European Securitisation: Market Update and Transparency Initiatives OECD Workshop on Securitisation...

European Securitisation: Market Update and Transparency Initiatives

OECD Workshop on SecuritisationMadrid, 27 May 2010

2

Agenda

• Introduction

• European Securitisation Market Update

• Transparency Initiatives

3

Who We Are

• The Association for Financial Markets in Europe (AFME) represents the shared interests of a broad range of global and European participants in the wholesale financial markets

• Our policy and advocacy section brings together a group of knowledgeable professionals to communicate the industry perspective to regulators, policy makers, and the general public

• Our business policy section supports the day-to-day commercial activities of our members through industry initiatives related to market standardisation and good practice in a particular business area or product line

• Previous affiliates of SIFMA (the Securities Industry and Financial Markets Association) - the European Covered Bond Dealers Association, the European High Yield Association, the European Securitisation Forum, the European Primary Dealers Association, the European Securities Services Forum, and the European Primary Markets Division - have been integrated into the business policy section's divisions.

European Securitisation Market Update

5

ESF Research

AFME / ESF Securitisation Data Report• Information on issuance, balances outstanding,

rating changes, prices, spreads, indices and global comparative data for European and US ABS and ABCP

AFME / ESF Securitisation Monthly Data Supplement

• Updates of selected charts contained in the quarterly Securitisation Data Report, including spreads and prices of European and US CMBS, RMBS and ABS, indices and total return data

6

European Securitisation Market Issuance

• New issuance in the European securitisation market during 2009 amounted to EUR 414.1 bn

• Retained deals accounted for about 99% of total issuance in 2009 and 98% in 2008, compared to about 24% in 2007 (more than 50% in H2 2007)

Sources: Bloomberg, JP Morgan, Merrill Lynch, RBS, Thomson Reuters, Unicredit, SIFMA

European securitisation issuance, EUR billion

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

7

European Securitisation Market Issuance by Asset Class


European securitisation issuance, 2007



Total EUR 453.7 billion

CMBS10.5%

RMBS57.2%

CDO19.5%

ABS12.7%


RMBS82.3%

CMBS0.7%

CDO6.8%

ABS10.3%


RMBS57.7%

CDO28.1%

ABS13.7%

CMBS3.7%

8

European Securitisation Market Issuance by Country






Italy12%

Spain11%

UK38%

Netherlands10%

Russia0%

Portugal2%

Belgium5%

Others1%Multinational

4%

France2%

Germany7%Greece

2%Ireland

6%


Greece5%

Ireland3%

Italy16%

Netherlands11%

UK22%

Spain15%

Multinational10%

Portugal3%

Russia0%

Germany6%

France2%

Belgium7%


Netherlands9%

Portugal2%

Russia0%

Spain13%UK

39%

Multinational21%

Belgium1%France

1%

Germany4%Greece

1%Ireland2%Italy6%

Others1%

9

European Securitisation Performance Update

European 3-5 year AAA RMBS Spreads

Source: Markit. Data as of 30 April 2010

European 3-5 year AAA RMBS Prices

Source: Markit. Data as of 30 April 2010

10

ABS Evolution in the ECB Collateral Framework

2006 2007 2008 2009

Average ABS eligible € 0.5 trillion € 0.7 trillion € 1.1 trillion

€ 1.3 trillion

Average value of assets put forward

€ 930 billion1

€ 1,101 billion2

€ 1,579 billion

€ 2,034 billion

Average share of ABS 12% 16% 28% 23%

Overall ABS amount submitted

€ 112 billion € 176 billion € 442 billion € 468 billion

1Figure subsequently revised to EUR 906 billion2 Figure subsequently revised to EUR 1,148 billionSources: ECB 2009, 2008, 2007 and 2006 Annual Reports

• European securitisation outstandings totaled EUR 1.88 tn as of 31 December 2009, EUR 1.74 tn, EUR 1.29 tn and EUR 1.11 tn as of end 2008, 2007 and 2006, respectively

Transparency Initiatives

12

RMBS Issuer Principles for Transparency and Disclosure

• Published in December 2008:• Principles for transparency and disclosure • Two data reporting templates for RMBS issuers (Prime RMBS

Standardised Reporting Template and a combined uniform Credit Rating Agency Reporting Template for UK Non-Conforming RMBS)

• Developed through active consultation with RMBS issuers and other market participants including investors from Italy, the Netherlands, Spain and the UK

• Enhance four aspects of data disclosure: transparency, accessibility, comparability and granularity

13

RMBS Issuer Principles for Transparency and Disclosure (cont’d)

• AFME / ESF presented the Principles to the European Commission, Governments, the European Central Bank and various National Central Banks

