met by combining reinsurance and synthetic securitisation strategies.
James Esdaile, md at BPL Global, comments that King-Underwood’s .......
News Analysis 27 September 2019
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STS synthetics framework unveiled
EBA publishes landmark consultation
The EBA has published its long-awaited discussion paper on its proposals for an STS framework for synthetic securitisation (SCI 20 September). The discussion paper aims to enhance transparency and further standardise risk transfer trades - although, for the moment, STS synthetic securitisations won’t benefit from preferential capital treatment via a reduction in senior tranche risk weights.
According .......
News Analysis 25 September 2019
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Legacy SRT call possibility
Regulatory triggers could lead to SRTs being called next year
Banks could potentially call legacy capital relief trades (CRTs) next year, as higher senior risk weights for these deals kick, following the end of a one-year grandfathering period. Higher senior risk weights could render the deals less efficient and justify calling and restructuring a transaction, but whether calls are exercised or not will depend on what counts as a .......
News Analysis 20 September 2019
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Case for STS synthetics outlined
Benefits of STS on synthetics clear, but objections could be raised
The EBA is set to release its discussion paper on the application of the STS label to synthetic securitisation next week, with a view to publishing a proposal by the middle of next year. While the paper is a “step in the right direction”, the market will not see any synthetic securitisations with the STS label for “quite some .......
News Analysis 20 September 2019
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Risk transfer round-up - 20 September
CRT sector developments and deal news
Standard Chartered is rumoured to be prepping a corporate capital relief trade for 4Q19. The bank’s last risk transfer trades were completed last summer and referenced corporate loans. The first one was dubbed Chakra 3 and was inked in June, while the second one was called Gongga and was completed in July (see SCI’s capital relief trades database).
...... News 20 September 2019Premium Content
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Risk transfer round-up - 12 September
CRT sector developments and deal news
Intesa Sanpaolo is rumoured to be prepping for 4Q19 two capital relief trades that reference respectively corporate and SME loans. The bank printed its last corporate and SME SRTs last year from the GARC programme (see SCI’s capital relief trades database).
The alleged transactions are riding a wave of Italian SRT issuance this year, fuelled by rising standardised bank ......
News 12 September 2019Premium Content
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Risk profile
Basel 4 impact to vary based on business model
The EBA last month published its advice on the implementation of Basel 4 in the EU, with its impact assessment suggesting that the full implementation of the new framework under conservative assumptions will increase the minimum capital requirement (MRC) by 24.4% on average. Although the resulting capital impact is highly dependent on the strategy of each bank, it is .......
News Analysis 12 September 2019
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Going concern?
Synthetics could help address UTP burden
Synthetic securitisation is being put forward as one way of proactively addressing the unlikely-to-pay loan burden in Italy. However, although risk transfer technology would allow banks to maintain their relationships with borrowers while benefiting from capital relief, the cost of such structures – among other challenges – may be prohibitive for some.
Robert Bradbury, head of structuring and .......
News Analysis 5 September 2019
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Regulatory boost
Italian SRT issuance picks up
Italian capital relief trades are experiencing a strong pick-up in issuance this year as regulatory changes enable more standardised banks to execute risk transfer transactions and open up the market to private investors. However, these banks will need time to adapt their IT and reporting systems, while risk-sharing transactions involving both SSAs and private investors are a more promising .......
News Analysis 30 August 2019
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Esoteric opportunities
Structured solutions to address corporate risk transfer needs
The newly-formed CAC Specialty (SCI 21 August) is seeking to capitalise on the convergence of the insurance and capital markets on a broader basis than that represented by the ILS market. Indeed, the firm aims to transfer the more esoteric risks via insurance and place them in a structured format.
“Insurance brokerage and investment banking have a .......
News 30 August 2019
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Risk transfer round-up - 28 August
CRT sector developments and deal news
Credit Suisse has called two transactions from its Magnolia Finance V programme. The transactions were issued in 2013 and 2014 and both risk transfer trades referenced US and Swiss corporate loans. The exercise of the calls concerned the underlying US loans.
One transaction, dubbed Magnolia Finance V series 2013-1, was an eight-year US$75m CLN that printed in .......
News 28 August 2019
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Counterintuitive results
EBA consultation incentivises unfunded SRT format
The EBA’s consultation on the determination of the weighted average maturity of a securitisation tranche (SCI 2 August) is seen as a positive step for synthetic securitisations, since it takes into account the conditional payments of the underlying assets. However, by not recognising the effect of prepayments and pool amortisations, the proposal creates counterintuitive results that incentivise banks .......
News Analysis 23 August 2019
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Risk transfer round-up - 16 August
CRT sector developments and deal news
UBI Banca is rumoured to be prepping an SME and corporate SRT for 3Q19. The alleged transaction is riding a wave of Italian SRT issuance that includes a number of standardised banks.
Banca Popolare di Bari completed the first SRTs between a standardised bank and a private investor last month (SCI 2 August). Banca Popolare dell'Alto Adige .......
News 16 August 2019
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Tweaking tradition
Dutch securitisation evolving across established sectors
The Dutch securitisation market is seeing innovation and growth away from its traditional strong focus on prime RMBS. This trend is evolutionary rather than revolutionary, as participants seek to build on the sector’s well-established foundations.
Some asset classes are simply returning to life, notably CMBS. “CMBS has been picking up since last year and the two big issuers, .......
News Analysis 13 August 2019
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Senior mezz eyed
CRT issuers target asset managers
Banks are targeting asset managers for the senior mezzanine tranches of dual-tranche capital relief trades, given that the market for the senior mezzanine remains less deep relative to that of the junior mezzanine tranche. Asset managers are drawn to the risk/return profile of the senior mezzanine, although their approach to capital relief trades will likely remain opportunistic going forward. .......
News Analysis 9 August 2019
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Risk transfer round-up - 9 August
CRT sector developments and deal news
BNP Paribas is rumoured to be prepping a corporate capital relief trade for 3Q19. The lender’s last risk transfer transaction closed last month. Dubbed AutoFlorence 1, the true sale deal is its first post-crisis Italian SRT (SCI 22 July).
The BNPP transaction follows rumours of another risk transfer trade from Societe Generale. The bank is believed to .......
News 9 August 2019