After almost two decades of contraction, outstanding Dutch securitisations sold to investors increased substantially in 2024, new figures from DNB show. Net growth was €3.1 billion (12%) to €29.2 billion, still considerably less than 20 years ago.
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The €3.1 billion increase in outstanding securitisations was the net effect of €7.8 billion in issuances and €4.7 billion in repayments in 2024.
Lenders seeking to (re)finance loans or transfer risks can raise funds by selling bonds to investors, mainly in the form of securitisations or covered bonds.
For our purposes, securitisations are previously originated loans, repackaged as bonds by special purpose entities. In the Netherlands, most of these loans are residential mortgage loans. Investors in these securitisations are repaid based on claims on the underlying loans.
Covered bonds are debt securities issued by banks; in the Netherlands these are backed by residential mortgage loans. Unlike securitisations, investors in these bonds have a claim not only against the collateral (the residential mortgage loans), but their first claim is against the bank.
Both securitisations and covered bonds can be sold to investors (externally placed) or retained. Retained bonds can be used as collateral, for example to obtain loans from central banks.
The securitisations market can play a role in a European capital markets union to stimulate investment, as mentioned in Mario Draghi's report 'The future of European competitiveness'. This is because securitisations can be used to spread risks and release funds for fresh investment.
Since 2007, outstanding securitisations fell sharply, due in part to the important role securitisations had played in the financial crisis, especially in the United States. As it turned out, they had become too complex, obscuring risks, such as those of junk mortgages. Moreover, they provided the wrong incentives, such as granting as many loans as possible because of commission income, regardless of credit quality.
Several policy measures were adopted in response. For example, higher capital requirements were introduced for investors, while it became mandatory for the original lenders to retain part of their securitisations. With more attractive financing alternatives becoming available, such as favourable loans from the European Central Bank (ECB) and covered bonds, securitisations became less and less popular over the years.
That trend was recently reversed. For the first time since 2007, outstanding Dutch securitisations sold to investors grew substantially in 2024.
The increase is mainly driven by non-bank market parties that have entered the securitisation market in recent years. Most of these are financiers of so-called 'buy to let' (rental) mortgages, consumer loans and car leases. As a result, securitisations related to these types of loans increased.
However, banks also securitised more than in recent years – the majority of newly securitised loans in 2024 were residential mortgage loans. Among the possible causes of this growth is the termination of the ECB's favourable borrowing facilities for banks, such as TLTROs. This may have prompted banks to look for other ways to raise funding.
The outstanding amount of Dutch covered bonds increased by €3.5 billion to €99.1 billion (+4%) in 2024. Covered bonds have become increasingly popular as an alternative to securitisations in recent decades, possibly in part because of their relatively high yield, combined with lower credit risk (due to its claim against both the bank and the collateral).
Added to this was the fact that Dutch banks had not issued any covered bonds until 2005 and had to make up lost ground. As a result, over the past decades, the ratio of Dutch outstanding securitisations to covered bonds (both sold and retained) has come more in line with that for Europe as a whole.
Table 9.5 Securitisations of mainly Dutch assets, by issuance and asset type
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