Statistical News Release: Volume of Dutch securitisations increasing for the first time since 2007
In 2018, the amount outstanding in Dutch securitisations placed with investors went up by EUR 0,7 billion (+1.4%) to EUR 50.1 billion. This marked the first growth since the financial crisis in 2007. The increase was mainly driven by higher issuance volumes, which totalled EUR 9.1 billion. New mortgage providers entered the securitisations market as well as market operators that had been absent for some time. Nevertheless, the total volume of outstanding securitisations is still 65% below the level of 2007.
Securitisations involve bundling of loans extended to households and businesses, which are then packaged and sold as marketable debt securities through dedicated securitisation vehicles. In the Netherlands, securitisations serve as a source of funding for residential mortgage loans, especially for banks. They grew sharply from 2000 onwards. Between the outbreak of the credit crisis in mid-2007 and the end of 2009, the volume of securitisations sold to external investors was close to non-existent, as confidence in these products had been compromised. Banks securitising debt mostly held on to these structured securities for liquidity purposes, e.g. for possible use as collateral to obtain loans from central banks.
Amount of securitisations outstanding increased in 2018
For the first time since the financial crisis in 2007, the outstanding amount in securitisations placed with external investors increased compared with the year before. The volume of Dutch securitisations went up by EUR 0,7 billion (+1.4%) to EUR 50.1 billion (see Chart 1). The majority (90%) involve residential mortgage loans.
Higher issuance volume in 2018
The increase in volume was the result of more issuances and fewer repayments compared to 2017 (see Chart 2). In 2018, securitisations worth EUR 9.1 billion were sold to external investors through Dutch securitisation vehicles, EUR 1.6 billion more (+22%) compared with 2017. Several market operators have re-entered the market for the first time in five years in a bid to achieve the desired spread in funding sources now that investors are more keen to invest. The volume increase was also connected to several new mortgage loan providers entering the securitisation market. The new Securitisation Regulation providing criteria for simple, transparent and standardised (STS) securitisations, which entered into force on 1 January 2019, may also have had an impact. Not all regulatory technical standards have as yet been finalised, and some market operators may have brought forward transactions in order to process them under the old regime.
Still two thirds below the pre-2007 level
In terms of issuance and amount outstanding, securitisation volumes are still some 65% below the 2007 pre-crisis level. This can be attributed to the stricter prudential treatment of securitisations and to higher funding costs compared to alternative financing instruments such as covered bonds. Covered bonds are securities issued by banks that are usually backed by residential mortgages. Between 2007 and 2018, the value of covered bonds held by external investors quintupled from EUR 15.1 billion to EUR 79.1 billion. The 2018 increase amounted to EUR 6.3 billion (+8.5%).
Non-banks place a quarter of securitised residential mortgage loans
Banks are the main securitising institutions, and three quarters of all securitised mortgage loans originate from domestic banking business (Monetary financial institutions – MFIs). The total volume of residential mortgage loans securitised by MFIs for externally placed or internally retained securitisations amounted to EUR 133 billion as at 31 December 2018.
A quarter of securitised residential mortgage loans, worth EUR 44 billion, originates from non-banks. This is a 50% decrease compared to 2009, but still substantial. It is therefore important to take residential mortgage loans securitised by non-bank parties into account when measuring lending and credit growth.