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European SF Weekly: To amend or not?

Bank of America Merrill Lynch - Martes, 18 de Julio

European SF Weekly: To amend or not? •   Provisional EU securitisation regs served a few surprises; jury out as to whether its cost-benefit analysis aids recovery. • Potential EU ban on self-certified mortgage securitisation from 2019 may disrupt issuance and cause WAL extension of NC RMBS. •  New Annington bonds could be downgraded if UK house prices decline by 7% to 11%, we think.

We saw a decent level of activity on the EU SF markets, with investors being occupied by deals on the primary (the first Swiss auto ABS executed in Euro, an UK BTL RMBS and the usual hand of reset/refi of CLOs). Spreads were stable in general, and moving sideways for some sectors. We think that the markets are still digesting different pieces of news: Yellen's more dovish than expected testimony, Yves Mersch's speech about the future of ABSPP, and above all the unexpected and purported EU ban on self-certified mortgage loan securitisation in the future.

Overall, we maintain our neutral view on the EU SF markets and await a catalyst to change the direction of the currently flattish, sideway moving pricing.

The just voted on provisional EU securitisation framework served a few surprises and the jury is out whether the cost benefit analysis works in favour of EU securitisation market recovery. The biggest surprise is what appears to be an outright ban on self-certified mortgage loan securitisation from 1/1/19, which poses significant risk to the execution of new and the refinancing of existing UK NC (and possibly BTL) RMBS, and a handful of RMBS transactions in other EU jurisdictions. It appears that the offending text was inserted in the last minute and voted as part of the full document package. Whether (and if so, how) the text can be amended will determine the fate of this market sector, and we do not expect clarity on this point to emerge until the autumn.


Commentary: Reading the provisional securitisation law backwards

RMBS: Potential EU ban on self-certified mortgage securitisation from 1/1/19 may cause WAL extension in some 2.0 UK NC and BTL RMBS

CLO: Credit, NAV and equity update

CORP: Annington ratings exposed to property correction?