A review of securitisation activity over the past seven days

Last week's stories
Benchmark legislation
Congress to rescue Libor-based contracts, but questions remain
Ever-changing moves
Euro CLOs remain fluid
Middle market opportunities
MM CLOs still offer relative value and continued innovation
NPL ABS inked
Vega securitisation underway
Pattern recognition?
New issue and secondary CLO double-B disparity discussed
Promising pipeline
STS synthetic securitisations slated
Residential rise
Mortgage SRT motivations examined
Stepping up
Indian banks change gear on Libor transition
The State Bank of India and ICICI Bank undertook their first alternative risk-free rate transactions in January. This utilisation of SOFR is expected be instructive in helping the Indian securitisation market move towards Libor cessation, having initially been slower to react than other jurisdictions.

"Libor is a central issue in Europe and the US, but the impact is felt far beyond London," says Nathan Menon, senior associate at Reed Smith. "The Indian market is a key market in Asia and, increasingly, a key market globally. The sheer size of the market is significant."

Europe and the US are perceived as being proactive in terms of the Libor transition, compared to India, due to the extent of their exposure to the benchmark. Essentially, those markets have the most to gain and the most to lose.

"With India, there has been a question of who is going to make the first move - the regulator or the banks? At the end of last year, the RBI pushed the agenda," Menon notes.

He continues: "The bulletin from November 2020 was a wake-up call. The Indian market will benefit, in the long term, from being cautious and watching what other markets do. Diving straight in would not benefit anyone."

The RBI's November bulletin revealed the extent to which progress still had to be made with regards to the Libor transition. It is estimated that India's exposure to the benchmark is around US$331bn. In order to make further progress, banks have been tasked with identifying exposures, determining risks and taking steps to complete the transition.

Menon highlights the significant link between Libor and the Indian economy, as the Mumbai Interbank Forward Offer Rate (MIFOR) is calculated using US dollar Libor. Commercial borrowings, derivatives, government loans and trade contracts are also calculated this way.

The Libor working group established by the Indian Banks' Association (IBA) shares the approach which has been used in Europe and the US, with a holistic view of what issues are present. Menon says: "In terms of contractual clauses and fallback language, attention will be needed by those that are deficient. It is a process of noteholders working with other participants and operational parties to come to a consensus about what they want the deal to look like in the future."

He adds: "What is in the documentation? I think there is going to be a whole slate of amendments. The only way to amend them would be in such a fashion."

There is also the question of whether political factors, such as the farmer protests in India, will negatively impact the economy. "However, the Indian government has emphasised that it is business-friendly, so the Indian economy is not currently seeing any negative side effects," Menon suggests.

Despite the unique challenge of the coronavirus pandemic in 2020, the Indian market continues to be viewed as counter-cyclical to some extent. Menon concludes: "The pandemic had ramifications in terms of changes to how economies function. More generally, the crisis has shown that such fundamental amendments will not be easy. The collective will of financial institutions and regulators is necessary."

Jasleen Mann

Other deal-related news

• The CFPB has released a notice of proposed rulemaking (NPRM) to delay the mandatory compliance date of the General Qualified Mortgage final rule from 1 July 2021 to 1 October 2022 (SCI 4 March).
• The UK FCA has confirmed that all Libor settings will either cease to be provided by any administrator or no longer be representative immediately after 31 December 2021 - in the case of all sterling, euro, Swiss franc and Japanese yen settings, as well as the one-week and two-month US dollar settings - and immediately after 30 June 2023, in the case of the remaining US dollar settings (SCI 5 March).
• Dentons has advised two UK banks in relation to switching their RMBS to SONIA from Libor (SCI 5 March).
• ESMA has published four new Q&As and modified 11 existing Q&As in connection with its securitisation reporting instructions (SCI 5 March).

Company and people moves

• Arrow Global Group has established a clients and capital formation group within its Arrow Capital Management business (SCI 4 March).
• Andy Murphy has rejoined DMS Governance as md, head of strategy - structured finance, based in Dublin (SCI 4 March).
• Holger Kapitza has been named director, sales, institutional clients at Wealthcap, based in Munich (SCI 4 March).
• Monroe Capital has sold a passive minority equity stake to Bonaccord Capital Partners, a division of Aberdeen Standard Investments (SCI 4 March).
• Peter Dailey has joined Aeolus Capital Management in the new position of head of research (SCI 4 March).
• Insurtech platform Arbol has named Hong Guo evp and chief insurance officer, responsible for leading all insurance-related strategy and operations for the company (SCI 4 March).
• Thomas Parcell has joined Lockton Re's new Bermuda platform as chief broking officer (SCI 4 March).
• RenaissanceRe has rebranded its ventures business as 'RenaissanceRe Capital Partners' (SCI 4 March).
• HIG Capital has expanded its European WhiteHorse team with the hire of Michael Lucas as an md, based in London (SCI 5 March).

Data

Recent research to download
Synthetic RMBS - March 2021
CLO Case Study - Spring 2021
Greek CRTs - January 2021                           

Upcoming events
SCI's 5th Annual Risk Transfer & Synthetics Seminar
21-22 April 2021, Virtual Event
SCI's 3rd Annual NPL Securitisation Seminar
26 May 2021, Virtual Event
SCI's 1st Annual CLO Special Opportunities Seminar
29 June 2021, Virtual Event