In recent years, the two subsegments of synthetic securitisation have seen
diverging trends. Riskier arbitrage transactions have disappeared. Meanwhile,
lower-risk balance sheet synthetic deals have surged. Most trades have become
bilateral. Balance sheet synthetic securitisation has significant potential to
enhance bank lending to the real economy in Europe.
It offers flexibility
regarding underlying loans and is thus particularly applicable to SME loans. In
addition, this market segment exhibits robust asset quality. Long-term
institutional investors are the major buyers.
Against this background, the
inclusion of balance sheet synthetic deals in the developing STS framework
could contribute to a recovery in lending in Europe.