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Securitisation process in the Handbook on Securities Statistics

Mr Christian Dembiermont

Presentation at the Workshop on securitisationOECD Working Party on Financial StatisticsMadrid, 28 May 2010

The views expressed are those of the presenter and not necessarily those of the BIS or the WGSD

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Objectives

o Improve information on securities markets

o Develop a conceptual framework for presentation of statistics on different types of securities issued and held

o Consistency with existing international statistical standards

Handbook on Securities Statistics

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Its scope

o Debt securities issued by institutional units in an economy

o Positions and flows of debt securities issued

o Not a compilation guide

Consistency with existing international statistical standards

o Harmonised with 2008 SNA & BPM6 to promote consistency, transparency and comparability

o Linkages to other international statistical frameworks

Definition of a debt security

o A negotiable financial instrument serving as evidence of a debt

Handbook on Securities Statistics

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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

Handbook on Securities Statistics: timeline

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Currency

Maturity

Interest rate

Currency

Maturity

Interest rate

Currency

Maturity

Interest rate

Lo

ca

tio

n o

f is

su

e

Residence of issuer

Domestic market

International markets

Total markets

Total residents

Non-residents

TotalNon-financial corporations

Financial corporations

General government

Households and non-profit

institutions serving

households

Issuing sector

Currency,Maturity, Interest rate& Market

Debt securities issues: stylised presentation table

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Securitisation results in debt securities for which coupon and principal payments are backed by payments on specified assets or future income streams

o A variety of assets or future income streams may be used securitised

o residential and commercial mortgage loanso consumer loanso corporate loanso government loanso credit derivativeso future revenue.

Definition of securitisation

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Securitisation process, type 1

Original collateral holder

Investors

T1: Funds

T1: Debt securities

No securitisation corporationNo transfer of assets

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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

Examples of type 1 securitisation

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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

Type 1 securitisation characteristics

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Securitisation process, type 2

Original collateral holder

Securitisation corporation

Investors

T2: FundsT2: Collateral

T2: FundsT2: Debt securities

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Securitisation process, type 3

Original collateral holder

Securitisation corporation

Investors

T3: FundsT3: Debt securities

T3: CDS premium

T3: Contingent funds after credit event

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Issuing sector: o Original collateral holder (non-financial corporation

or financial corporation) oro Securitisation corporation (financial corporation)

Type of securitisation debt securities issued:o Covered bondso Mortgage-backed bonds (MBB)o Asset-backed securities (ABS)o Asset-backed commercial paper (ABCP)o Credit-linked notes (CLN)o Colletarised debt obligations (CDO)

Classification of debt securities issued in securitisation schemes

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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;

European Union definition of securitisation

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Reconciliation between 2 definitions

o ECB definition narrower than the one in the Handbook of Debt Securities

o ECB definition corresponds to Type 2 and Type 3 securitisation schemes

o Type 1 securitisation schemes are by definition outside the scope of the ECB regulation on statistics

Reconciliation between 2 definitions

o Type 1: on-balance sheet securitisation

o Types 2 and 3: off-balance sheet securitisation

Two definitions of securitisation

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Handbook on Securities Statistics’ recommendation

o Collection only on the issuer side Data collection

o Type 1: Monetary institutions’ balance sheets

Other financial institutions’ balance sheets

o Types 2 and 3: specific statistical reporting templates

Data collection on securitisation

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Extended presentation table: types 1 to 3 Residents Non-

residents All

issuers

Issuer

Market, currency, maturity, and interest rate

Non-financial

corporations

Financial corporations

General govern-

ment

House-holds and

NPISH

1.1 Currency 1.2 Maturity 1.3 Interest rate

1. Domestic market

1.4 Memo item: securitisation debt securities

Lo

cati

on

of

iss

ue

2.1 Currency 2.2 Maturity 2.3 Interest rate

2. International markets

2.4 Memo item: securitisation debt securities

3.1 Currency 3.2 Maturity 3.3 Interest rate

3. All markets

3.4 Memo item: securitisation debt securities

Residence of issuer

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Extended presentation table: types 2 and 3

Residents Non-residents

Financial corporations General government

Issuer

Market

Non-finan-cial

corps.

Central bank

Other money–issuing corps.

Securitisation corps.

Other finan-cial corps.

Central government

Other general government

House-holds and

NPISH

Memo item: public sector

All issuers

1. Domestic market

2. International markets

3. All markets