Capital Relief Trades

  • 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

  • CRT issuance boost expected

    Total capital relief trade issuance this year should exceed 2017, believes alternative asset manager PAG Asia, one of the sector’s major investors. Issuance is expected to be accelerated by an end to accommodative central bank monetary policies, underlining the importance of investing experience and expertise.

    James Parsons, portfolio manager at PAG Asia, says: “This year may be a pivotal year .......

    News Analysis 25 April 2018

  • Potential solution to IFRS 9 volatility

    Capital relief trade issuers are understood to be considering whether credit guarantees which are accounted for as a “reimbursement asset” can be used to mitigate volatility arising from the implementation of IFRS 9 expected credit losses. However, the accounting technique features its own challenges and raises a number of other questions.

    A reimbursement asset is recognised for holders of credit .......

    News Analysis 25 April 2018

  • Proportional protection reviewed

    EU policymakers are currently negotiating an amendment to Article 234 of the CRR that would allow banks to treat first-loss protection as proportional protection. If successful, the move is expected to boost mortgage significant risk transfer issuance.

    According to Article 234 of the CRR, loan-level insurance protection for synthetic securitisations that is tranched first-loss protection must apply Chapter .......

    News Analysis 20 April 2018

  • Risk transfer round-up - 20 April

    The capital relief trades market is undergoing a quiet period, following some unusual activity for Q1. Sources point to three transactions during this period from Deutsche Bank, Credit Suisse and a “UK bank with a non-standard portfolio”. Meanwhile, a Spanish bank is rumoured to be prepping another deal.

    Drivers behind the Q1 activity include pent-up supply from last .......

    News 20 April 2018

  • Synthetic NPLs gain traction

    The ECB’s latest non-performing loan provisioning guidelines are expected to trigger increased synthetic NPL securitisation issuance. Nevertheless, defining a credit event for a portfolio of loans that are already non-performing remains a significant challenge.

    The ECB guidelines prescribe full provisioning for unsecured NPLs after two years and seven years for secured NPLs. “This could potentially incentivise banks to .......

    News Analysis 29 March 2018

  • Innovative Dutch SRT completed

    Rabobank has completed an innovative Dutch significant risk transfer (SRT) deal with the EIF. The €128m financial guarantee is the lender’s only transaction where the second-loss risk has been fully transferred, as well as its first transaction under the CRD 4 in the SME space.

    The transaction will be guaranteed by the European Fund for Strategic Investments (EFSI). .......

    News 28 March 2018

  • Seeking to scale

    The capital relief trades (CRT) market suffers from a material gap between banks’ needs and the availability of investor capital, within the strategy. To facilitate growth, one of the next steps should be to attract greater buy-in from long-term investors, especially pension funds and their investment consultants.

    Kaikobad Kakalia, cio at Chorus Capital, believes that long-term investors - especially pension .......

    News Analysis 26 March 2018

  • Market moves - 23 March

    CDS clearing developments
    Intercontinental Exchange has transitioned index CDS open interest from CME Group to ICE Clear Credit, follows CME Group’s decision to exit the CDS business and transfer client positions to an alternative clearing house. ICE Clear Europe has also launched clearing for North American investment grade and high yield index CDS instruments, thereby providing regional customers the ability .......

    News 23 March 2018

  • Risk transfer round-up - 23 March

    Credit Suisse is believed to have priced a capital relief trade referencing a loan book originated in Switzerland. The deal was allegedly 3x subscribed, with guidance at 7.625% but printing at 7%.

    Separately, arrangers note an increase in requests for transactions by standardised banks, with deals already said to be in the pipeline. Most of the transactions until now were .......

    News 23 March 2018

  • Grappling with uncertainty

    Capital relief trade issuers are incorporating structural features highlighted in the EBA’s risk transfer discussion paper in an effort to gain some regulatory certainty in the absence of any guidance. Challenges remain, though, as significant risk transfer (SRT) recognition will depend on negotiations between national regulators and banks.

    “There are a number of grey areas that can affect the SRT status of a .......

    News Analysis 23 March 2018

  • Stress scenarios disclosed

    The Bank of England has announced that the 2018 stress test scenario for the major UK banks will be the same as that used in 2017, rendering it more severe than the global financial crisis. The scenario will assess the impact of IFRS 9 on the stress test results, but the central bank confirms that although capital ratios are .......

    News 19 March 2018

  • Market moves - 16 March

    EMEA

    Citigroup has appointed Laura Coady to the newly created position of head of EMEA, structured finance syndicate desk and she will continue to report locally to EMEA co-heads of global structured finance and securitisation Peter Keller and Bob Liao, and report globally to Vikram Prasad, global head of credit syndicate desk, taking responsibility for distributing all products from the .......

    Market Moves 16 March 2018

  • CRE CRTs pick up

    Synthetic securitisations referencing commercial real estate are attracting more investor interest, following the issuance of three transactions at the end of last year (see SCI’s capital relief trades database). Representing the first post-crisis synthetic CRE deals, issuance is being driven by high risk weights for specialised lending and investor step-in rights.

    The three CRE capital relief trades .......

    News Analysis 9 March 2018

  • Efficiency drive

    Credit Suisse is pioneering the re-tranching of capital relief trades, following the implementation of the new securitisation framework in Switzerland (SCI 9 February). However, more widespread re-tranching activity is expected to emerge over the next 24 months, as issuers seek to retain the efficiency of their transactions.

    The new securitisation framework became effective in Switzerland on 1 January .......

    News Analysis 9 March 2018

  • Basel 4 impact 'manageable'

    The new Basel 4 capital framework (SCI 14 December 2017) is expected to increase Dutch bank RWAs by approximately 25%, on a pro forma basis, equivalent to around 300bp of CET1. However, the impact is expected to be manageable, considering strong capitalisation and profitability levels, as well as the long implementation timeframe.

    Higher capital requirements will be driven .......

    News 7 March 2018

  • Risk-sharing on the agenda

    Panellists participating in SCI’s Risk Transfer & Synthetics Seminar are primed to discuss everything from traditional capital relief trades through to GSE credit risk transfer and bespoke investments at the event next week. Indeed, the theme of risk-sharing is expected to be explored in some depth across a number of panels.

    “Structural issues are key to determining the .......

    News 7 March 2018

  • Synthetic exposure expanded

    Bank of Ireland has released its Pillar Three report, which indicates an expansion of its synthetic securitisation exposure. It also provides insight into the lender's counterparty exposures.
    According to the report, the total outstanding amount of synthetic securitisation exposure originated by the Bank of Ireland group increased by nearly a third in 2017 to €4.3bn. This comprises the bulk of .......

    News 2 March 2018
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