The European ABS market and its development

Frankfurt am Main

Ten years ago, the European ABS market experienced significant distress. This lead to greater risk aversion for investors, which reshaped the lending practices on the issuer’s side. The European Central Bank (ECB), with the aim to revive the ABS market, reacted to this by increasing regulatory and surveillance activities to enhance transparency, restore confidence, and facilitate risk assessment. A cornerstone of ECB’s action plan was the establishment of a loan-level initiative, which posed a new requirement for loan-level data (LLD) disclosure for ABS transactions starting in 2013.

There are over 116 million loans reported in more than 1,200 transactions in Europe as of Q3 2018. This large universe allows today’s CFA lecturers to elaborate on some interesting developments in the European securitization market, and provide insights into the underlying loan attributes, collateral, and performance figures. The presenters, Petr Surala and Cesar Fernandez from European DataWarehouse, the designated ABS data repository, will explain the benefits of leveraging LLD-based analysis, including market events and case studies from a macro perspective.

In addition, the presentation will discuss the upcoming regime change, where market regulatory and surveillance activities will be handed over to ESMA, resulting in new reporting requirements and standards, commencing in 2019. A new transaction labeling, STS (Simple, Transparent, Standardized) will be introduced, impacting access to liquidity, capital structure and pricing.