Capital Relief Trades
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NPR issued on GSE capital framework
Sector developments and company hires
NPR issued on GSE capital framework
Market Moves 16 September 2021
The FHFA is seeking comment on a notice of proposed rulemaking that would amend the Enterprise Regulatory Capital Framework (ERCF) for Fannie Mae and Freddie Mac. The proposed amendments would refine the prescribed leverage buffer amount (PLBA) and the capital treatment of credit risk transfers (CRT) to better reflect the risks inherent in the .......
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SRT debut
First Nordic green synthetic executed
Nordea and the EIF have finalised a significant risk transfer transaction that references a €1.8bn portfolio of corporate and SME loans (SCI 23 July). The deal will free up capital for green lending to Swedish and Finnish firms, rendering it the first such deal from a Nordic bank.
The transaction features tranches that amortise on a pro-rata .......
News 16 September 2021
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Tender pick-up
Buyback value depends on specifics of each bondholder
Freddie Mac broke new ground with its tender offer last week, but there is some doubt about how many investors will be interested in surrendering their by now valuable paper, say market experts.
The average coupon of the eight tranches on offer is 3.85%, and the range is between 2.43% and 4.88%. This, in a low rate environment, is relatively attractive.
Moreover, .......
News 14 September 2021
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Love me tender
STACR tender shows validity of CRT and salience of capital efficiency
The significance of Freddie Mac’s STACR tender offer, announced earlier this week, should not be underestimated, say market insiders.
The tender shows, on the one hand, that the GSE is acutely conscious of the demands of greater capital efficiency, they say.
But it also demonstrates that it places continued faith in the CRT mechanism.
“By this tender offer, Freddie shows that there is .......
News Analysis 10 September 2021
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JP Morgan into fifth gear
Third CLN in 2021 to cover auto loan losses soon to print
JP Morgan Chase is to price its second auto loan-linked CLN deal in two months, its third of the year and its fifth in just over 12 months as the auto loan book become the clear favourite for the bank’s use of the CRT mechanism.
Designated Chase Auto Credit Linked Notes, Series 2021-3 (CACLN 2021-3), the note transfers risk to noteholders via .......
News 9 September 2021
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WAL enters CRT space
CRT trade covers first losses on warehouse loans
Western Alliance Bancorporation (WAL), a $35bn western US lender headquartered in Phoenix, Arizona, completed a $242m 144a credit linked note (CLN) sale at the end of June to cover first losses on $1.9bn reference pool of mortgage warehouse loans.
This constitutes another capital relief trade brought to the market by a US regional following the lead of Texas Capital Bank six .......
News 9 September 2021
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Tender Freddie
GSE has commenced a debut buyback scheme to retire old STACR issuance
Freddie Mac yesterday (September 7) inaugurated its first-ever tender offer programme to buy back STACR notes to reduce indebtedness, the agency told SCI last night.
The tender offer period will run until midnight EDT on October 4 and will be managed by co-managers Barclays Capital and Bank of America. Freddie will buy back up to $650m in aggregate original principal amount, targeting .......
News 8 September 2021
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High LTV Italian SRT inked
Intesa executes capital relief trade
Intesa Sanpaolo has finalized a significant risk transfer (SRT) transaction from the GARC programme that references a €1.3bn portfolio of high loan-to-value (LTV) residential mortgages.
The deal is the first high LTV mortgage SRT in the Italian market. The mortgages in the pool have a LTV ratio that is 80% or higher.
The trade features a €33.3m upper junior tranche (1.5%-4%), a €70.6m .......
News 3 September 2021
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Ready to launch
Norway readies SRT take off
The Norwegian banking market is getting ready for a pick-up in significant risk transfer (SRT) issuance next year following the pending incorporation into law of the new Securitisation Regulation, say market experts.
Nevertheless, the first deals are expected to be relatively simple vanilla structures, given the scepticism of local supervisors.
The Norwegian market has been slow to adopt the SRT mechanism for .......
News Analysis 3 September 2021
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Risk transfer round up - 31 August
CRT sector developments and deal news
Alpha bank confirmed in last week’s 1H21 statements further details of a significant risk transfer trade that the Greek lender intends to execute in 4Q21 (SCI 5 March).
Dubbed Aurora, the transaction references a €2bn corporate and SME portfolio, and is expected to release €1bn of RWAs. Piraeus Bank opened the Greek SRT market in March (SCI 18 March) and .......
News 31 August 2021
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Double bind
New SRT tests pose complexities
The European Commission’s new consultation on the Securitisation Regulation (SCI 26 July) for the first time officially offers banks the opportunity to raise questions on the workability of the new significant risk transfer tests included in the EBA’s final report on SRT (SCI 27 November 2020). The tests pose several complexities for banks, due to the design .......
News Analysis 20 August 2021
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Financing boost
EGF extended to synthetics
The European Commission has approved the extension of the EIB’s European Guarantee Fund’s support to synthetic securitisations, following an assessment of EU state aid rules. The extension to significant risk transfer deals applies under certain conditions pertaining to SME origination levels and the deployment of released capital.
The envisaged €1.4bn budget is expected to mobilise at least .......
News 18 August 2021
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The puzzling case of the disappearance of Fannie Mae
FNMA's absence from CRT investigated
Fannie Mae has not issued a CRT deal since 1Q20. This SCI CRT Premium Content article investigates the circumstances behind the GSE’s disappearance from the market and what might make it come back.
Fannie Mae, one of the co-founders of the ground-breaking GSE credit risk transfer market, has not issued a CAS or CIRT transaction since 1Q20. There is ......
News Analysis 18 August 2021Premium Content
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Simulation analysis
Covid-19 boosts capital ratios
UK and EU bank capital ratios have increased over the past year, despite the effect of the pandemic on profits. Nevertheless, the Covid crisis has exacerbated many of the difficulties related to generating returns, so analysts expect the environment to remain challenging for the European banking sector.
According to KPMG, UK banks saw a 150bp improvement in common .......
News 13 August 2021
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Positive prospects
Risk sharing remains promising, despite due diligence burden
Risk-sharing deals involving the EIF and private investors are yet to gain ground. This CRT Premium Content article surveys the likelihood of such collaborations going forward.
Significant risk transfer transactions between banks on the one hand and insurers and hedge funds on the other have grown substantially over the last two years in deal count terms. However, risk-sharing deals ......
News Analysis 6 August 2021Premium Content
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Record Freddie
Freddie Mac churns out STACR and ACIS at highest yet seen volumes
Freddie Mac today (August 5) announced that its CRT programme, including both STACR and ACIS, achieved record H1 issuance of $9.9bn, protecting $418.9bn of unpaid principal balance of mortgage loans.
This was comprised of $6.4bn of issuance in Q1 - a new quarterly record - and $3.5bn in Q2. There were five STACR deals and seven ACIS transactions in H1. So far .......
News 5 August 2021
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