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Dirección General del Servicio de Estudios
THE SECURITISATION MARKET IN SPAIN: PAST, PRESENT AND FUTURE
Roberto BlancoHead of the Financial Studies Division (DG Economics, Statistics and Research)
WPFS WORKSHOP ON SECURITISATION
Madrid27-28 MAY 2010
OUTLINE OF THE PRESENTATION
1. The pre-crisis period (2000-August 2007)Substantial expansion of ABS and covered bondsMain charateristics of the productsDriving factors of the expansion
2. The crisis period (since August 2007)QuantitiesPricesMain factors
3. The perspectives4. Concluding remarks
2
ABS AND COVERED BONDS EXPANDED SUBSTANTIALLY IN SPAIN BETWEEN 2000 AND 2007 Q2
3
0
100
200
300
400
500
600
700
800
00 01 02 03 04 05 06 07 Q2
ABS COVERED BONDS OTHER FIXED INCOME SECURITIES
OUTSTANDING AMOUNTS. FINANCIAL SECTOR. SPAIN
mm €
SOURCE: Banco de España.
SPAIN BECAME ONE OF THE MAIN EUROPEAN MARKETS FOR ABS AND COVERED BONDS
4
MS RANKING MS RANKING
ABS 13.2% 2nd. (after UK) 14.2% 2nd. (after UK)
COVERED BONDS 13.5%3rd. (after Germany and Denmark)
21.4% 2nd. (after Germany)
SOURCE: European Securitisation Forum, European Mortgage Federation and Dealogic.
OUTSTANDING AMOUNTS J UNE 2007
GROSS ISSUANCE 2004-2007 Q2
SPANISH WEIGTH
ABS VS COVERED BONDS
5
ABS COVERED BONDS
AVERAGE MATURITY (YEARS,J UNE 2007) 25.1 10.5
MATURITY MISMATCH NO YES
RISK TRANSFERYES
(but in practice, small)NO
TRANCHES YES NO
COLLATERAL ANY ASSETMORTGAGES
LOANS TO GENERAL GOVERNMENT
STRUCTURECOULD BE COMPLEX(but not in practice)
SIMPLE
DISTINCTIVE FEATURES OF SPANISH SECURITISATION
1. Simple productsNo CDO, CDO squaredNo synthetic securitisation
2. Less conflicts of interest between originators and investorsOriginators retained the equity tranches
3. Comparatively higher transparency and investor protectionProspectusRegistry at the CNMVLegal framework for mortgages
6
CREDIT RISKS WERE NOT TRANSFERRED WITH ABS
7
0
1
2
3
4
5
6
7
04 05 06 07
PROPORTION OF SECURITISED ASSETS DERECOGNISED
%
SOURCE: Banco de España.
COLLATERAL. ABS VS COVERED BONDS
8
OUTSTANDING AMOUNT. SPAIN. BREAKDOWN BY COLLATERALDEC 2006
8.4
91.6
GENERAL GOVERNMENT LOANS
MORTGAGES
COVERED BONDS
%
38.4
37.1
11.5
4.7
8.10.2
MORTGAGESCOVERED BONDSLOANS TO SMECONSUMER LOANSOTHER ASSETSSECURITIZATION BY NON-FINANCIAL CORP.
ABS
%
SOURCE: Banco de España.
FUNDING WAS THE MAIN FACTOR FOR THE EXPANSION OF ABS
9
0
50
100
150
200
250
300
350
00 01 02 03 04 05 06 07
LOANS (NET FLOWS) DEPOSITS (NET FLOWS)
FINANCING GAP OF SPANISH CREDIT INSTITUTIONS
mm €
SOURCE: Banco de España.
AFTER THE SUMMER OF 2007 PUBLIC ISSUANCE OF ABSs FELL EVERYWHERE
10
ABS. GROSS ISSUANCE VOLUMES
0
100
200
300
400
500
600
700
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
00 01 02 03 04 05 06 07 08 09
USA. NON RETAINEDUSA. RETAINEDEU. NON RETAINED (RIGHT HAND)EU. RETAINED (RIGHT HAND)
USA AND EU
mm € mm €
SOURCE: Dealogic.
0
20
40
60
80
100
120
140
160
180
00 01 02 03 04 05 06 07 08 09
NON RETAINED
RETAINED
SPAIN
mm €
SOURCE: Banco de España and own estimates.
WHEREAS COVERED BOND ISSUANCE WAS MORE RESILIENT
11
COVERED BONDS. GROSS ISSUANCE VOLUMES
0
50
100
150
200
250
300
00 01 02 03 04 05 06 07 08 09
J UMBO OTHER
EU
mm €
SOURCE: Dealogic.
0
10
20
30
40
50
60
00 01 02 03 04 05 06 07 08 09
SPAIN
mm €
SOURCE: Banco de España.
IN TERMS OF PRICES THE IMPACT OF THE CRISIS WAS ALSO LESS STRONG FOR COVERED BONDS
12
-20
80
180
280
380
480
580
680
780
Jul-0
7
Jan-
08
Jul-0
8
Jan-
09
Jul-0
9
Jan-
10
SPAIN (5.5 years)
GERMANY (3 years)
FRANCE (4.5 years)
IRELAND (4.3 years)
COVERED BONDS SWAP SPREADS
bp
-20
80
180
280
380
480
580
680
780
Jul-0
7
Jan-
08
Jul-0
8
Jan-
09
Jul-0
9
Jan-
10
SPAIN (5-6 years)
UK (5 years)
ITALY (6-7 years)
NETHERLANDS (5 years)
RMBS AAA SPREADS
bp
SOURCE: J P Morgan and Datastream
FACTORS FOR THE WORST PERFORMANCE OF ABSs AT THE INTERNATIONAL LEVEL
1. Lack of investor confidence for ABSsLack of transparency regarding underlying assetsConflict of interests between originators and investors
2. Exit of SIVs and ABCP conduitsThey played a crucial role in transforming maturities in ABSs
3. Market liquidity4. Uncertainty regarding credit quality
13
THE PERSPECTIVES: DEMAND
KEY FACTORS:1. Uncertainty regarding credit quality2. Investor confidence in the products3. Liquidity in the secondary markets
For (1), the macroeconomic and financial developments will play a role
For (2) and (3) current private and public iniciatives to re-establish securitisation on a sounder basis will help
14
THE PERSPECTIVES: SUPPLY
15
0
50
100
150
200
250
96 97 98 99 00 01 02 03 04 05 06 07 08 09
SPAIN USA UK EMU
DEBT OF HOUSEHOLDS AND NFC / GDP
%
-50
0
50
100
150
200
250
300
350
00 01 02 03 04 05 06 07 08 09
LOANS (NET FLOWS) DEPOSITS (NET FLOWS)
FINANCING GAP OF SPANISH CREDIT INSTITUTIONS
mm €
SOURCE: Banco de España.
CONCLUDING REMARKS
The pre-crisis levels will not (and should not) be reached in the medium termLower demand: SIVs and conduits will not (and should not) returnLower suppy: deleveraging of the financial and non-financial sectors
But some recovery from the current low levels seems desirable since securitisation can play some important economic roles (not played by covered bonds)Credit risks can be transferred (diversification)No maturity mismatchWider collateral (SMEs)Tranching
Main challenges: Restore investor confidenceImprove market liquidity
Current private and public iniciatives to re-establish securitisation on a sounder basis are welcome
16
THANKS FOR YOUR ATTENTION
DG Economics, Statistics and Research