Principal losses loom for risk transfer buyers after accounting wrinkle

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By Owen Sanderson
14 Nov 2019

European bank supervisors have switched their approach to excess spread in risk transfer securitizations, paving the way for the stream of full stack capital relief deals issued this year by banks including BNP Paribas and Santander. But questions remain about how the deals handle IFRS 9 accounting, with Santander’s approach potentially boosting principal losses for investors. Owen Sanderson reports.

Cash securitizations for risk transfer have been one of the market’s biggest trends this year, with Santander and BNP Paribas leading the way in securitizing portfolios of consumer assets. Santander has done three cash deals since the summer, transferring risk on books of auto loans in Finland, Italy ...

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