Capital Relief Trades

  • Call for TALF expansion

    Sector developments and company hires

    BlackRock hired
    The New York Fed has retained BlackRock Financial Markets Advisory as a third-party vendor to operationalise its purchases of agency CMBS and transact with primary dealers on behalf of the SOMA. BlackRock was selected on a short-term basis to serve as an investment manager after considering its expertise in trading and analysing agency CMBS in the secondary market, .......

    Market Moves 25 March 2020

  • CRT deals disclosed

    Intesa publishes capital management strategy

    Intesa Sanpaolo has released details of its capital management strategy, following the release of its 2019 annual report on Friday (20 March). The lender has revealed the details of four capital relief trades that were completed last year. 

    Intesa Sanpaolo’s 2018-2021 business plan includes initiatives for credit portfolio management that fall within the remit of the active credit portfolio steering .......

    News 23 March 2020

  • Economically efficient

    Study supports reduction of PD estimates

    A new study undertaken by Open Source Investor Services (OSIS) suggests that capital relief trades are a good alternative to traditional issuance of new capital in the majority (75%) of cases reviewed and in 40% of cases the instrument works well during a downturn scenario, even if investors are compensated for higher losses. The research investigates whether and when .......

    News Analysis 20 March 2020

  • Credit event definitions

    UTP category brings less uniformity

    The EBA’s guidelines on default definitions have brought less uniformity to credit event determinations in synthetic securitisations, despite the benefits of subsequent procedures such as principal adjustments for investors. However, from an issuer perspective, the key concern is maintaining protection for restructured loans.

    According to David Wainer, partner at Allen & Overy: “We have observed a shift away from the relative standardisation of Article 216 of .......

    News Analysis 20 March 2020

  • Close relationship

    CRT documentation should evidence intentions

    When structuring a capital relief trade, the documentation should evidence the intentions of the parties. Given the risk-sharing nature of such transactions, investors benefit from forming a close relationship with the originating bank and being comfortable with its governance, risk management and flow of assets.

    “To really share the risks of the underlying assets’ and the overall bank’s .......

    News 20 March 2020

  • Short-term volatility

    SRTs on hold, although 2H20 rebound expected

    Capital relief trade issuance has been postponed until the second half of the year due to the coronavirus crisis, as market participants expect disruption to be relatively short-lived. Nevertheless, more targeted government and central bank action towards consumers and SMEs is desired.

    According to one SRT investor: “In the near term, it’s going to be very difficult to .......

    News Analysis 19 March 2020

  • EIB mulls SME ABS purchase plan

    Sector developments and company hires

    Dealer credit facility launched
    The US Fed has established a Primary Dealer Credit Facility (PDCF) available from 20 March, which will offer overnight and term funding with maturities up to 90 days. The facility will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under the facility may be .......

    Market Moves 18 March 2020

  • Pandemic response

    DNB lowers bank buffers amid outbreak

    Dutch central bank DNB has lowered the capital buffers for Dutch banks and postponed the introduction of the risk weight floor for mortgages, following ECB action on the Coronavirus crisis. Combined, these measures will free up €8bn in capital and will allow banks to continue their lending activities in the face of rising losses. 

    According to a DNB .......

    News 18 March 2020

  • SCI Start the Week - 16 March

    A review of securitisation activity over the past seven days

    SCI NPL Securitisation Awards 2020
    As a result of COVID-19, the SCI NPL Securitisation seminar has unfortunately had to be postponed and along with it the inaugural SCI NPL Securitisation Awards ceremony. Nominations remain open and a revised deadline for them will be announced in due course. Further information and details of how to pitch can be found here.

    This week's stories
    AMC .......

    News 16 March 2020

  • Multi-tranching?

    Investor diversification raises triple-tranche prospects

    Seer Capital sees a future for triple tranche structures in significant risk transfer transactions. One driver is the market’s need to further diversify the investor base.

    According to Richard d’Albert, co-cio and cro at Seer Capital: “We are going to see more dual- and multi-tranche structures. It’s just a more efficient way for banks to execute thicker hedges .......

    News Analysis 13 March 2020

  • Definition debate

    Call for coalescence around ESG standards

    Impact is still being defined in the capital markets, both at a conceptual level and in terms of general product development. The terms ‘ethical’, ‘ESG’, ‘impact’ and ‘responsible’ mean different things to different participants. To avoid fragmentation and misunderstandings, the securitisation industry therefore needs to coalesce around specific ESG definitions and performance standards.

