News from Securitisation

Tackling the IFRS 9 impact on credit portfolios

So, what’s new in securitisation?

Digitisation (blockchain et al.) has the potential to have a great impact on securitisation. It’s currently in proof-of-concept or even pilot modes in various banks.

Synthetic securitisations, after years of hibernation, have come back on the table in recent years. In times of tightening capital requirements, they have been rediscovered as a flexible and efficient capital-relief tool.

The new kid on the block in the regulatory ecology is IFRS 9. It has been mandatory since January 1, 2018, and its introduction hasn't had as severe of an impact on banks’ capital ratios as was initially feared by many analysts. This is principally attributable to its introduction at a benign point in the economic cycle, which, along with central banks’ quantitative easing, has led to loans performing well over recent years.

However, the pro-cyclical effects of IFRS 9 in future downturns has the potential to trigger significant increases in provisioning, which will directly result in greater P&L volatility and lower capital ratios for banks. For certain credit portfolios on banks’ balance sheets, this may become an acute problem both in terms P&L impact and level of regulatory capital required.

Also with respect to these effects of IFRS 9, tailored synthetic securitisations can be part of the solution. Read our paper here, as prepared by our UK-team.

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Philipp von Websky
+49 211 8772 3867