• Gross global issuance down 37 per cent to $2,777bn in 2008 as many issues retained within banks are used to restore liquidity
• Industry groups launch initiative to restore confidence in 2009 with no indication of recovery in the first quarter
Net global securitisation issuance slumped by 79 per cent from $2,138bn in 2007 to $441bn in 2008, according to the annual Securitisation report by International Financial Services London (IFSL), the independent organisation promoting UK financial services worldwide. Quarterly issuance continued to fall through 2008 from $149bn in Q1 to $60bn in Q4. There is little indication of a recovery in the first quarter of 2009.
The global market for securitisation has fallen away since the autumn of 2007, due to turbulence in credit markets, a lack of liquidity and a reduction in investors’ tolerance of risk. The nationalisation in September 2008 of US federal agencies Fannie Mae and Freddie Mac has compounded earlier problems. Nearly two thirds of European securitisations downgraded in 2008 - 728 out of 1,174 - occurred in the fourth quarter. By contrast only 184 issues were upgraded in 2008.
During 2008 a growing volume of securitisation issuance, not included in the net figures, was retained within issuing banks. This reflected the use of securitisation by governments around the world as a mechanism to enhance liquidity and availability of credit. As a result, gross global securitisation issuance fell rather less than net issuance, by 37 per cent from $3,817bn in 2007 to $2,777bn in 2008.
In the UK, financial institutions borrowed £185bn through the Bank of England Special Liquidity Scheme which contributed substantially to the rise in gross UK issuance from $237bn to $400bn between 2007 and 2008. The UK was the largest European issuer in 2008 because of banks’ heavy funding requirements and its share of gross issuance in Europe was steady at 38%.
Duncan McKenzie, Director of Economics at IFSL, said “The already weak securitisation market was knocked in the final months of 2008 by the downfall of Lehman Brothers and the nationalisation of the US federal agencies. The current year has also got off to a very slow start and revival in the remainder of 2009 is dependent on both recovery of investor confidence and stabilisation of financial markets”.
Leading industry groups around the world have recognised problems and identified key priorities for action. Recommendations include improving disclosure of information on underlying assets; enhancing transparency on underwriting and origination practices; and restoring credibility of credit reference agencies. It is hoped that the US launch in 2009 of the Term Asset-Backed Securities Loan Facility (TALF) will help to kick start the securitisation market, although applications have got off to a slow start. The Federal Reserve Board has made available an initial tranche of $200bn although this could rise to $1,000bn.
• Industry groups launch initiative to restore confidence in 2009 with no indication of recovery in the first quarter
Net global securitisation issuance slumped by 79 per cent from $2,138bn in 2007 to $441bn in 2008, according to the annual Securitisation report by International Financial Services London (IFSL), the independent organisation promoting UK financial services worldwide. Quarterly issuance continued to fall through 2008 from $149bn in Q1 to $60bn in Q4. There is little indication of a recovery in the first quarter of 2009.
The global market for securitisation has fallen away since the autumn of 2007, due to turbulence in credit markets, a lack of liquidity and a reduction in investors’ tolerance of risk. The nationalisation in September 2008 of US federal agencies Fannie Mae and Freddie Mac has compounded earlier problems. Nearly two thirds of European securitisations downgraded in 2008 - 728 out of 1,174 - occurred in the fourth quarter. By contrast only 184 issues were upgraded in 2008.
During 2008 a growing volume of securitisation issuance, not included in the net figures, was retained within issuing banks. This reflected the use of securitisation by governments around the world as a mechanism to enhance liquidity and availability of credit. As a result, gross global securitisation issuance fell rather less than net issuance, by 37 per cent from $3,817bn in 2007 to $2,777bn in 2008.
In the UK, financial institutions borrowed £185bn through the Bank of England Special Liquidity Scheme which contributed substantially to the rise in gross UK issuance from $237bn to $400bn between 2007 and 2008. The UK was the largest European issuer in 2008 because of banks’ heavy funding requirements and its share of gross issuance in Europe was steady at 38%.
Duncan McKenzie, Director of Economics at IFSL, said “The already weak securitisation market was knocked in the final months of 2008 by the downfall of Lehman Brothers and the nationalisation of the US federal agencies. The current year has also got off to a very slow start and revival in the remainder of 2009 is dependent on both recovery of investor confidence and stabilisation of financial markets”.
Leading industry groups around the world have recognised problems and identified key priorities for action. Recommendations include improving disclosure of information on underlying assets; enhancing transparency on underwriting and origination practices; and restoring credibility of credit reference agencies. It is hoped that the US launch in 2009 of the Term Asset-Backed Securities Loan Facility (TALF) will help to kick start the securitisation market, although applications have got off to a slow start. The Federal Reserve Board has made available an initial tranche of $200bn although this could rise to $1,000bn.
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