Capital Relief Trades

  • Mortgage SRT booster voted down

    MEP Caroline Nagtegaal’s amendment 596 to Article 234 of the CRR was rejected by the European Parliament in a vote this week, in order to prevent the establishment of an unwanted precedent. The amendment had been expected to boost significant risk transfer (SRT) transactions of mortgages (SCI 20 April).

    According to Article 234 of the CRR, loan-level insurance protection .......

    News Analysis 22 June 2018

  • Risk transfer round-up - 22 June

    Intesa Sanpaolo is rumoured to be prepping a capital relief trade referencing corporate assets, with the transaction currently believed to be in the portfolio selection process. The Italian lender is a frequent issuer of synthetic SME securitisations, but it has been less active in the corporate space (see SCI’s capital relief trades database).

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    News 22 June 2018

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  • Capital computation

    The complexity involved in executing capital relief trades is driving increased focus on the operational requirements necessary for efficient cost of capital computation. Indeed, implementing a joined-up approach across the front, middle and back offices can benefit an issuer’s bottom line – not only in terms of RWA savings, but also in other areas of their business.

    “A great deal .......

    News Analysis 18 June 2018

  • IFRS 9 benefit welcomed

    The first-time adoption of IFRS 9 has had a muted impact on bank capital ratios and this has been reflected in existing capital relief trades through P&L gains (SCI 14 May). Indeed, the benefit can be acquired whether the first-loss tranche is sold or retained.

    According to a structurer at a large European bank: “The silver lining in SRT deals .......

    News Analysis 15 June 2018

  • Risk transfer round-up - 15 June

    Deutsche Bank is expected to execute two capital relief trades this month. One is a corporate deal from its CRAFT programme and the other is an SME deal from its GATE programme. The bank is also believed to be prepping a trade finance transaction from its TRAFIN programme for either end-3Q18 or 4Q18.  

    .......

    News 15 June 2018

  • CRI explained

    Stephen Taylor, head of structured and capital solutions EME...

    Q: What is credit risk insurance?
    A: Credit risk insurance (CRI) is used to transfer credit risk to insurers. One of the benefits of using CRI in securitisation structures is that this credit enhances the asset pool (subject to the legal/accounting treatment) and can make the portfolio more attractive to lenders.

    Q: How does CRI help optimise a credit portfolio?
    A: Our .......

    Talking Point 15 June 2018

  • Consultant activity surveyed

    Investment consultants for long-term investors such as pension funds haven’t been as active in capital relief trades as other investors, typically hedge funds - although this is expected to change, as corporate defaults pick up over the next two to three years (SCI 25 April). The trades are attractive to consultants’ clients, as they provide exposure to higher quality corporate .......

    News Analysis 1 June 2018

  • Risk transfer round-up - 25 May

    Standard Chartered is expected to roll over two existing trade finance capital relief trades in 2H18. In particular, Shangren 3 and Sealane 3 will be rolled over into two new deals: Shangren 4 and Sealane 4. Shangren 3 – in which Dutch pension fund PGGM was the investor - is a bilateral deal, while Sealane 3 is a syndicated one.

    News 25 May 2018

  • IFRS 9 first-time impact gauged

    Banks have begun releasing their first quarterly results for this year, with the reports suggesting a limited impact from the first-time adoption of IFRS 9. However, the lack of a requirement to restate comparative figures means that the potential volatility in reporting generated by the accounting standard’s three credit stages will have to be monitored over time. Furthermore, banks appear .......

    News Analysis 14 May 2018

  • Standardised bank issuance picking up

    Standardised bank issuance of capital relief trades is picking up, despite the market having long been the purview of larger internal rating based (IRB) banks. This is driven by rating agencies offering more flexible benchmarking and the Juncker plan, which allows the EIF to guarantee both the senior and mezzanine risk.

    However, the shift is slow because of .......

    News Analysis 8 May 2018

  • Risk transfer round-up - 4 May

    The Royal Bank of Scotland is rumoured to be marketing a commercial real estate transaction dubbed “project Dragonstone”. The deal is expected to close in the summer when overall issuance is expected to pick up.

