Capital Relief Trades

  • Second Magdalena deal priced

    Santander SME portfolio attracts further investor interest

    Santander has completed its second FT Pymes Magdalena risk transfer transaction. The €166.3m CLN references a €2.5bn Spanish SME portfolio and pays three-month Euribor plus 8.85%.

    The portfolio comprises a diversified and granular portfolio of Spanish SMEs -including self-employed borrowers - a market where Santander holds a dominant position. Protection has been bought on 95% of the reference portfolio.

    The .......

    News 8 August 2018

  • Retention questioned

    Call for NPL regulatory differentiation

    Questions are emerging over the relevance of risk retention in the context of European non-performing loan securitisations. Given its utility in transferring risk on capital-intensive portfolios, securitisation could play a greater role in resolving Europe’s troubled loan burden if there was regulatory differentiation for such assets.

    Vertical risk retention may make sense in terms of originating banks being .......

    News Analysis 7 August 2018

  • CRT resilience highlighted

    Investors undeterred by turn in credit cycle

    Widening credit spreads and an expected turn in the credit cycle have not induced significant changes in the structuring of capital relief trades, thanks to the positive performance of the asset class. Indeed, investors continue to allocate more capital to the sector.  

    “QE ends soon and tightening will start next year. However, Euribor is quite low. It will take a .......

    News Analysis 6 August 2018

  • Risk transfer round-up - 27 July

    CRT sector developments and deal news.

    Mitsubishi UFJ is rumoured to be prepping its first transaction referencing European loans. The bilateral deal is expected to close in 4Q18.

    The Japanese issuer’s last and inaugural capital relief trade, dubbed Battersea and placed in January 2017, is believed to be a US$100m five-year bilateral deal referencing a US$1bn Asian oil and gas portfolio.

    .......

    News 26 July 2018

  • Return to form?

    More traditional synthetic CRE deals emerging

    A number of issuers are working on CRE capital relief trades, including some UK banks that issued CRE deals in 4Q17 (see SCI’s CRT database), with a view to closing before year-end. However, some of these transactions suggest that the asset class may potentially be returning to more traditional significant risk transfer structures and investors.

    David Wainer, partner at .......

    News Analysis 13 July 2018

  • Risk transfer round-up - 6 July

    The Cayman Islands stock exchange has released a late June document regarding an early redemption of Deutsche Bank’s GATE 2015-1 capital relief trade (see SCI’s capital relief trades database). A call notice has been issued and the trade will be called on its next payment date in mid-July. 

    Deutsche Bank replaced this trade with a new trade, dubbed .......

    News 6 July 2018

  • Barclays engineers comeback

    Further impetus added to Colonnade programme

    Barclays has returned to the risk transfer market with Colonnade Global 2018-1, a £34.2m cash-collateralised eight-year financial guarantee. As with previous Colonnade transactions, the credit protection covers both principal and accrued interest (SCI 8 September 2017).

    Rated by DBRS, the deal comprises US$325.3 triple-A rated class A notes, US$6.2m double-A rated class B notes, US$1.75m double-A rated class C .......

    News 2 July 2018

  • Trade finance CRTs gather pace

    Transactions offer multiple benefits to issuers and investors

    Interest is growing in synthetic securitisations backed by trade finance receivables - collateral that is particularly suited to the synthetic structure. These transactions exhibit several differences to corporate capital relief trades and while some of these can cause certain challenges, they also offer issuers and investors unique benefits.

    Peter Wong, md, portfolio management at Standard Chartered, says that the synthetic .......

    News Analysis 28 June 2018

  • PRA's tough stance continues

    Banks have been reviewing the PRA’s significant risk transfer (SRT) consultation, which proposes a full capital charge for excess spread in SRT securitisations and is expected to reduce the capital relief that can be achieved by UK issuers. The paper also introduces uncertainty over the hierarchy of approaches and is another indication that, going forward, the UK regulator’s stance .......

    News Analysis 22 June 2018

  • Mortgage SRT booster voted down

    MEP Caroline Nagtegaal’s amendment 596 to Article 234 of the CRR was rejected by the European Parliament in a vote this week, in order to prevent the establishment of an unwanted precedent. The amendment had been expected to boost significant risk transfer (SRT) transactions of mortgages (SCI 20 April).

