DBRS Publishes “European NPL Securitisations: Development of a New Asset Class”
DBRS Publishes “European NPL Securitisations: Development of a New Asset Class”
Structured Finance, Split Shares & Funds, ABCP
DBRS Ratings Limited (DBRS) published a commentary on non-performing loan securitisations titled "European NPL Securitisations: Development of a New Asset Class."
Securitisation markets are not new to the use of non-performing loans as collateral, evidenced by the U.S. savings and loan crisis, the Asian crisis and recent European troubles. Securitisation provides a method for banks to remove bad loans from their balance sheets. Currently, the use of securitisation for non-performing loans is now spreading across Europe to help improve the banking system.
During the most recent European crisis, Italy targeted the securitisation market to address its non-performing loan crisis. The introduction of the Garanzia Cartolarizzazione Sofferenze allowed banks to securitise portfolios with the provision of a guarantee on the senior tranche. This guarantee has helped the Italian bank market issue 20 transactions since 2016. Additionally, four transactions have been issued out of Ireland and two from Portugal. DBRS expects transactions from Spain and Greece to occur in 2019 as well.
DBRS has been analysing the available information now that some of these transactions have begun to report on their performance. In this commentary, DBRS shows that performance within the transactions varies, both by transaction and by country, and compares differences in transaction composition and structural features.