Statistics point to increasing appetite for securitisation
The value of Irish resident securitisation vehicles fell again in Q2 but the number is on the rise
Financial institutions and corporates use securitisation to transfer risk from their balance sheets.
Although the assets held in Irish securitisation vehicles declined during the second quarter of 2013, the number of such vehicles increased, pointing to an “an underlying appetite” for securitisation.
According to statistics from the Central Bank, the number of Irish resident financial vehicle corporations (FVCs) or special purpose vehicles (SPVs) increased from 682 in the first quarter of 2013 to 690 in the second quarter. The majority of these new vehicles are involved in traditional securitisations, whereby the institution transfers assets off-balance sheet to an FVC, with traditional FVCs now accounting for 67 per cent of entities.
“In general, with reporting numbers relatively stable since Q1 2012, this suggests there is still some appetite from financial institutions for securitisation in order to manage credit risk,” the Central Bank said.
Assets of Irish resident securitised vehicles continued a trend of decline seen since the end of 2010, albeit temporarily interrupted by large NAMA-related transactions in the previous quarter. Assets fell by €13.8 billion to €437.4 billion in the second quarter, with outflows from securitised loans, deposit and loan claims, and other assets of € 4.3 billion, € 3.9 billion and € 2.7 billion respectively, the main drivers.
Most asset classes reported a fall in value, the only exception being other securitised assets which saw a small increase of €0.2 billion. The main contributing factors to the fall were a combination of early redemptions and restructuring of a number of FVC vehicles.
The decline of assets in the latest quarter was most evident for corporate asset-backed securities (corporate ABS) which decreased by €3.1 billion (Table 1). Commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS) also fell, by €2.6 billion and €2.4 billion respectively, “reflecting continued difficulties in loans issued by euro area banks, euro area firms, and non-euro area residents”.