    The market is undergoing a quiet period, following some unusual activity for 1Q18. Sources point to three transactions during this period from Deutsche Bank, Credit .......

    News 4 May 2018

  • SRT features incorporated

    The EIF has granted BBVA a €90m guarantee on a mezzanine tranche of a €1.95bn portfolio which will enable the provision of up to €600m financing of new investment projects to Spanish SMEs. The transaction incorporates structural features from the EBA’s significant risk transfer discussion paper and is part of a wave of agreements supporting SMEs across Europe.

    News Analysis 27 April 2018

  • CRT issuance boost expected

    Total capital relief trade issuance this year should exceed 2017, believes alternative asset manager PAG Asia, one of the sector’s major investors. Issuance is expected to be accelerated by an end to accommodative central bank monetary policies, underlining the importance of investing experience and expertise.

    James Parsons, portfolio manager at PAG Asia, says: “This year may be a pivotal year .......

    News Analysis 25 April 2018

  • Potential solution to IFRS 9 volatility

    Capital relief trade issuers are understood to be considering whether credit guarantees which are accounted for as a “reimbursement asset” can be used to mitigate volatility arising from the implementation of IFRS 9 expected credit losses. However, the accounting technique features its own challenges and raises a number of other questions.

    A reimbursement asset is recognised for holders of credit .......

    News Analysis 25 April 2018

  • Proportional protection reviewed

    EU policymakers are currently negotiating an amendment to Article 234 of the CRR that would allow banks to treat first-loss protection as proportional protection. If successful, the move is expected to boost mortgage significant risk transfer issuance.

    According to Article 234 of the CRR, loan-level insurance protection for synthetic securitisations that is tranched first-loss protection must apply Chapter .......

    News Analysis 20 April 2018

  • Risk transfer round-up - 20 April

    The capital relief trades market is undergoing a quiet period, following some unusual activity for Q1. Sources point to three transactions during this period from Deutsche Bank, Credit Suisse and a “UK bank with a non-standard portfolio”. Meanwhile, a Spanish bank is rumoured to be prepping another deal.

    Drivers behind the Q1 activity include pent-up supply from last .......

    News 20 April 2018

  • Synthetic NPLs gain traction

    The ECB’s latest non-performing loan provisioning guidelines are expected to trigger increased synthetic NPL securitisation issuance. Nevertheless, defining a credit event for a portfolio of loans that are already non-performing remains a significant challenge.

    The ECB guidelines prescribe full provisioning for unsecured NPLs after two years and seven years for secured NPLs. “This could potentially incentivise banks to .......

    News Analysis 29 March 2018

  • Innovative Dutch SRT completed

    Rabobank has completed an innovative Dutch significant risk transfer (SRT) deal with the EIF. The €128m financial guarantee is the lender’s only transaction where the second-loss risk has been fully transferred, as well as its first transaction under the CRD 4 in the SME space.

    The transaction will be guaranteed by the European Fund for Strategic Investments (EFSI). .......

    News 28 March 2018

  • Seeking to scale

    The capital relief trades (CRT) market suffers from a material gap between banks’ needs and the availability of investor capital, within the strategy. To facilitate growth, one of the next steps should be to attract greater buy-in from long-term investors, especially pension funds and their investment consultants.

    Kaikobad Kakalia, cio at Chorus Capital, believes that long-term investors - especially pension .......

    News Analysis 26 March 2018

  • Market moves - 23 March

    CDS clearing developments
    Intercontinental Exchange has transitioned index CDS open interest from CME Group to ICE Clear Credit, follows CME Group’s decision to exit the CDS business and transfer client positions to an alternative clearing house. ICE Clear Europe has also launched clearing for North American investment grade and high yield index CDS instruments, thereby providing regional customers the ability .......

    News 23 March 2018

  • Risk transfer round-up - 23 March

    Credit Suisse is believed to have priced a capital relief trade referencing a loan book originated in Switzerland. The deal was allegedly 3x subscribed, with guidance at 7.625% but printing at 7%.

    Separately, arrangers note an increase in requests for transactions by standardised banks, with deals already said to be in the pipeline. Most of the transactions until now were .......

    News 23 March 2018
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