Securitisation: Risk Transferred or not?

At a time when regulatory capital burdens are increasing, there is a clear shift towards greater scrutiny of capital relief transactions. Even in the midst of this heightened scrutiny, Significant Risk Transfer transactions still have the potential to help firms manage their Risk Weighted Exposure Assets in a sensible manner.

This paper from Deloitte’s Bank Treasury Advisory team examines why a financial institution might want to engage in Significant Risk Transfer (SRT) trades, as well as the regulatory considerations a financial institution may have when satisfying the European Banking Authority and Prudential Regulation Authority requirements, as well as that of the Capital Requirements Regulation.

We conclude that amid a supportive regulatory stance on securitisation markets, firms may wish to consider if they intend to participate in reviving securitisation markets, either as a consequence of their appetite to broaden their fund-raising and risk distribution channels or because they may have need of such a financial instrument in their future strategy. With this in mind, some key preparatory efforts may be worth financial institutions considering, including:

• Preparing for additional regulatory burden
• Mapping and documenting existing governance
• Data gathering
• Economic analysis tools

The paper will be of interest to securitisation transaction originators, sponsors, arrangers and investors, as well as those thinking of entering the securitisation market for capital relief purposes.

Deloitte Bank Treasury Advisory team

The team provides advisory services to banking clients, within the UK and internationally. Consisting of industry specialists, regulatory experts and professional services practitioners, the team offers a rounded and unique skillset; able to provide bespoke services and solutions.