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Securitisation is becoming the preferred funding route for an increasing number of issuers and is one of the largest, fastest growing contributors to global capital markets. For issuers securitisation offers efficient, diversified sources funding and for investors it offers exposure to a range of credit, maturity and payment structures.
In 2000 €78bn of asset backed and mortgage backed securities were issued in Europe. In 2005 this number had grown to €319bn (a 32% increase on the 2004 issuance).
As well as an increase in volume, the last few years have also seen an increase in the range of asset classes securitised. Recently, the largest growth areas in Europe have been in commercial mortgage securitisation (CMBS) and collaterised debt obligation issuance (CDOs). Over recent years, a number of investment banks have set specialist commercial mortgage conduits lending specifically with a view of repackaging the assets for securitisation, fuelling the growth in the CMBS market. Likewise, the CDO market has been driven by investor interest in the underlying economics in the highly leveraged loans used in private equity and other such transactions.
Issues facing the securitisation industry
Two of the largest issues facing the European securitisation industry in 2006 are the implementation of International Financial Reporting Standards (IFRS) and the imminent introduction of the new Basel II capital requirements in 2007. International Financial Reporting Standards (IFRS)
 | | Under IFRS a number of transactions that may have historically achieved either off balance sheet or a compromise accounting treatment under local accounting standards will no longer achieve de-recognition. Furthermore there are a number of interpretational issues surrounding the implementation of IFRS as it applies to securitisation transactions. |
More detail on some of these issues and where securitisation accounting is moving globally can be found in our article Are we there yet?Basel II
For a number of years many have predicted that the eventual enforcement of the Basel II accord will spell the end of sustained growth in European securitisation as regulatory arbitrage opportunities are lost. However as we enter the final straight before implementation, the market shows little evidence of slowing. Whilst it is clear that securitisation will no longer offer all of the regulatory benefits previously achieved, some participants argue that in fact certain asset classes benefit from aspects of the new requirements.
Our global team of over 400 securitisation professionals have worked on more than 14,000 transactions in over 40 countries. To find out more about how we can help your securitisation business please contact any one of our team.
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