- In Q2 2018, EUR 67.2 billion of securitised product was issued in Europe, an increase of 14.8% from Q1 2018 but a decline of 8.0% from Q2 2017.
Of the EUR 67.2 billion issued, EUR 37.7 billion was placed, representing 56.1% of issuance, compared to the 55.1% of issuance in Q1 2018 and the 54.2% of issuance in Q2 2017.
CLO refinancing (“refis”) activity continued in the second quarter of 2018; according to Thomson Reuters LPC, the combined amount of European CLO resets and refinancings totalled EUR 5.1 bn in Q2 2018 (EUR 4.3 bn in Q1 2018).
- Outstanding volumes rose slightly to EUR 1.2 trillion outstanding at the end of Q2 2018, an increase of 0.7% QoQ and an increase of 8.0% YoY.
- Credit quality: In Europe, upgrades outpaced downgrades in Q2 2018, with upgrades concentrated in prime RMBS.
- European asset backed commercial paper (ABCP) issuance was EUR 109.4 billion in Q2 2018, an increase of 60.3% QoQ (from EUR 68.2 billion in Q1 2018) and a 59.8% increase YoY (from EUR 68.4 billion in Q2 2017). Multiseller conduits continue to dominate as the largest category of issuer in the ABCP market, particularly from France and Ireland in the second quarter.
- Regulatory update: On 30 July 2018, the EBA published its final draft Regulatory Technical Standards (RTS) on risk retention and homogeneity, which, together with ESMA’s technical standards on disclosures and STS Notification, form key parts of the STS Securitisation reform.
The final drafts of the EBA’s and ESMA’s technical standards will be submitted for the European Commission’s endorsement and are later subject to the scrutiny period by the European Parliament and the Council. Therefore, it is possible for these RTS to enter into force before the 1 January 2019 start date of the STS regime, but this is by no means a certainty, especially in case of the RTS on disclosures.
Liquidity Coverage Ratio (LCR): On 13 July 2018, the Commission published the final text of revisions to the Liquidity Coverage Ratio (LCR) Delegated Act which, disappointingly, falls short of improving the treatment of STS securitisations (which remain classified as Level 2b assets).