    According to Article 234 of the CRR, loan-level insurance protection .......

    News Analysis 22 June 2018

  • Risk transfer round-up - 22 June

    Intesa Sanpaolo is rumoured to be prepping a capital relief trade referencing corporate assets, with the transaction currently believed to be in the portfolio selection process. The Italian lender is a frequent issuer of synthetic SME securitisations, but it has been less active in the corporate space (see SCI’s capital relief trades database).

    ......

    News 22 June 2018

    Premium Content

  • Capital computation

    The complexity involved in executing capital relief trades is driving increased focus on the operational requirements necessary for efficient cost of capital computation. Indeed, implementing a joined-up approach across the front, middle and back offices can benefit an issuer’s bottom line – not only in terms of RWA savings, but also in other areas of their business.

    “A great deal .......

    News Analysis 18 June 2018

  • IFRS 9 benefit welcomed

    The first-time adoption of IFRS 9 has had a muted impact on bank capital ratios and this has been reflected in existing capital relief trades through P&L gains (SCI 14 May). Indeed, the benefit can be acquired whether the first-loss tranche is sold or retained.

    According to a structurer at a large European bank: “The silver lining in SRT deals .......

    News Analysis 15 June 2018

  • Risk transfer round-up - 15 June

    Deutsche Bank is expected to execute two capital relief trades this month. One is a corporate deal from its CRAFT programme and the other is an SME deal from its GATE programme. The bank is also believed to be prepping a trade finance transaction from its TRAFIN programme for either end-3Q18 or 4Q18.  

    .......

    News 15 June 2018

  • CRI explained

    Stephen Taylor, head of structured and capital solutions EME...

    Q: What is credit risk insurance?
    A: Credit risk insurance (CRI) is used to transfer credit risk to insurers. One of the benefits of using CRI in securitisation structures is that this credit enhances the asset pool (subject to the legal/accounting treatment) and can make the portfolio more attractive to lenders.

    Q: How does CRI help optimise a credit portfolio?
    A: Our .......

    Talking Point 15 June 2018

  • Consultant activity surveyed

    Investment consultants for long-term investors such as pension funds haven’t been as active in capital relief trades as other investors, typically hedge funds - although this is expected to change, as corporate defaults pick up over the next two to three years (SCI 25 April). The trades are attractive to consultants’ clients, as they provide exposure to higher quality corporate .......

    News Analysis 1 June 2018

  • Risk transfer round-up - 25 May

    Standard Chartered is expected to roll over two existing trade finance capital relief trades in 2H18. In particular, Shangren 3 and Sealane 3 will be rolled over into two new deals: Shangren 4 and Sealane 4. Shangren 3 – in which Dutch pension fund PGGM was the investor - is a bilateral deal, while Sealane 3 is a syndicated one.

    News 25 May 2018

  • IFRS 9 first-time impact gauged

    Banks have begun releasing their first quarterly results for this year, with the reports suggesting a limited impact from the first-time adoption of IFRS 9. However, the lack of a requirement to restate comparative figures means that the potential volatility in reporting generated by the accounting standard’s three credit stages will have to be monitored over time. Furthermore, banks appear .......

    News Analysis 14 May 2018

  • Standardised bank issuance picking up

    Standardised bank issuance of capital relief trades is picking up, despite the market having long been the purview of larger internal rating based (IRB) banks. This is driven by rating agencies offering more flexible benchmarking and the Juncker plan, which allows the EIF to guarantee both the senior and mezzanine risk.

    However, the shift is slow because of .......

    News Analysis 8 May 2018

  • Risk transfer round-up - 4 May

    The Royal Bank of Scotland is rumoured to be marketing a commercial real estate transaction dubbed “project Dragonstone”. The deal is expected to close in the summer when overall issuance is expected to pick up.

    The market is undergoing a quiet period, following some unusual activity for 1Q18. Sources point to three transactions during this period from Deutsche Bank, Credit .......

    News 4 May 2018

  • SRT features incorporated

    The EIF has granted BBVA a €90m guarantee on a mezzanine tranche of a €1.95bn portfolio which will enable the provision of up to €600m financing of new investment projects to Spanish SMEs. The transaction incorporates structural features from the EBA’s significant risk transfer discussion paper and is part of a wave of agreements supporting SMEs across Europe.

    News Analysis 27 April 2018

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