Monthly Archive:: September 2012

How to calculate capital relief under securitization?

This article answers the question how to calculate the capital relief of securitization transaction. This is done in 3 steps: setting the risk of securitized exposure to zero, replacing it by the risk of the tranches in securitization, and finally replacing the risk of the protected tranche by the risk of the protection

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Crisis in Europe: A Very European Break Up

Enjoy the short and very entertaining romantic comedy inspired by crisis in Europe and published shortly on Youtube. She is German, he is Greek. Watch the alarm clock for more understanding about the events in the movie. 20:09 is the year 2009, the first signs of crisis in Europe. Greece delivers since years the manipulating statistics to EU, hiding the problems. What do you think about this movie? If you like it, please share it in social networks

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How to Calculate Effective Number of Exposures?

Effective number of exposures “N” is one of three portfolio-based input parameters for supervisory formula approach. It is the figure determining the concentration of portfolio on a customer level. Find out in this article how the “N” influences the effectively of capital-relief securitization transactions

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European data warehouse: loan-by-loan data delivery to ECB

In the nearest future, the issuers of Asset Backed Securities will be obliged to report the loan-by-loan data into European data warehouse, EU centralized database administered by European DataWarehouse GmbH (ED), the ECB-related entity.  If not, the ABS paper will not be accepted as repo collateral. The reporting is done under “ABS Loan Level Initiative”. Initially, the data delivery had to be started end of 2012 for RMBS, and thereafter enrolled for CMBS, SME, leasing and other asset classes. Per today, the initiative is indefinitely delayed. Additionally, it faces the opposition of the EU countries and can lead to legal disputes in banking secrecy law

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“Asset Encumbrance” against “Secured Funding”: fight since June 2012

In June 2012 the fight of “Asset Encumbrance” against “Secured Funding” has started. “Asset Encumbrance” movement restricts the banks in pledging the assets under securitisation and asset backed transactions.  “Secured Funding” movement rquires from the banks to pledge more collateral for their liabilities and is driven by EU bail-in regulations: in case of bank’s default the government can convert the creditors into the owners of defaulted entity

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4 requirements for Asset Backed Securities to be accepted for ECB funding

As you know, the banks can get the cheap money from European Central Bank (ECB) by pledging to it the Asset Backed Securities (ABS, = true-sale securitization tranches). What are the eligibility criteria on ABS papers provided to ECB? There are several eligibility criteria’s, but the most relevant are

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What can by securitized? Bob Dylan bond!

Latest news in September 2012 is that Goldman Sax securitizes the songs of Bob Dylan. Not his songs, but performance royalties from Bob Dylan, Neil Diamond, and a catalog of other classic performers. The $300 million heavy bond is rated BBB-, so exactly of the border between investment grade and the junk are. Is it crazy

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Requirements on eligible guarantee

Which requirements must be fulfilled, if the credit risk of securitization tranche is mitigated by means of the unfunded protection (read another article which risk mitigation techniques exist)? The Capital Adequacy Directive provides the concrete requirements described in CAD 2006-48-EC in ANNEX VIII para 2.1 number 14 .  Unfortunately, CAD provides only the “keywords” which philosophical criteria are valid, but does not explain how to implement them in praxis

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Which risk mitigation instruments are used under securitization?

ISSUE: under securitization, the portfolio is restructured into 3 tranches (e.g. senior, mezzanine and equity tranche). External investor covers the risk of the e.g. mezzanine tranche, means he provides the risk mitigation instrument covering the risk of the tranche. Which instruments can the investor provide to the bank to cover the risk of the tranche

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Country Sovereign Credit Ratings

It is relevant to know the ratings of country where you start structuring the securitization. The reason is simple: the senior tranche of securitization will be usually capped in rating by the rating of souvereign. This post is relevant in combination with the post “What is necessary to know about rating grades for securitization?&#

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