    Amitji Odedra, associate director at .......

    News Analysis 12 March 2020

  • Regulatory events

    Standard Chartered amends Gongga SRT terms

    Standard Chartered has amended the regulatory event definitions for the class A notes of a corporate SRT dubbed Gongga that was finalised last year (SCI 2 August 2019). The amendments exclude any reference to any requirement to disclose information about the underlying borrowers as per ESMA’s securitisation disclosure requirements, where doing so would be impossible or result .......

    News 12 March 2020

  • Opaqueness premium

    Regulatory RWA variability highlighted

    In its latest Working Paper, the BIS unveils a new measure of risk-weighted asset variability – the variability ratio (VR) - that utilises market data to determine a market-implied estimate of a bank’s RWAs. Using this measure, the bank finds considerable variability in regulatory RWAs - both across banks and jurisdictions - and that market-implied RWA estimates are persistently .......

    News 4 March 2020

  • Bulgarian micro loan guarantees inked

    Sector developments and company hires

    Bulgarian guarantees
    The EIF has signed new guarantee agreements with Unicredit Bulbank, United Bulgarian Bank and ProCredit Bank (Bulgaria) to support the fast-growing documentary finance activity in Bulgaria. Under these agreements, the three EIF partner banks will finance Bulgarian small enterprises and small mid-caps with documentary credit lines, such as letters of credit, payment guarantees, advance payment guarantees and performance .......

    Market Moves 4 March 2020

  • Green light

    OCC gives regulatory approval to JPM CRT

    JP Morgan Chase has won favourable regulatory treatment from the Office of the Comptroller of the Currency (OCC) for its innovatory CRT transaction priced in October, say well-placed sources.

    “The OCC blessed the deal and JP Morgan received the capital treatment it desired. There are multiple independent confirmations that it got green lit by the OCC,” says a .......

    News Analysis 3 March 2020

  • Provisioning hedge

    Landmark Italian SRT inked

    AmTrust International has completed its inaugural capital relief trade, which references a €1bn seasoned low-LTV residential mortgage portfolio originated by an undisclosed leading Italian bank. The transaction is believed to be a first for the European market in that the SRT mechanism is via an insurance policy, rather than a financial guarantee.

    “The solution highlights the increasing role .......

    News 2 March 2020

  • Risk transfer round-up - 28 February

    CRT sector developments and deal news

    Banca Monte dei Paschi di Siena is rumoured to be readying an SME SRT for next month, with the counterparty allegedly already selected. The transaction would be the bank’s first synthetic securitisation and it was reportedly scheduled initially for 4Q19.

    ......

    News 28 February 2020

    Premium Content

  • MRT evolution

    US Mortgage Risk Transfer report now available

    Pioneered by Fannie Mae and Freddie Mac the US mortgage risk transfer (MRT) market is growing strongly and is now attracting the interest of potential new participants. Both the sell- and buy-side are hoping the sector will evolve to include non-agency issuance and kick-start a US capital relief trades market to rival and eventually even exceed the one seen .......

    News 27 February 2020

  • UK SRT debuts

    Opel prepping full-stack auto ABS

    BNP Paribas is marketing Opel’s second full-stack auto ABS from the E-CARAT programme. Dubbed E-CARAT 11, the capital relief trade is the issuer’s first to reference UK auto loans.

    Boudewijn Dierick, head of ABS markets at BNP Paribas, notes: “The residual value is the novelty and main challenge here, as different investors take different views on UK RV .......

    News 25 February 2020

  • High-profile bankers exit SRT

    Sector developments and company hires

    SRT departures
    Last week saw a couple of high-profile exits from SRT banking teams in London. Structuring specialist Jeremy Hermant is understood to have left Santander, while md Bob Paterson has reportedly been put at risk of redundancy at Lloyds.

    Spokespeople at both banks declined to comment, although the latter stated: “Whenever we make role reductions, these changes do require making difficult .......

    Market Moves 24 February 2020

  • Moving down

    Insurers target first-loss CRTs

    Insurers are now targeting the first-loss tranches of capital relief trades, having eyed the senior mezzanine tranches of dual-tranche transactions last year (SCI 22 March 2019). The better risk/return profile of first-loss tranches and an adaptation of traditional credit insurance contracts into unconditional guarantee formats are the main factors driving the development.

    According to one reinsurer: “We have no .......

    News Analysis 21 February 2020
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