NAVIGATING THE CASH VS SYNTHETIC DEBATE,
WEIGHING THE COST OF CAPITAL
As securitisation shifts from being a funding tool to a balance sheet and credit risk management tool, balance sheet relief trades (as distinct from capital relief trades) are gaining traction. At the same time, banks are increasingly relying on retained/bilateral/preplaced deals to meet their liquidity needs, driving a large portion of European ABS activity towards private execution.
SCIâ€™s Capital Relief Trades Seminar provides an in-depth exploration of this diverging trend, focusing on a number of different RWA management techniques, as well as how to demonstrate significant risk transfer and an update on the latest assets and jurisdictions to emerge.
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*This event is CLOSED to the press.
LOCATION: 20 Primrose St, London EC2A 2RS
SPEAKERS: If you would like to speak on a particular panel, please e-mail us and quote the panel name in the subject line.
12:30 - 13:30: THE STRUCTURAL LANDSCAPE
The Orange Lion 2013-10, CFHL-1 and CFHL-2 RMBS demonstrate that true sale can be an effective tool for balance sheet relief, providing the issuer can place the full capital stack and achieve accounting derecognition. How prolific are these types of deals likely to become and which structural innovations are they pioneering? What are the different motivations for executing a cash versus a synthetic trade and vice versa? Are bilateral/preplaced transactions damaging the European ABS market, given that only experienced investors are typically shown them and price comparables are limited? Would the inclusion of synthetics in the STC framework increase transparency around RWA management trades?
Case study and Q&A
Tahir Wahid, Credit Suisse
Steve Baker, Apollo Management Int
Jessica Littlewood, Clifford Chance
Kaikobad Kakalia, Chorus Capital Management
Serdar Ozdemir, RaboBank
13:30 - 14:00: NETWORKING BREAK
14:00 - 14:45: COST OF CAPITAL AND ALTERNATIVES
Achieving the right balance between deal pricing, tranche thickness and RWA reduction is the key to executing capital relief trades. How should issuers approach calculating the cost of equity/cost of capital involved and at what level does the net interest margin make sense? Can unfunded credit protection providers play a role? What are the pros and cons of issuing hybrid capital or other alternatives over executing an RWA management trade? How do issuers decide which tool to use?
Juan Grana, Nomura
Matthias Korn, Caplantic
Giorgio Gallo, Chorus Capital Management
Jeremy Bradley, Lloyds
14:45 - 15:00: NETWORKING BREAK
15:00 - 15:45: ISSUING BANK STRATEGIES
A panel of bank issuers discuss what it takes to execute a deal, why good deals can sometimes fail and how they have deployed the cash freed up via capital/balance sheet relief trades
Himesh Shah, Christofferson Robb
Jonas BĂ¤cklund, Nordea Bank
Georgi Stoev, European Investment Fund
Alexandre Linden, BNP Paribas
15:45 - 16:15: NETWORKING BREAK
16:15 - 17:00: DEMONSTRATING SIGNIFICANT RISK TRANSFER
The EBA guidelines acknowledge the existence of potential capital arbitrage within the credit risk mitigation framework and a more stringent application of significant risk transfer is expected on an ongoing basis. How can genuine risk transfer transactions differentiate themselves from shorter-term arbitrage trades? Is better demonstration of governance and risk management around economic substance and the integrity of expected loss determinations required? What are the specific challenges of SRT for non-standard trades? Could Brexit allow the PRA to provide clarity on commensurate risk transfer and/or evolve mechanistic tests?
Nick Stainthorpe, Reed Smith
Jereon Batema, Open Source Investor services
Steve Gandy, Santander
Ramnik Ahuja, Deloitte
17:00 - 17:15: NETWORKING BREAK
17:15 - 18:00: JURISDICTION/ACTIVITY UPDATE
Different drivers for Northern European versus Southern European issuers are emerging. This panel explores the new assets, jurisdictions and participants entering the capital relief trade space. Are certain types of issuers likely to make better candidates for issuing RWA management trades? What should investors be aware of when analysing a new asset or jurisdiction?
Robert Bradbury, StormHarbour Securities
Aidan McKeown, Magnetar
Molly Whitehouse, Mariner Investment Group
Juan-Carlos Martorell, Mizuho International
Davide Fiore, UniCredit
18:00 - 19:30: COCKTAILS
Delegate feedback from SCI Capital Relief Trades Seminar, December 2015, London:
As an issuer, the event is a good opportunity to meet investors, who could then invest in our future issuances. It is also a good opportunity to connect with other issuers to discuss challenges we face and potential solutions. JL, BMO
It is a well thought out event that covers pretty much all the relevant aspects of CRT transactions. I also liked the networking sessions which connected investors, issuers and others. RC, IFC
The event is a valuable gathering of CRT trades issuers, advisors and investors sharing experience on this product. As a bank, using CRT trades for capital benefits, we face the same question as others on regulation and internal approval. Best practice and experience sharing is very useful. Meeting investors wishes in order to get the best execution is a top priority. Knowing their expectations and capacity is therefore valuable.â€¦.. having a SEC representative in the panel is interesting, it allows for transparency the market needs and to best address regulatorsâ€™ concern in general. MC, BNP Paribas
The CRT seminar was excellent. I came away thinking that CRT "is NOT just another regulatory arbitrage fad" ... but that the insights shown in properly structuring solutions to properly recapitalize banks after the credit crunch got me thinking of mechanisms that could be critical in building a new, shareholder value-creating, global banking industry of tomorrow. All speakers were knowledgeable and approachable. It was one of the best events I've been to in years. EJ, Tempus Advisors
It was very helpful to meet some of the other key players in this space and hear first-hand how they navigated some of the difficulties in completing transactions. I like the panel format and the give and take among participants; the representatives were all very knowledgeable and impressive. TK, Sandler O'Neill + Partners
Great gathering of banks, arrangers and investors. Speakers were very forthcoming. GG, BNP Paribas
"I thoroughly enjoyed the conference and appreciated that there is finally a dedicated Risk/Capital Relief seminar. It was good to have an event which specifically focusses on risk transfer transactions solely. The balance between investors and issuers was good. Very good to hear and see investors at the same table and hear they common vies on the market as it stands. The networking is I think the most important aspect of this event, so appreciated the frequent break-outs enabling to catch up with almost all participants." SO, Rabobank
"We got exposure to the Reg Cap market which is very private in nature, and allowing us to network with various market participants was very helpful. Further, the content covered by the panel was quite technical and detail, which is very useful as well." TS, Barclays
"Was a good occasion to meet other market participants and interesting to get their perspective on market trends." VM, Nomura
"What was important from my side was that the event covered all aspects of CRT transactions from regulation, to structuring considerations, pricing and finally opportunities and relative value so there was no section missing as such." KK, Santander
"The event was very useful and well-organised. The most important aspect is the insight from market practitioners, and therefore the panel format was very effective." GA, BNP Paribas
This event will bring together:
Issuers, Hedge Funds, Broker-Dealers, Institutional investors, Structurers, Heads of RWAs, Regulators, Law firms
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