The Spanish renewables market is highly competitive. Market pricing is increasingly less reliant on subsidy. Spain is committed to growing renewable power capacity by approx. 50GW by 2030. This Market Insight examines some recent initiatives and significant steps being taken to reduce carbon emissions, including the impact of increased cross-border investor interest.
The Covid-19 pandemic has a big impact on the economy and the banking sector. Since the implementation of IFRS9 in 2018, banks have to take large provisions early on in a crisis. Bank capital will become tighter and consequently banks will be less able to support a speedy economic recovery. Securitisation techniques may help banks address unwanted fluctuations in IFRS9 loan loss provisions. Mike Nawas from Bishopsfield Capital Partners, weighs up the advantages and disadvantages, in an article he published in Dutch together with his colleagues at Nyenrode Business University.
Read the article in Dutch: IFRS-9 kan economisch herstel in de weg zitten
Peer-to-peer (“P2P”) and peer-to-business (“P2B”) platforms have changed the dynamics in the credit markets. They have become more appealing and useful to the public. In addition, they have become increasingly attractive to investors, who are either looking to invest in P2P and P2B companies themselves, or to utilise borrower-lender matchmaking services offered in these platforms. However, as access to credit becomes progressively effortless thanks to these platforms, market failures surface. Given the significance P2P and P2B platforms have gained in the corporate credit market, we examine whether it possible to mitigate these market failures.
This paper discusses how a lender must balance mitigating relationship damage whilst not limiting legal remedies if a borrower breaches its debt facility agreement. We argue that adopting measured communication strategies to complement robust legal responses is essential and enhances the likelihood of an efficient and effective resolution.
This paper examines relative value amongst certain groupings of debt instruments typically classed under the banner of infrastructure debt. We observe that triple-B rated investment-grade rated debt within the Infrastructure & Transport sub-category offer the most consistent, risk adjusted returns across the maturity spectrum, whilst single-A rated bonds in the Energy & Utility sub-category offer the greatest value – at the long-end of the maturity spectrum, after adjusting for expected losses.
The promise of blockchain, the technology behind Bitcoin, is to make financial services more efficient and secure. Clever coding and sophisticated cryptography are said to remove the need for middlemen and supervisors to validate transactions. Will blockchain-enabled Fintech start-ups indeed disrupt the financial services industry, or is a more collaborative approach more likely?
Regulators require that Asset-Backed Securities (‘ABS’) investors conduct on-going surveillance with significant penalties for non-compliance. We investigate how regulators define surveillance requirements and how an investor can demonstrate compliance. This Market Insight introduces a surveillance framework enabling investors to demonstrate best practice to their regulator.
Evidence from the European Triple-A Structured Finance Securities
In much of the current research on market practices with respect to the use of credit ratings, the rating shopping hypothesis and the information production hypothesis feature prominently. Both of these hypotheses predict an inverse relationship between the number of ratings and a security’s funding cost; that is, more ratings will reduce funding costs and, conversely, fewer ratings will increase funding costs.
Our study finds precisely the opposite to have been the case for the mainstay of the structured finance securities market in Europe prior to 2007, namely the triple-A tranches of European residential mortgage-backed securities.
Our findings suggest that structured finance markets may behave differently than what would be predicted by two hypotheses traditionally used to explain the number of ratings and funding costs: the rating shopping and information production hypotheses. Obtaining multiple credit ratings may be a signal for complexity, for which investors demand a risk premium.
With interest rates at historically low levels, fixed income investors are on the hunt for investment opportunities with attractive risk/return profiles. Residential real estate debt appears to be one such opportunity in Europe. Risks are modest and returns are alluring. But what type of residential real estate debt instrument to invest in? Loan format, bond format or securitised format? In this Market Insight we compare and contrast the alternative investment opportunities that fixed income investors have when investing in residential real estate debt in Germany, the Netherlands or the United Kingdom.
Is the asset-backed securitisation (“ABS”) purchase programme, proposed by the European Central Bank (“ECB”), aimed at preventing economic deflation or at building confidence in a stuttering securitisation market? Or is it the European way to recapitalise banks? Or, is it a mechanism to prompt banks to intensify lending to SMEs and other parts of the “real economy”? Some would argue that it is meant to achieve all of these; some would be more optimistic than others. Mario Draghi, in his European Parliament address on September 22nd 2014, has provided important insights into what the programme will constitute when it is formally announced on October 2nd. Our Market Insight establishes whether it is likely to be enough to achieve the aim of having securitisation contribute to real economic growth in Europe.