Thankfully, bankruptcies of financial institutions which are also originators of consumer loan or residential mortgage backed securitisation transactions are rare. Why do we say “thankfully”? Aren’t securitisations “bankruptcy remote”, i.e., structures that can withstand a bankruptcy of the originator? They are indeed. But, in practice, originator bankruptcy has resulted in impairment to the value of noteholders’ securities and clear weaknesses have been uncovered in typical securitisation structures and the analysis and thinking that underpinned them. In this Market Insight we look at what lessons can be learned from the bankruptcy of DSB, a small Dutch consumer bank active in securitisation, and how this case might shape the securitisation market in the Netherlands – an active securitisation market post crisis.
Ask any European CFO or treasurer what have been the salutary lessons from the credit crisis and their list will almost certainly include the need to move away from an over-reliance on bank funding. With private placements being hailed by many market commentators as part of the solution for companies seeking diversification of funding, we explore what can be learned from the US market, whether there is a need for a European private placement market and in which way a European market could evolve.