THE SECURITISATION MARKET IN SPAIN: PAST, PRESENT AND FUTURE

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THE SECURITISATION MARKET IN SPAIN PAST, PRESENT
AND FUTURE
Roberto Blanco
Head of the Financial Studies Division (DG
Economics, Statistics and Research)
WPFS WORKSHOP ON SECURITISATION
Madrid 27-28 MAY 2010
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OUTLINE OF THE PRESENTATION

• The pre-crisis period (2000-August 2007)
• Substantial expansion of ABS and covered bonds
• Main charateristics of the products
• Driving factors of the expansion
• The crisis period (since August 2007)
• Quantities
• Prices
• Main factors
• The perspectives
• Concluding remarks

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ABS AND COVERED BONDS EXPANDED SUBSTANTIALLY IN
SPAIN BETWEEN 2000 AND 2007 Q2
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SPAIN BECAME ONE OF THE MAIN EUROPEAN MARKETS FOR
ABS AND COVERED BONDS
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ABS VS COVERED BONDS
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DISTINCTIVE FEATURES OF SPANISH SECURITISATION

• Simple products
• No CDO, CDO squared
• No synthetic securitisation
• Less conflicts of interest between originators
  and investors
• Originators retained the equity tranches
• Comparatively higher transparency and investor
  protection
• Prospectus
• Registry at the CNMV
• Legal framework for mortgages

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CREDIT RISKS WERE NOT TRANSFERRED WITH ABS
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COLLATERAL. ABS VS COVERED BONDS
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FUNDING WAS THE MAIN FACTOR FOR THE EXPANSION OF
ABS
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AFTER THE SUMMER OF 2007 PUBLIC ISSUANCE OF ABSs
FELL EVERYWHERE
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WHEREAS COVERED BOND ISSUANCE WAS MORE RESILIENT
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IN TERMS OF PRICES THE IMPACT OF THE CRISIS WAS
ALSO LESS STRONG FOR COVERED BONDS
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FACTORS FOR THE WORST PERFORMANCE OF ABSs AT THE
INTERNATIONAL LEVEL

• Lack of investor confidence for ABSs
• Lack of transparency regarding underlying assets
• Conflict of interests between originators and
  investors
• Exit of SIVs and ABCP conduits
• They played a crucial role in transforming
  maturities in ABSs
• Market liquidity
• Uncertainty regarding credit quality

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THE PERSPECTIVES DEMAND

• KEY FACTORS
• Uncertainty regarding credit quality
• Investor confidence in the products
• Liquidity in the secondary markets
• For (1), the macroeconomic and financial
  developments will play a role
• For (2) and (3) current private and public
  iniciatives to re-establish securitisation on a
  sounder basis will help

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THE PERSPECTIVES SUPPLY
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CONCLUDING REMARKS

• The pre-crisis levels will not (and should not)
  be reached in the medium term
• Lower demand SIVs and conduits will not (and
  should not) return
• Lower suppy deleveraging of the financial and
  non-financial sectors
• But some recovery from the current low levels
  seems desirable since securitisation can play
  some important economic roles (not played by
  covered bonds)
• Credit risks can be transferred (diversification)
• No maturity mismatch
• Wider collateral (SMEs)
• Tranching
• Main challenges
• Restore investor confidence
• Improve market liquidity
• Current private and public iniciatives to
  re-establish securitisation on a sounder basis
  are welcome

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