At 31 December 2021, the volume of Dutch securitisations outstanding, also referred to as re-packaged loans, stood at €168 billion. Figures from DNB show that for the first time their value is lower than that of covered bonds issued by banks (€172 billion), which can serve as an alternative to securitisations.
Securitisation involves bundling loans extended to households and businesses, which are then re-packaged and sold as bonds through special purpose vehicles. In the Netherlands, these involve predominantly residential mortgage loans. This frees up funds for the original lenders, such as banks, so they can provide new loans.
The bonds issued (asset-backed securities) can be sold to investors. They are known as placed (or non-retained) securitisations. The bonds can also be held by the securitisation issuer, such as the original lender, for possible use as collateral, for example to obtain loans from central banks. These are referred to as retained securitisations.
Covered bonds are debt securities issued by banks, usually backed by residential mortgages. They can be an alternative to securitisations for banks. The difference with securitisations is that the bonds that banks issue are on their balance sheets. A bondholder has a claim not only on the collateral but also on the bank. As with securitisations, covered bonds can be sold to investors or retained by banks for liquidity purposes.
At year-end 2021, securitisations outstanding, both placed and retained, amounted to €167.6 billion. Their volume has been declining almost continuously since 2009, in particular placed securitisations, which are sold to investors. An important factor is the use of other types of funding, which enables banks to obtain money more easily and more cheaply in recent years. For example, via the ECB’s additional lending facilities and covered bonds.
Since 2018, the amount of covered bonds outstanding issued by Dutch banks has more than doubled, from €72.9 billion to €171.7 billion (see Chart 1). This increase is mostly related to banks’ retained covered bonds, partly due to the ECB’s favourable lending facilities as part of COVID-19 policy measures. The less stringent regulatory regime compared to that for securitisations and their more favourable eligibility for collateral appear to play a role in this respect.
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Despite the fact that the value of covered bonds outstanding is now higher than that of total securitisations outstanding, the latter still increased in 2021, rising by €8.4 billion (+5.3%) to €167.6 billion (see Chart 2). This was entirely due to an increase in retained securitisations, which in 2021 grew €10.7 billion (+8.9%) to €130.8 billion.
By contrast, securitisations outstanding sold to investors fell by €2.2 billion (-5.7%) to €36.8 billion in 2021. Although new placed securitisations to the tune of €6.0 billion (€0.2 billion more than in 2020) were issued in 2021, mainly by parties other than banks, these could not offset the impact of matured existing securitisations to reverse the long-term trend.
Outstanding securitisations have also declined over time in most other European countries, although to a lesser extent than in the Netherlands. At the end of 2013 an amount of €1,223 billion was outstanding in European securitisations, while at the end of 2021 this had fallen to €1,009 billion; a decline by 17%. Over the same period, the volume of Dutch securitisations dropped by 38%. As a result, the Dutch share in European securitisations fell from 21% to 16%. For placed securitisations, the decrease was from 16% to 11%, and retained securitisations dropped from 25% to 18% (see Chart 3).
Even so, the Netherlands is still the second largest securitisation country in Europe, following the United Kingdom, which accounts for 24%. Italy and Spain follow with 15% and France with 12%. The difference between the Netherlands and the United Kingdom as regards placed securitisations is considerably larger, at 49% versus 11%. For retained securitisations, the Netherlands tops the list, just ahead of Italy.
This shows that although covered bonds in the Netherlands have partly taken over the role of securitisations, the volume of Dutch securitisations is still relatively high by international standards. Especially if this is compared with the 6% share of Dutch covered bonds in Europe at the end of 2020.
Table 9.2 Securitisations of mainly Dutch assets, by issuance and asset type
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