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GERMANY IS THE largest credit market in Europe, but the traditional reliance on bank debt is only slowly giving way to other forms of financing, such as asset-backed securities. As part of the sweeping changes to the investment laws and tax code made last year by the Bundestag, many of the constraints on securitization have been removed. In particular, changes to corporate taxation and the way in which value-added tax is charged tore down the biggest obstacles to securitizing consumer credits and the first deal was not long in coming. Volkswagen started the ball rolling last November when it securitized €1.2 billion of car loans – about 110,000 individual loans – selling off the principal debt as a risk for the first time ever.
"Autobanks are a classic user of securitization as it is a cheap way of refinancing the loans, so it is not amazing that VW was the first bank to securitize a debt in Germany," says Hartmut Bechtold, the head of the True Sale Initiative (TSI), a consortium of leading banks that is promoting securitization in Germany.