• 14 Endorsing Firms (12 in the UK, 2 in The Netherlands) and 19 Programme issuers endorsed the Principles and agreed to report at least 90% of mandatory fields by 31 December 2009

• Three credit rating agencies agreed to adopt a uniform reporting template for the minimum data to be provided by UK non-conforming RMBS issuers from 31 March 2009

• Work is under way to continue developing the RMBS Issuer Principles and increase the number of endorsing firms

• Version 2 of the Principles will be developed in a variety of areas, including standardisation of definitions

14

Issuer Programme Jurisdiction

Obvion N.V. Storm The Netherlands

SNS Bank N.V. Hermes and PEARL The Netherlands

Abbey National PLC Holmes Master Issuer PLC United Kingdom

Barclays Bank PLC Gracechurch Mortgage Financing PLC United Kingdom

Bradford & Bingley PLC Aire Valley Master Trust United Kingdom

Britannia Building Society

Leek United Kingdom

Clydesdale Bank PLC Lanark Master Issuer PLC United Kingdom

GMAC-RFC Ltd (UK) RMAC United Kingdom

HBOS Permanent Master Issuer PLC United Kingdom

Investec Bank PLC Residential Mortgage Securities, Money Partners Securities, Kensington Mortgage Securities and Landmark Mortgage Securities

United Kingdom

Lloyds TSB Bank PLC Arkle Master Issuer PLC United Kingdom

Nationwide Silverstone Master Issuer PLC United Kingdom

Paragon Group Paragon Mortgages PLC United Kingdom

Royal Bank of Scotland Group

Arran Residential Mortgages Funding PLC and Greenock Funding Limited

United Kingdom

AFME / ESF Principles – 14 Endorsing Firms and 19 Programmes

15

ESF UK Working Groups

1. AFME / ESF Working Group on Standardisation of Investor ReportsWorking on a standardised reporting template for UK RMBS applying to both stand alone and master trust structures

2. AFME / ESF Working Group on Standardisation of DefinitionsCreating commonly agreed definitions for terms such as prime and non-prime, arrears, valuation amounts, early repayments among others

3. AFME / ESF Working Group on Standardisation of DocumentationBuilding a standardised prospectus for stand alone RMBS first, and master trust RMBS thereafter

16

AFME / ESF Investor ABS Transparency Survey

AFME / ESF Survey based on 31 investors from across European jurisdictions as of 28 April 2010

Percentage of the ABS investments among the respondents:

# Answer Response %

1 SENIOR TRANCES 28 90%

2 MEZZANINE TRANCHES 21 68%

3 EQUITY TRANCHES 6 19%

Question 1: Would loan-level data be of use to you?

# Answer Response %

1 YES 24 77%

2 MAYBE 7 23%

3 NO 0 0%

Total 31 100%

17

AFME / ESF Investor ABS Transparency Survey (cont’d)

Question 2: If originators provided loan-level data, what is your capability to manipulate and use the large amount of data that would be provided?

# Answer Response %

1 WE HAVE THE CAPABILITY TO USE THIS FORM OF DATA

20 67%

2 WE ARE NOT INTERESTED IN LOAN-LEVEL DATA

0 0%

3

WE WOULD LOOK TO THIRD PARTIES TO PROVIDE PRODUCTS TO HELP ASSESS THIS DATA

10 33%

Total 30 100%

Question 3: Would standardised investor reports make analysis of ABS?

# Answer Response %

1 SIGNIFICANTLY EASIER 26 84%

2 MARGINALLY EASIER 3 10%

3 MAKE NO DIFFERENCE 2 6%

Total 31 100%

18

Question 4: Would historical performance data be of use to you (i.e. performance data for the loans prior to securitisation)?

# Answer Response %

1 YES 27 87%

2 MAYBE 3 10%

3 NO 1 3%

Total 31 100%

Question 5: Would more accurate cash flow models be of use to you?

# Answer Response %

1 YES 26 84%

2 MAYBE 3 10%

3 NO 2 6%

Total 31 100%

Question 6: Would a standardised summary of the legal structure of each transaction be of use to you?

# Answer Response %

1 YES 28 90%

2 MAYBE 1 3%

3 NO 2 6%

Total 31 100%

AFME / ESF Investor ABS Transparency Survey (cont’d)

19

Regulatory Initiatives Overview

CRD changesECB and BoE projects re loan-by-loan reportingIOSCO and CESR projects re pre- and post-trade

transparency (MiFID review)SEC revision of ABS Offering Rules

20

Questions?

Contact details:

Anna Zennaroafme / Association for Financial Markets in EuropeP: +44-207-743-9305 [email protected]

http://www.afme.eu/

European Securitisation: Market Update and Transparency Initiatives OECD Workshop on Securitisation...

Documents

Transcript of European Securitisation: Market Update and Transparency Initiatives OECD Workshop on Securitisation...