Capital Relief Trades
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SCI In Conversation podcast: Jeff Krohn, Guy Carpenter
We discuss the hottest topics in securitisation today...
In this episode of the SCI In Conversation podcast, Guy Carpenter's md, mortgage and structured credit segment leader Jeff Krohn talks about the recent shape of events in the GSE CRT sector, from the perspective of the capital markets and reinsurance market. He also touches on the topic of recent issuance - or the lack of it - from mortgage insurers .......
News 17 August 2023
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Risk transfer round-up - 10 August
The week's CRT developments and deal news
Market news
News 10 August 2023
Western Alliance Bank has amended its WAL 2021-CL2 transaction, to collateralise the deal and reduce corporate credit risk. Principal payments on the notes are now secured by a cash collateral account equal to the full principal amount. Interest payments remain the obligation of WAB but are newly secured by a line of credit by JPMorgan for up to .......
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Green front
EIF obvious candidate to scale up SRT amid energy transition
A new paper highlights how SRT transactions could be scaled up to support Europe’s shift to the green economy. Central to the proposal is the potential for the EIF to participate as a ‘fronter’ in synthetic securitisations.
In the paper, entitled ‘A proposal for the European Green Transition via Significant Risk Transfer Securitisations’, ECB senior advisor Fernando Gonzalez .......
News Analysis 9 August 2023
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Latest SRTx fixings released
Stabilising trend continues in August index values
The latest fixings for the SRTx (Significant Risk Transfer Index) have been released. The stabilising trend seen across the sub-indexes over the last few months generally appears to have continued, albeit views are slightly mixed on certain segments.
Spreads across the SRTx Spread Indexes have stabilised to improved month-on-month, reflecting the economic backdrop. Values now stand at .......
News 3 August 2023
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Happy birthday STACR
The GSE CRT market hits 10th birthday
Last week marked the tenth anniversary of the GSE CRT market, as, on July 23, 2013, Freddie Mac priced its inaugural US$500m STACR trade.
This debut transaction, STACR 2013-DN1, matured at end of last month.
Fannie Mae got in on the act a couple of months later when it sold its debut CAS deal, dubbed CAS 2013-01, which is due to mature in .......
News 3 August 2023
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Risk transfer round-up - 3 August
The week's CRT developments and deal news
Market news
News 3 August 2023
Risk Control has received funding from the MDB Challenge Fund for two projects with the objective of helping Multilateral Development Banks (MDBs) build on the recommendations of the G20’s Independent Review of MDB Capital Adequacy Frameworks (CAF). One of the projects will deliver analysis to support MDB risk transfer, creating insights and technical tools for balance sheet optimisation .......
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Closing the gap
SRT 'unlevel playing field' called out
A reduction of the p-factor is inarguably positive for IRB banks and the significant risk transfer space in general, as these banks account for the bulk of synthetic securitisation issuance volume (SCI 25 July). However, the absence of changes positively affecting banks under the standardised approach points to an unlevel playing field across the market.
The hurdles .......
News Analysis 1 August 2023
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Get in, Granville
BNS brings much heralded SRT deal, latest Canadian to set sail
Bank of Nova Scotia (BNS) has sold its first SRT trade, a securitization of investment grade loans, in a transaction dubbed Granville USD.
The trade, which was arranged by BNP Paribas, has been rumoured for several weeks, and is the latest in a series of regulatory capital relief trades by Canadian banks.
Bank of Montreal has had a presence in this market for .......
News 28 July 2023
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Mortgage penalty
Higher risk weighting for high LTV loans boosts SRT
As had been strongly rumoured, new capital rules unveiled by the Federal Reserve today (July 27) ascribe heavier risk weightings to higher LTV mortgages.
Currently first lien mortgages are subject to a 50% risk weighting, but the proposed regulations seek to impose weightings of between 40% and 90% to larger banks. Loans with high LTVs will receive the highest risk weightings.
The adjustments, .......
