Capital Relief Trades
Capital relief trades are deals put together by banks to sell on to investors to reduce the bank's regulatory capital requirements.
Such deals can take many forms, but SCI focuses on those where synthetic or securitisation structures are utilised.
Those deals can be broken down into the following broad categories (deals can be combinations of these categories):
CDS - credit default swaps: in the capital relief trade context, this denotes deals that utilise such instruments to transfer credit risk.
CLN - credit-linked note: in the capital relief trade context, this denotes the deal is structured as a note with an embedded credit derivative.
Fin gtee - Financial guarantee: a means of structuring a capital relief trade, whereby the investors benefit from a guarantee that all the issuer's obligations will be met.
Funded: where a capital relief trade is understood to have been structured using a credit derivative (CDS, CLN, synthetic CDO etc) with the protection seller making an initial payment.
Unfunded: where a capital relief trade is understood to have been structured without an initial payment being made under the credit derivative (CDS, CLN, synthetic CDO etc).
True sale: a capital relief trade based on a cash securitisation structure rather than a synthetic securitisation structure.
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Take the highway
Auto loans CRTs make good fit for regionals, but is the end in sight?
News Analysis 25 November 2024
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SRT Journal: A growth market
The fourth of five essays compiled in SCI's inaugural SRT Jo...
Mortgage insurance is as old as the hills, but the provision of financial guarantees or insurance policies on pools of home loans to secure capital relief as a tool of the significant risk transfer (SRT) market is of much more recent vintage. SCI looks at the growth and structural developments in the unfunded mortgage SRT market, but also the .......
News Analysis 25 November 2024
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Job swaps weekly: BBB elevates two to co-chief banking officer
People moves and key promotions in securitisation
This week’s roundup of securitisation job swaps sees The British Business Bank appointing two co-chief banking officers. Meanwhile, Latham & Watkins has poached an experienced White & Case structured credit executive as partner, while Centralis Group has hired a new Ireland Country head.
The British Business Bank has appointed Richard Bearman and Reinald de Monchy as co-chief banking .......
Market Moves 22 November 2024
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Robust pipeline
Italian cash SRT market on the rise
Five Italian cash SRT deals closed in the consumer and auto loan space earlier in 2024 (SCI 12 July), and two recent announcements by Stellantis (Auto ABS Stella Loans 2024-2) and CA Auto Bank (A-BEST 25) bring the total to seven confirmed transactions this year for the jurisdiction. Three additional deals – Brignole CO 2024 and Brignole CQ .......
News 20 November 2024
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SRT: The long view – video
Man Group's Moniot delves into key differences between European and North American SRT
Matthew Moniot, md and co-head of credit risk sharing at Man Group in London, speaks to SCI’s Simon Boughey about the latest trends and developments in the SRT market. Moniot discusses the differences in attitude to – and regulation of – the synthetic securitisation market in Europe and North America, as well as the continuing utility of the mechanism to banks .......
News Analysis 19 November 2024
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Latest SRTx fixings released
SRTx figures display continuity
With market sources continuing to report a tightening in spreads for new issue trades (repeat benchmark deals from established issuers are seeing bids 100+ basis points tighter than comparable transactions from earlier in 2024), the latest SRTx fixings present a generally stable and coherent narrative, in line with the positive risk tone that has been prevalent since the summer .......
News 14 November 2024
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NAV in focus
Growing market 'key' to fund finance toolkit
Net asset value (NAV) lending volumes are poised to more than double over the next few years. Indeed, panellists at Invisso’s recent ABS East conference forecast that the market could grow from nearly US$150bn in 2024 to an estimated US$500bn by the end of the decade.
NAV loans are becoming an increasingly relevant tool within the broader US$1.2trn .......
News Analysis 5 November 2024
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Job swaps weekly: Linklaters lures four A&O Shearman partners
People moves and key promotions in securitisation
This week’s roundup of securitisation job swaps sees Linklaters hiring four partners from A&O Shearman for its New York office. Elsewhere, the Prytania Solutions team has joined Houlihan Lokey’s structured products valuation advisory team as part of the latter’s acquisition of the former, while Danske Bank has snapped up a former senior Nordea executive as investment director.
Linklaters .......
Market Moves 1 November 2024
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Significant piece of regulation
The PRA's latest consultation paper introduces consequential developments for the SRT market
While the Prudential Regulation Authority’s (PRA) latest consultation paper (CP13/24 – Remainder of CRR: Restatement of assimilated law) focuses more broadly on capital requirements, three significant developments for the SRT community have clearly emerged.
The meaningful proposals include a new formula based p factor, (still) no STS for synthetics and a widely softened stance for unfunded SRTs.
News Analysis 29 October 2024
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