Securitization Trustee of the Year — Citi
From supporting transactions under stress during treacherous market conditions, to helping clients navigate the data and reconciliation challenges of the simple, transparent and standardised (STS) regime, Citi was able to build on strong foundations to deliver for clients in a critical time for the market, making it our Securitization Trustee of the Year.
One of the challenges for the securitization market last year was the progress of the European Union’s simple, transparent and standardised (STS) regulation. First introduced in 2017, last year was when many of its provisions made it to the rule book, while ever more issuers are using the STS label or otherwise producing the ESMA annexes for their securitisations and are getting used to dealing with the demand for high quality portfolio data. With work continuing on the role of data repositories, this challenge isn’t over yet, says Andrew Mulley, EMEA head of issuer services at Citi.
“Since the implementation of the STS rules and ESMA annexes, the focus is very much on data quality,” he says. “The job of getting that data right is something we’ve been talking about for some time, but really has been brought home as the regulations and annexes have been implemented.”
For a securitization trustee like Citi, it means working as closely as possible with clients to ensure that what comes out of their internal systems meets the data quality requirements. “There is a lot of work behind the scenes to ensure that the data that is being received downstream is as accurate as possible,” says Mulley. “That’s very important for transactions where the clients are their own servicers but even more paramount when the asset portfolio has been acquired by a new party such as a private equity sponsor.”
Citi recognised that getting the data right and being able to tie it back to transaction cashflows through reconciliation was a strategic imperative several years ago – and this year has been the culmination of that work. “It’s like all of a sudden it has crystallised,” says Mulley.
Getting the data right, though, could also open new opportunities for the securitization market. Citi is particularly optimistic in two crucial areas for the post-pandemic economy: environmental, social and governance (ESG) and small and medium sized enterprise (SME) securitisations.
“If in the longer term the reliability and quality of the data continues to improve there will be benefits in other areas, such as in ESG,” says Mulley. “If you know which houses have solar heating, which cars are electric, then once the data is there, it can be reported and monitored.”
For SMEs, Citi has been working closely in the UK with the authorities backing Covid-19 loan schemes such as the Coronavirus Business Interruption Loans Scheme and the new Recovery Loan Scheme, as well as originators and clients using those platforms. SME support is something that post-pandemic is going to get more focus he says.
Citi’s leading position today has been built over many years and is notable for the amount of time that it spends with clients on understanding the multiple different public and private programmes that they have in place, and how they interact. “When we’re appointed by our clients on many of their different funding platforms, we have to take a very integrated approach to understanding how they work together,” says Mulley. “We spend time understanding their platforms and their constraints – we aim to become an integral part of their process.”
According to Matthew Barlow, Citi’s issuer services UK sales director, it’s also an approach that doesn’t just focus on high volume, routine securitizations, taking what Barlow calls a “nurturing” approach to debut issuers and taking the time to understand what they need from all the parties involved and then getting thoroughly engaged in the data journey. “We’re always very happy to do it and we know from deep experience that many of these debut issuers become active securitisation clients over time, but regardless we see our role as being supportive to the industry as a whole.”
“What makes us valuable to those types of issuers is our ability to offer an integrated, end-to-end solution with the full set of roles that are necessary from the warehouse phase of the securitisation to a possible refinancing of the transaction in a wide variety of geographies.”