News 28 July 2023
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Risk transfer round-up - 27 July
The week's CRT developments and deal news
Pipeline update
The capital relief trades market is currently seeing a lull in activity ahead of the traditional fourth-quarter spike in issuance, as banks seek to close transactions before year-end. Indeed, a significant pick-up in CRT trades is anticipated straight out of the blocks in September.“We are expecting a lot of significant risk transfer deals to .......
News 27 July 2023
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Less punitive
Halving of p-factor sparks SRT optimism
The European Council’s finalisation of the Basel 3 reforms last month has sparked renewed optimism across the European capital relief trades market, with news of an agreement to halve the punitive p-factor (SCI 28 June). The impending need to address the adverse effects of the output floor had been at the core of the regulatory debate for synthetic .......
News 25 July 2023
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Legacy issue
ECJ ruling a boon for Polish CRTs
The European Court of Justice (ECJ) ruled last month that Polish banks must not charge remuneration from customers when legacy Swiss franc mortgage contracts are annulled (SCI 21 November 2016). As a result, banks could face moderately higher losses from affected portfolios and are likely to speed up their provisioning for such mortgages due to borrower lawsuits. The .......
News Analysis 25 July 2023
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Wider still and wider
GSE CRT spreads blow out in 2023
Freddie Mac CRT spreads have mushroomed this year despite the marked diminution of issuance, confirmed the GSE in its quarterly CRT webinar yesterday.
In some cases, spreads are more than 100% wider than 12 months ago. For example, the STACR 2022 DNA1, priced in January 2022, carried spreads of SOFR plus 100bp, plus 185bp, plus 250bp and plus 710bp for the M1, .......
News 19 July 2023
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Capital loss
Fed's scheduled CET1 increase to shred US bank excess capital
The Federal Reserve’s planned 200bp increase to Common Equity Tier One (CET1) requirements will burn through the US$121bn of excess capital the biggest US banks currently enjoy, suggest analysts.
As a result, banks are likely to be parsimonious with shareholder dividends in the next couple of years as they attempt to build up capital, the research report adds. Buybacks are also .......
News Analysis 18 July 2023
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Vertical rebrands
Market updates and sector developments
Vertical Capital Income Fund has appointed Carlyle Global Credit Investment Management as its investment manager and rebranded as Carlyle Credit Income Fund (CCIF). Following the agreement, CCIF will begin focusing on investing in equity and debt tranches of collateralised loan obligations.
The development is part of an agreement that also sees Carlyle building towards a 40% stake in CCIF. In January, the .......
Market Moves 18 July 2023
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Polish wave continues
Bank Millennium adds to CEE SRT flow
Bank Millennium has finalised a funded synthetic securitisation of Polish leasing assets that references a PLN4bn portfolio. Dubbed Project Medea, the transaction is the bank’s third significant risk transfer trade and adds to the Polish SRT deal flow that began last year (SCI passim).
According to sources close to the transaction, the deal features a retained first loss .......
News 13 July 2023
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SRT boom
IACPM data shows record year for synthetic securitisations
The global volume of synthetic securitisation issuance reached its highest ever level in 2022, with both the number of trades and notional pool size far outstripping pre-pandemic levels, according to the latest IACPM survey. The results suggest that 90 significant risk transfer trades were executed last year with an aggregate underlying pool size at inception of €199bn, surpassing previous .......
News 11 July 2023
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Capital rising
Regulators announce new rules coming soon
As expected, US regulators are poised to increase capital requirements for domestic banks imminently, according to a speech yesterday (July 10) made by Michael Barr, vice chair of supervision at the Federal Reserve, at the Bipartisan Policy Center in Washington, DC.
Large banks, described as those with over US$100bn in assets, could be asked to hold an extra 2% of capital .......
News 11 July 2023
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Latest SRTx fixings released
Improved tone continues in July index values
The latest fixings for the SRTx (Significant Risk Transfer Index) have been released. The improved tone seen across the sub-indexes in June’s fixings (SCI 2 June) generally appears to have continued, as market conditions stabilise following March’s banking volatility.
Indeed, the overall improved values for the SRTx Liquidity Indexes and SRTx Volatility Indexes suggest that issues across .......
News 7 July 2023