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TEXT-Fitch: European structured finance supply seen unchanged in 2013
Jan 16 - Public and retained European structured finance issuance in 2013 will be broadly unchanged from 2012, at about EUR200bn, Fitch Ratings says.
This is still some way below 2011's total of EUR310bn, but the proportion of issuance placed with investors - rather than retained for possible central bank funding - continues to rise. We forecast 40% of issuance will be placed with investors this year, up from 35% last year and 31% in 2011.
We expect issuance volumes to remain unchanged in 2013 for a number of reasons. The economic slowdown, tighter bank lending criteria, and in some cases falling house prices, continue to limit asset origination. Refinancing needs are generally moderate. Banks have other market funding options in the most active structured finance markets in the shape of the senior unsecured and covered bond markets. Furthermore, regulation remains a potential hindrance to supply.
Speaking Tuesday at Fitch's European Credit Outlook 2013 in London, Marjan van der Weijden, Head of EMEA Structured Finance, said that UK RMBS supply remains the key variable in the overall forecast. The UK RMBS market is historically the largest EMEA SF market, but this now competes with the Bank of England's Funding for Lending Scheme, launched in August last year, which offers UK banks the ability to draw down funds from the central bank to fund lending to households and businesses. Regular issuers will maintain a presence in the primary market, but the FLS appears likely to have an impact on total supply.
On the regulatory side, last week's announcement of the widening of the liquid asset criteria in banks' Liquidity Coverage Ratios - so that it includes some RMBS - is a sign that regulators recognise the role the structured finance sector can play in bank funding. But the capital rules proposed in Basel III and Solvency II could still limit the appetite for securitised debt among banks and insurers.
As we said when they were released in December, we believe the latest proposals from the Basel Committee on Banking Supervision on the capital treatment of securitisation exposures are inconsistent with the strong performance of most structured finance securities.
Tuesday's Credit Outlook event in London was the first of a series that will be held across Europe in Q1. Full details, along with our outlook for EMEA Structured Finance in 2013, are available at www.fitchratings.com.
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