Securitisation

There have been a number of recent articles in the mainstream press about the 10 year anniversary of the collapse of Lehman Brothers, with some saying familiar risks are emerging and questioning whether lessons have been learned.

In the early 1990s, Marvel comics introduced a world 100 years in the future with new stories for its popular heroes and villains. Doctor Doom's story was called "The Doom of Tomorrow".

Since that first encounter the market has remained a core financing option for banks’ consumer and corporate lending books, but there has always been a degree of innovation around the fringes.

Now that the summer lull has finally kicked in, it seems an ideal time to review the ABS market so far this year and try to make a prediction for the remainder of 2018.

In the past two years the diversity of supply in the ABS market has been restricted by the availability of cheaper funding alternatives, both in the Eurozone through the TLTRO and in the UK, where the BoE Term Funding Scheme has suppressed issuance from the traditional banks and building societies.

It’s been an interesting week for European CLOs; one of our favourite picks in fixed income. 

The last ten year period has seen supply from various parts of the ABS market ebb and flow.

For many years ABS has primarily been used as a funding tool for banks and other lenders.

It seems a long time since the European ABS market saw any meaningful volatility.

Nearly 4,000 international ABS market participants attended the Association for Financial Markets in Europe’s Global ABS Conference last week, the biggest attendance since the financial crisis.

European ABS market performance and volatility have been remarkably stable since 2016, largely weathering broader credit weaknesses so far this year.

Last year we wrote about the forthcoming "STS" (Simple, Transparent and Standardised) regulation for securitisation, designed in part to harmonise eligibility and capital charges for ABS across the wider regulatory landscape.