In 2008 securitization in Europe had a record year, with €711.3 billion of issuance – but practically all of it was repoed with the central banks. Experts agree that around €1 trillion of issuance has been retained in Europe since the onset of the crisis, €500 million of which has been repoed (the remainder staying on balance sheet). The UK’s SLS scheme extended to £185 billion by the time it closed in January.
While the European Central Bank has been tightening its criteria and raising haircuts, several other forms of state support are being curtailed and the SLS scheme itself expires in 2011. Talk of a return to a fully functioning securitization market is premature until banks are not only issuing publicly but are also refinancing this backlog of retained issuance.
There are now signs that European banks are starting to take advantage of improved sentiment to sell off some retained exposure. "We are getting the sense that some issuers that launched triple-As and retained them are now selling them to investors in small private deals," says one trader. In recent weeks both Dutch and Spanish banks have been in the market with such trades.
