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With most of Europe — come to mention it, most the world — opting for couch versus desk last Tuesday, the week was ideally set up for relaxed lunches. Working so close to Adam Smith’s birthplace rather precludes London-based bankers taking a day off to celebrate a day for the workers.
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Mortgage funding is being squeezed by a pincer movement of covered bond encumbrance and overzealous ABS regulation. But what about whole loan sales? They offer a viable alternative to covered bonds and securitisation — and one that looks increasingly attractive. -
First the periphery, now the core. The euro crisis is well and truly back. But now is the not the time to panic. Senior bankers should be out there calming things down, focusing on their clients and attempting to establish some much needed middle ground between despair and relief.
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Long gone are the days when Cédulas and Pfandbriefe traded within a few basis points of each other and no one could conceive of a covered bond default. Today that prospect is only as remote as a sovereign default. So spare a thought for investors who have no way of hedging their risk.
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Getting away from it all seemed to be the name of the game for much of the FIG world in the week following Easter. The European Banking Authority did its best to scupper holiday plans, releasing its 57 page consultation on regulatory technical standards for own funds a day before the long weekend. That added to the pressure a day before Deutsche’s Gerald Podobnik was due to set off for a relaxed break in Austria, and caught others on the hop: Royal Bank of Scotland’s A.J. Davidson was on the road — literally, cruising down the all-American sounding West Side Highway — dealing with patchy signals as he dialed in to London to stay on top of the news.
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Asia’s loan bankers may have just been through a dismal quarter, but there is always someone worse off. They should count themselves lucky they are not securitisation bankers, who have suffered a dismal few years. Perhaps by working together, bankers in the two areas can add a bit of zest to the loan market — and some much needed volumes to the securitisation market.
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In its final consultation on bail-in, the European Commission is asking key stakeholders whether short term debt should be included in burden-sharing arrangements. This clashes with the drive by other regulators to make banks less reliant on short term funding. The result? Confusion at a time when certainty is needed.
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Covered bonds are moving towards a system of labelling, designed to act as a kitemark of quality. But investors should remember: there is more to credit analysis than ticking boxes. Weak deals can pass through labelling systems, while great deals can get excluded.
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Reports that some banks are already thinking of paying back funds borrowed from the European Central Bank under its longer term refinancing operations should be cautiously welcomed. But at the same time, stigmatisation of those that stay in the scheme for the full three years would not be in anyone’s interest.
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Rumours of the first Australian and Kazakh sukuk are bubbling up again. We’ve heard it before, but perhaps this time the reports will be followed by action. For the sake of the market, let’s hope so. The Islamic finance market now needs to move to the next level, with broader international involvement.
