Latest news with #securitisation
Reuters
5 days ago
- Business
- Reuters
EU wants to ease securitisation rules to boost lending to economy
BRUSSELS, June 17 (Reuters) - The European Commission proposed on Tuesday to loosen the EU's overly strict securitisation rules for banks, in a bid to boost the underdeveloped securitisation market and free up capital for lending while still safeguarding financial stability. It is the first Commission proposal under a new push by the EU executive arm to better integrate the 27-nation bloc's capital markets to provide more sources of financing for companies to better compete with China and the United States. The proposal does not, however, address the problem of Europe's debt bias in corporate financing, an issue especially for small enterprises -- a vast majority of EU firms -- which often do not have sufficient collateral to secure a bank loan. The Commission has said it would present ideas to increase equity financing, seen as more stable and beneficial, later. The Commission proposal, which will have to be agreed among EU governments and the European Parliament before it enters into force, seeks to roll back some of the sharp tightening of securitisation rules in the wake of the sub-prime mortgage crisis in the United States after 2007. "This was the root cause of the great financial crisis, but we should not confuse the instrument with its misuse," EU Financial Services Commissioner Maria Albuquerque said. "We have revised the securitisation framework which entered into force in 2019, and which was focused on making sure that there were no risks," she said, adding too much focus on risk avoidance stifled the whole market. "Risk is like everything else -- if you take risk to zero, you kill all activity. So now we are trying to find a better balance between risk and the positive outcome that should come from the use of this instrument," she said. Securitisation means that banks can package loans to companies or households and sell them to investors, like insurance companies or asset managers, as securities. This lets banks transfer the risk associated with the loans to the investors and use the bank capital they had to set aside to cover that risk, to make new loans. But the Commission did not have any estimates of how much bank capital the relaxed rules could free up or how lending might increase as a result. "It is impossible to predict," one Commision official said. The Commission said there was room for the securitisation market to grow because in the U.S. it was around $14 trillion while in the EU only 1.6 trillion euros ($1.85 trillion), still below the peak of 2 trillion euros from 2008, when the U.S. sub-prime crisis hit Europe. "We've all learned the lesson, so the framework is more robust now," Albuquerque said. "We are still making sure that this is managed properly, hence the capital requirements and the floors that we are putting in place. We are lowering them, but we're not taking them off," she said. Among the proposed changes, investors would no longer need to double-check from their side if the bank issuing the security fulfilled all the necessary requirements. Due diligence would also be more proportionate to the level of risk. There would also be less paperwork, fewer details required to be disclosed and a lighter transparency regime for private deals compared to transactions with public entities. "This isn't about returning to practices that led to financial turbulence," Albuquerque said. "Financial stability can never be endangered, but we think there is room to manage this better, increase the capacity and the efficiency of banks to lend to the economy and still preserve financial stability." ($1 = 0.8642 euros)
Telegraph
6 days ago
- Business
- Telegraph
Young people are taking out loans to buy pizzas
