In late September, the CSC Global Financial Markets Team gathered at the TSI Congress 2019 in Berlin, where the mood was positive with more than 600 guests in attendance. From our perspective, this was the first time we’d sponsored TSI, a decision driven by our commitment to developing our business in Germany. It was great to speak to so many market participants, introducing who we are, what we do and how we fit in to the securitization industry.
Here are some of the key themes we discussed in Berlin:
1. Securitisation industry feeling more comfortable with new regulations
In 2018 there was a great deal of anxiety about the impending Securitisation Regulations implementation. This year, the general consensus has been more upbeat, with the sense that the market has successfully adapted, and is dealing with the new requirements well. Many issuers we spoke with who have not yet completed STS issuances were buoyed by having seen their peers do so, and were working hard on completing their own STS deals soon. There has been a positive response to the new regulations, but the feeling in Berlin was that a “regulatory pause,” during which the new regulations can be properly bedded down, should now follow. The securitisation industry, which has been under pressure for so long, needs a period of calm, rather than having to worry about more change appearing on the horizon any time soon.
2. Applying STS to synthetic securitisation
On 25 September 2019, the EBA launched a two-month public consultation on its proposals to expand the STS framework to synthetic securitisation transactions. There was, therefore, a lot of talk in Berlin about the ramifications this could have on synthetic transactions. The general view was that the proposals would be positive for liquidity in this growing part of the market, while also providing greater efficiencies to banks through lower-risk weights on bonds issued under STS. Unfortunately, it has become clear that the proposals are going to take considerable time to implement, so there was some frustration that STS eligibility remains a distant possibility.
3. Everyone’s going green
Interest in green finance continues to grow exponentially. Economies across Europe are keen to develop strong, sustainable, balanced growth policies while adhering to international commitments on climate change, the environment, and sustainable investment. The Luxembourg Stock Exchange has invested heavily in advertising their approach to green finance, which was evident in Berlin. Participants were keen to talk about green finance, and we expect the trend to continue to grow in the future.
4. The securitisation asset selection debate
Regulators were keen to discuss the processes and controls that oversee how assets are selected for securitisation transactions. Regulators debated whether a third party should oversee the selection process, or whether that decision should remain with the borrower. Procedures around this need to be as robust as possible in order to give investors confidence prior to entering the market.
5. Clients bringing structures onshore
Several clients spoke of plans to move their remaining offshore structures onshore, with Luxembourg touted as the overwhelming jurisdiction of choice. This move is being driven in part by the Securitisation Regulations requirements, which do not permit offshore SPVs. Clients also expressed a desire to tidy up their programmes and move onshore in advance of any new issuances.
6. Attendees still bullish on blockchain
Discussions around blockchain were frequent in Berlin, with many of the major issuers embarking on test transactions. Several participants were extremely bullish on blockchain, although it’s fair to say that regulation needs to catch up with these new technologies before genuine momentum can build. Given the level of interest, however, we expect this to happen sooner rather than later.
Overall some really interesting discussions took place at TSI Congress 2019, and we’re already looking forward to catching up with friends and colleagues in Berlin at next year’s event.
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