BP Bari completes capital relief trades

Banca Popolare di Bari has completed two capital relief trades that reference respectively a €1.1bn Italian SME portfolio and a €1.8bn Italian residential mortgage portfolio. This is the first time that transactions have been carried out between an Italian standardised bank and a private investor.

The risk transfer trades were arranged by Banca IMI and they are funded first loss deals that reference predominantly southern Italian exposures.

Until last year, standardised banks needed a rating to determine their risk weights in securitisations, which can be less capital efficient. However, the revisions to the CRR that were enacted in January have rendered the deals more efficient by reducing the risk weights for the retained tranches.

Standardised banks have carried out transactions with the EIF using its mezzanine risk guarantees. This partly explains why a significant number of transactions have been with the fund and why the deals have often referenced SME portfolios. However, the lower risk weights of the new approach are expected to spur more transactions between standardised banks and private investors. 

The EIF has previously completed transactions with BP Bari. The last transaction was inked in August 2018 and included a number of features designed to address moral hazard (SCI 17 August 2018). Scope Ratings confirmed in March that the deal’s performance was in line with expectations (SCI 6 March).

Stelios Papadopoulos