The film of Michael Lewis's book The Big Short is a magnificent piece of storytelling that made the 2008 financial crash comprehensible. In the movie, a renegade hedge fund boss discovers that the financial system contains an unexploded bomb. Huge amounts of poorly secured credit are floating around that are far riskier than the holders realise, or want to admit. It's a collective hallucination of trust, and he bets that it must eventually collapse. It introduced a mass audience to collateralised debt obligations (CDOs), one of the sophisticated creations used to hide the dodgy debt. Loans had been chopped up and blended with other loans into new tradable financial products like CDOs, in a process called securitisation. Sometimes, these new securities were chopped up and blended again, obscuring the risk even more. The credit ratings agencies insisted these new products were safe investments – but the hedge fund contrarian had discovered they were very high risk. Much of the debt had been advanced as mortgages to low-income families who were vulnerable to a rise in interest rates, and so the value of the securities would collapse when lending rates went up. Surely it couldn't happen again? However, today, unsecured credit is being advanced to allow consumers to buy not houses, but pizzas, burritos and burgers. Companies including Deliveroo and DoorDash have formed partnerships with Klarna, the buy-now-pay-later (BNPL) lender. And those instant gratification debts are now being securitised. Last October, Klarna offloaded most of its UK debt – worth some £30bn – to Elliott Investments, a hedge fund. Private equity group KKR has agreed to buy up €40bn (£34bn) of PayPal loans. Consumer credit has come a long way from mortgages to munchies. When financial social media caught wind of the developments a couple of months ago, it turned it into a meme: the 'collateralised burrito obligation'. "You have no intention of paying off your collateralized burrito obligations, do you?" — litquidity (@litcapital) May 20, 2025 Families who couldn't pay their mortgages in 2008 left the keys on the kitchen table, the door unlocked, and simply disappeared. But good luck repossessing a burger once it has been eaten. So do we need to get ready for the sequel, The Big Mac Short? The number of people seeking help to repay BNPL debt has increased 68pc, The Telegraph reported in May. The amounts are still dwarfed by mortgages, but it's significant, and the unsecured portion is increasing. In a cost of living crisis, household bills are now being paid on BNPL. The New York Times reports how increasingly even groceries are being paid for with it. Supporters argue that families can avoid punitive credit card fees if they pay their BNPL loans on time. In one sense, it's nothing new: an informal credit system has always been with us, but in the shadows. 'The fundamentals haven't changed,' explains Ralph Jainz, a fund manager. 'A debt is a debt, and one day a bloke with a baseball bat turns up at your doorstep, demanding money. 'It's always been a nasty business, just as it was in the slums of Paris during Les Misérables,' he adds, referring to Victor Hugo's novel in which the Thénardiers are the exploitative and ingenious community credit brokers, who immiserate and enslave the honest. Pawn shops and doorstep lenders are not new. What we are seeing is something that was once in the shadows emerge and meet the regulated financial system. Klarna is in good nick, with a robust credit rating and plenty of capital – it can always raise fees to retailers. But what about the holders of the burrito securities? In theory, securitisation should make things more legible, not more obscure. As one pundit explained when the collateralised burrito obligation meme was bouncing around the socials, 'as a financial engineering and market completion enjoyer, I think this is great. A complete market is one where every risk can be priced, traded or hedged, ie: every risk has a price, every future has a counterparty'. Ratings agencies who were so complacent in 2008, giving CDOs a clean bill of health, have been more cautious this time. S&P and Moody's do not rate burrito debt or BNPL. But just as with the subprime mortgages, S&P notes that 'BNPL asset performance may also be particularly vulnerable to a turn in the credit cycle'. BNPL debt is really part of a bigger story: the emergence of a shadow banking sector, with an increase in lending by non-regulated institutions like hedge funds and private equity, firms who are taking on the burrito loans today. Hedge fund lenders don't have to issue monthly risk reports or make deposit guarantees. One of the most remarkable stories of the year, as Reuters has reported, is that hedge funds loaded up with burrito debt are placing bets against Rachel Reeves. Sixty per cent of bond trading volumes in January and February were from hedge funds. 'The real scandal is that the world has massively got into private credit,' says Jainz. 'But one day a CEO will wake up and have debt he or she doesn't understand.'
