Capital Relief Trades
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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
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SCI Start the Week - 16 March
A review of securitisation activity over the past seven days
SCI NPL Securitisation Awards 2020
News 16 March 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 .......
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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
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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
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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
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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
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Bulgarian micro loan guarantees inked
Sector developments and company hires
Bulgarian guarantees
Market Moves 4 March 2020
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 .......
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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
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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
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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 2020Premium Content
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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
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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
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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
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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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SRT fund launched
AXA engineers return
AXA Investment Managers has completed its eighth partner capital solutions fund. With the move, the firm is seeking to capitalise on diversification opportunities and volume growth in the risk transfer market.
According to Deborah Shire, global head of structured finance at AXA Investment Managers: "The reg cap market has been transformed into a full-fledged alternative investment opportunity, with .......
News 21 February 2020
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Risk transfer round-up - 20 February
CRT sector developments and deal news
Further details have been revealed of CRT transactions that were completed in 4Q19. One is another Barclays deal from the Colonnade programme, which is a US$55m tranche that matures in December 2026.
Lloyds also returned to the market with a third Wetherby trade. Dubbed Wetherby Securities 3 2019, it comprises two tranches sized at £49.5m and £36m (see ......
News 20 February 2020Premium Content
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SME double
EIF closes pair of EFSI guarantees
The EIF has closed two new guarantee agreements supporting European SMEs, both of which are supported by the European Fund for Strategic Investments (EFSI). One is a synthetic securitisation executed with Commerzbank and the other is the extension of a COSME facility with Bank Gospodarstwa Krajowego (BGK).
Under the first agreement, the EIB and the EIF have provided .......
News 19 February 2020
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ArrowMark acquires investment platform
Sector developments and company hires
Acquisition
Market Moves 14 February 2020
ArrowMark Partners has acquired the bank investment platform and assets of StoneCastle Asset Management. As a closing condition of the transaction, stockholders approved a new investment management agreement between the company and StoneCastle-ArrowMark Asset Management - a subsidiary of ArrowMark - and elected eight directors, constituting its board. Sanjai Bhonsle has been elected as the company’s ceo and chairman. .......
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Risk transfer round-up - 13 February
CRT sector developments and deal news
Mediobanca is readying another capital relief trade in addition to its inaugural SRT that will close this year (SCI 7 February). The second transaction is expected to close in 2021.
...... News 13 February 2020Premium Content
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Risk transfer boost
CRT issuance breaks record
Capital relief trade issuance broke a record in 2019, with volumes reaching €7.5bn. This marks the highest total tranche notional volume in the post-crisis period, surpassing the previous record set in 2017.
According to SCI data, total tranche notional volumes for 2019 reached €7.5bn, compared to €6.6bn and €6.7bn for 2018 and 2017 respectively. Multiple CRT investors though estimate .......
News Analysis 13 February 2020
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CRT upgraded due to 'substantial' increase in CE
Sector developments and company hires
Canadian MBS ETF
Market Moves 12 February 2020
BMO Asset Management has launched a new stable of ETFs trading on the TSX, including the first MBS ETF in Canada. Dubbed BMO Canadian MBS Index ETF, the offering aims to provide unique exposure to a segment of the MBS market fully guaranteed by the Canada Mortgage and Housing Corporation (CMHC). The pools each have a term .......