Impressive momentum in recent years
Synthetic securitisation has seen impressive momentum in recent years which
has gone largely unnoticed. Banks have increasingly tapped this market to
manage credit risk and improve their capital ratios. Policymakers have paid
renewed attention to securitisation markets, too. They see securitisation as a
tool to enhance lending to the real economy, which has been anaemic in some
euro area countries. Consequently, the European Commission has named
restarting high-quality securitisation as one of the main objectives of its Capital
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Markets Union project. But discussions have centred around true-sale
securitisation, largely neglecting the potential of synthetic securitisation.
Especially for tailor-made loans such as loans to small and medium-size
enterprises (SME), however, synthetic securitisation offers lucrative features. In
contrast to plain-vanilla (true-sale) deals, SME loans can easily be securitised in
a synthetic way, thus releasing banks’ regulatory capital, which can then be
used for the provision of additional funding to SMEs.
To shed some light on
these points, we compare synthetic and true-sale securitisation in Europe, their
regulation, and the most recent issuance and market quality trends in this
publication.
EU Forecast
euf:ba1.8i:153/nws-01