Yahoo
12-06-2025
- Business
- Yahoo
KBRA Releases Global ABS 2025: Day 2 Recap
LONDON, June 12, 2025--(BUSINESS WIRE)--KBRA releases a Day 2 recap of the 29th annual Global ABS conference. Day 2 of the Global ABS 2025 conference featured a full agenda, covering a broad spectrum of topics—from the savings and investment union regulations to the tokenisation of cash flows—in addition to the typical securitisation sector panels. Business meetings, along with insightful conference panels and presentations, typically contribute to a busy second day of the conference. The day began with several networking breakfast meetings, followed by a series of panels focused on regulations and the direction of the industry. It concluded with a range of sessions, including the researchers' roundtable. The wide variety of panel discussions involved subjects such as collateralised loan obligations (CLO), private credit, residential mortgage-backed securities (RMBS), and more. Click here to view a recap of some of the day's panel discussions. Click here to view the report. Recent Publications Global ABS 2024: Day 1 Recap UK Mortgage and Housing Trends: June 2025 Update Data Centers: A Comparison of ABS and CMBS Structures European Auto ABS Indices: April 2025 European Auto ABS: Tariff Spillovers May Weigh on Used Vehicle Values Tariff Uncertainty Amplifies Pressure on Diamond ABS Sector European CLO Manager Style Comparisons: March 2025 Update European Securitisation: Shifting Funding Strategies 2025 European Structured Finance Sector Outlook: Keep Calm and Carry On About KBRA KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions. Doc ID: 1009818 View source version on Contacts Gordon Kerr, European Macro Strategist+44 20 8148 Rahat Virji Allana, Associate Director+44 20 8148 Irfan Surti, Associate Director+44 20 8148 John Hogan, Co-Head of Europe, Ratings General+353 1 588 Media Contact Adam Tempkin, Director of Communications+1 Business Development Contacts Mauricio Noé, Co-Head of Europe+44 20 8148 Miten Amin, Managing Director+44 20 8148 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
11-06-2025
- Business
- Yahoo
KBRA Releases Global ABS 2025: Day 1 Recap
LONDON, June 11, 2025--(BUSINESS WIRE)--The Global ABS 2025 conference, held in Barcelona on 10-12 June, opened to a record 5,000+ registered attendees, including over 2,000 issuers and investors, as well as a full programme. The conference celebrated its 29th anniversary as the largest annual European structured finance conference and is hosted by the Association for Financial Markets in Europe (AFME). This year marks the first time the event is being organised by FT Live, following its takeover of the previous organiser, Invisso. Judging by the strong attendance and KBRA's very active meeting calendar, the industry event reflects the growth momentum experienced by European securitisation markets. New transaction issuance started the year on a strong note and, despite a temporary pause, continued to build a robust and positive pipeline of transactions across all product types. Day 1 panels featured market updates on asset-backed securities (ABS), collateralised loan obligations (CLO), commercial mortgage-backed securities (CMBS), nonperforming loans (NPL), and more. Other discussions included broader topics such as regulation and synthetic risk transfer (SRT) securities, including several plenary sessions. KBRA speakers featured on a number of important panels covering solar panel loans, CLOs, and residential mortgage-backed securities (RMBS) markets. Click here to view a recap of some of the day's panel discussions. Recent Publications UK Mortgage and Housing Trends: June 2025 Update Data Centers: A Comparison of ABS and CMBS Structures European Auto ABS Indices: April 2025 European Auto ABS: Tariff Spillovers May Weigh on Used Vehicle Values Tariff Uncertainty Amplifies Pressure on Diamond ABS Sector European CLO Manager Style Comparisons: March 2025 Update European Securitisation: Shifting Funding Strategies 2025 European Structured Finance Sector Outlook: Keep Calm and Carry On About KBRA KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions. Doc ID: 1009819 View source version on Contacts Gordon Kerr, European Macro Strategist+44 20 8148 Utkarsh Mehta, Senior Analyst+353 1 Rahat Virji Allana , Associate Director+44 20 8148 John Hogan, Co-Head of Europe, Ratings General+353 1 588 Media Contact Adam Tempkin, Director of Communications+1 Business Development Contacts Mauricio Noé, Co-Head of Europe+44 20 8148 Miten Amin, Managing Director+44 20 8148 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Associated Press
23-05-2025
- Automotive
- Associated Press
KBRA Releases European Auto ABS Indices: April 2025
LONDON--(BUSINESS WIRE)--May 23, 2025-- KBRA releases its European Auto ABS Indices: April 2025, providing monthly credit trends across securitised auto loans and leases. Click here to view the report. About KBRA KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions. Doc ID: 1009582 View source version on CONTACT: Killian Walsh, Managing Director +353 1 588 1184 [email protected] Ford, Managing Director +1 646-731-2329 [email protected] Development ContactArielle Smelkinson, Senior Director +1 646-731-2369 [email protected] KEYWORD: UNITED KINGDOM EUROPE INDUSTRY KEYWORD: PERSONAL FINANCE FINANCE PROFESSIONAL SERVICES GENERAL AUTOMOTIVE AUTOMOTIVE SOURCE: Kroll Bond Rating Agency, LLC Copyright Business Wire 2025. PUB: 05/23/2025 04:48 AM/DISC: 05/23/2025 04:47 AM
