Amount of securitisations outstanding declined in 2013
In 2013, external investors bought EUR 15.3 billion worth of packaged loans via securitisations from financial institutions based in the Netherlands (up 17% on 2012). In addition, an amount of EUR 24 billion was securitised for liquidity purposes (down 42% on 2012), whereby banks have retained the securitisations. The total amount of outstanding securitisations fell by EUR 26.2 billion to EUR 267.4 billion (down 8.9%), which is comparable with the 2007 year-end level. Securitisations of residential mortgages sold to external investors remained virtually unchanged at around EUR 76 billion relative to 2012.
Securitisations involve the bundling of loan assets, especially bank loans to households and businesses, which are then packaged and sold as marketable securities. Securitisations are an additional source of funding for banks. In the years following the outbreak of the credit crisis (in mid-2007), such loans-packaged-into-bonds were not or hardly sold to external (third party) investors, as trust in securitised products had been compromised. During these years, loans were mainly securitised for liquidity purposes. Banks do not sell on these securitisations to the market, but retained them to use as collateral when obtaining liquidity from central banks or the commercial market (internal - or retained - securitisations).
External investors' appetite for securitisations has picked up again since the end of 2009, although the number of investors has fallen since the outbreak of the crisis and loans are often placed on the private market. In 2013, Dutch securitisations to the total of EUR 15.3 billion were sold to external investors; all of these securitisations are related to residential mortgages. This was EUR 2.2 billion (17%) more than in 2012 (Chart 1). For residential mortgages only, external placements rose EUR 3.5 billion (30%) on 2012. The amount of external securitisations in the first half of the year was twice as high as that recorded in the first half.
Besides external securitisations, internal securitisations in the Netherlands in 2013 totalled EUR 24 billion (down 42%), EUR 17 billion less than in 2012. They served mainly as replacements for maturing securitisations.
Chart 1: New securitisaties by category
In EUR billion
The trend of securitisation transactions is related to financing requirements and opportunities, such as the envisaged distribution in financing sources, credit extension, the desired and possible use of collateral, and financial market trends (including risk spreads). The future approach to securitisations by the different supervisory regimes is also having an impact here. This focuses on the question to what extent securitisations may be included in the liquidity buffers of banks and to what extent capital requirements for investment in securitisations by banks and insurers will be tightened. Partly due to this, maturities of securitisations have shortened these past few years.
As on balance more securitisations matured than were newly created, the total amount of securitisations outstanding in 2013 declined by EUR 26.2 billion (down 8.9%) to EUR 267.5 billion (Chart 2). Relatively speaking, the decline in internal securitisations (down 10.5% to EUR 179.8 billion) was twice as large as that in external securitisations (down 5.3% to EUR 87.6 billion). The outstanding external securitisations of residential mortgages in 2013, however, remained virtually unchanged at EUR 76.8 billion, some 12% of the total amount of residential mortgage loans outstanding. This is, however, EUR 19 billion (20%) lower than in 2007 (17% of residential mortgages outstanding at that time).
Due to this decline, securitisations outstanding fell back to around their end-2007 level (Chart 2), almost six months after the outbreak of the credit crisis. The composition is different, however: there are currently more internal securitisations of residential mortgages outstanding (up EUR 71 billion, 60%) and far less other securitisations (down EUR 50 billion, 80%). These other securitisations mainly represent synthetic securitisations, in which only credit risk is transferred by means of credit derivatives.
Chart 2: Outstanding securitisations of mainly Dutch assets according to category and placement
in EUR billion
In the Netherlands, heavy use is made of securitisations; in the past few years they have been used primarily as a source of finance rather than as a tool for transferring risks. Accounting for 20%, external securitisation of residential mortgages in the Netherlands in 2013 represented the largest securitisation category in Europe (up from 15% in 2012), followed by German loans for car purchases with a 14% contribution (note 1).These market shares are, however, also related to the Funding for Lending Scheme in the United Kingdom, whereby British banks can borrow money under attractive conditions at the central bank provided they use the money for lending operations. This is why British banks currently have less immediate need for other financing forms, with far fewer British residential mortgages being securitised as a result. In 2012, this still represented the largest securitisation category in Europe, accounting for 26%.
Note 1: Source: AFME Securitisation Data Q4 2013.