Securitisation process in the Handbook on Securities Statistics

1. Securitisation process in the Handbook on Securities Statistics Mr Christian Dembiermont Presentation at the Workshop on securitisation OECD Working Party on Financial Statistics Madrid, 28 May 2010 The views expressed are those of the presenter and not necessarily those of the BIS or the WGSD 1

2. Handbook on Securities Statistics • Objectives • Improve information on securities markets • Develop a conceptual framework for presentation of statistics on different types of securities issued and held • Consistency with existing international statistical standards

3. Handbook on Securities Statistics • Its scope • Debt securities issued by institutional units in an economy • Positions and flows of debt securities issued • Not a compilation guide • Consistency with existing international statistical standards • Harmonised with 2008 SNA & BPM6 to promote consistency, transparency and comparability • Linkages to other international statistical frameworks • Definition of a debt security • A negotiable financial instrument serving as evidence of a debt

4. Handbook on Securities Statistics: timeline • June 2007: recommendations in CGFS report • October 2007: recommendations in G8 report • November 2007: reconvened IMF Working Group on Securities Database (WGSD) • March 2008: IFC workshop in Washington on “Challenges to improve global comparison of securities statistics” (see IFC Publication on …) • Upon general demand BIS-ECB-IMF took joint initiative to develop Handbook on Securities Statistics (HSS), initially (Part I) to cover debt securities issues • May 2009: Part 1 of the Handbook on statistics of debt securities issues has been published (see http://www.imf.org/external/np/sta/wgsd/hbook.htm) • March 2010: first draft of Part 2 on debt securities holdings prepared by the BIS, the ECB and the IMF has been discussed by the Review Group • Plan to publish Part 2 of the Handbook by June 2010 • Part 3 of the Handbook will cover equities statistics and is expected to be finalised by end 2011

5. Debt securities issues: stylised presentation table

6. Definitionof securitisation • Securitisation results in debt securities for which coupon and principal payments are backed by payments on specified assets or future income streams • A variety of assets or future income streams may be used securitised • residential and commercial mortgage loans • consumer loans • corporate loans • government loans • credit derivatives • future revenue.

7. Securitisation process, type 1 Original collateral holder No securitisation corporation No transfer of assets T1: Funds T1: Debt securities Investors

8. Examples of type 1 securitisation • Debt securities issued under similar schemes as Type 1: • Pfandbriefe (Germany) • Obligations foncières (France) • Obbligazioni bancarie garantite (Italy) • Lettres de gage hypothécaires and lettres de gage publiques (Luxembourg) • Obrigações hipotecárias and obrigações hipotecárias sobre a sector público (Portugal) • Cédulas hipotecarias and cédulas territoriales (Spain) • Realkreditobligationer (Denmark) • Mainly continental Europe for legal reasons • Now being promoted in other countries, incl. US

9. Type 1 securitisation characteristics • There is no transfer of the assets to a special purpose entity • Assets are identified and ring-fenced as per local law, and are placed as a security for the bonds • In the event of bankruptcy of the mortgage originator, a general secured lending law or a special law relating to the covered bonds grants the bondholders recourse against the pool of mortgages over which security interest had been created • In the event of defaults on the mortgages, investors still have a recourse against the bond issuer

10. Securitisation process, type 2 Original collateral holder T2: Collateral T2: Funds Securitisation corporation T2: Debt securities T2: Funds Investors

11. Securitisation process, type 3 Original collateral holder T3: CDS premium T3: Contingent funds after credit event Securitisation corporation T3: Debt securities T3: Funds Investors

12. Classification of debt securities issued in securitisation schemes • Issuing sector: • Original collateral holder (non-financial corporation or financial corporation) or • Securitisation corporation (financial corporation) • Type of securitisation debt securities issued: • Covered bonds • Mortgage-backed bonds (MBB) • Asset-backed securities (ABS) • Asset-backed commercial paper (ABCP) • Credit-linked notes (CLN) • Colletarised debt obligations (CDO)

13. European Union definition of securitisation • ECB regulation (EC) No 24/2009 of the ECB concerning statistics on the assets and liabilities of financial vehicle corporations engaged in securitisation transactions (ECB/2008/30) • ‘Securitisation’ means a transaction or scheme whereby an asset or pool of assets is transferred to an entity that is separate from the originator and is created for or serves the purpose of the securitisation and/or the credit risk of an asset or pool of assets, or part thereof, is transferred to the investors in the securities, securitisation fund units, other debt instruments and/or financial derivatives issued by an entity that is separate from the originator and is created for or serves the purpose of the securitisation, and: • (a) in case of transfer of credit risk, the transfer is achieved by: — the economic transfer of the assets being securitised to an entity separate from the originator created for or serving the purpose of the securitisation, or — the use of credit derivatives, guarantees or any similar mechanism; and • (b) where such securities, securitisation fund units, debt instruments and/or financial derivatives are issued, they do not represent the originator's payment obligations;

14. Two definitions of securitisation • Reconciliation between 2 definitions • ECB definition narrower than the one in the Handbook of Debt Securities • ECB definition corresponds to Type 2 and Type 3 securitisation schemes • Type 1 securitisation schemes are by definition outside the scope of the ECB regulation on statistics • Reconciliation between 2 definitions • Type 1: on-balance sheet securitisation • Types 2 and 3: off-balance sheet securitisation

15. Data collection on securitisation • Handbook on Securities Statistics’ recommendation • Collection only on the issuer side • Data collection • Type 1: Monetary institutions’ balance sheets Other financial institutions’ balance sheets • Types 2 and 3: specific statistical reporting templates

16. Extended presentation table: types 1 to 3

17. Extended presentation table: types 2 and 3