Data is at the heart of securitisation transparency
“Data transparency offers unique insights into the European securitisation market,” says Dr. Christian Thun, data scientist and CEO of European Data Warehouse (EDW) in Frankfurt.
On April 21st, 2022 the No. 1 Dutch Securitisation Event takes place at the Barbizon Palace in Amsterdam. At this event more than 200 participants come together annually to discuss developments in the securitisation market.
The Big Short
And when it comes to European securitisation data, he should know. EDW houses data on over three billion European loan records and the insights that go along with that. Thun is speaking at the European Securitisation Event where he will join a panel discussion on the landscape of private versus public securitisation, data transparency and the tensions and commonalities in the ABS marketplace.
EDW was the first official securitisation repository in Europe founded by the market in 2012. EDW collects, validates and distributes detailed asset-class specific data for asset-backed securities and whole-loan portfolios. “The whole concept of a securitisation repository was born out of the financial crisis,” explains Thun. “The lack of transparency, or more specifically, the lack of insight into the underlying loan pools, contributed to the catastrophe which emerged in 2008/2009 and was well illustrated in the 2015 movie The Big Short*,” says Thun.
At that time, investors shied away from European securitisations as it was unclear if these instruments contained the same risky exposures as the securitisations that were being issued in the US at the time.
“The European Central Bank stepped in to stabilise the market and to restore investors’ confidence by increasing transparency,” explains Thun. The market responded positively, and leading participants established European DataWarehouse as the first central securitisation repository.”
Fast forward to now
“Today, European securitisations are globally among the most transparent financial instruments,” says Thun. “The European securitisation market has slowly but steadily recovered. Still, European issuance is around 40% lower than it was back in 2011,” explains Thun. “That is in stark contrast to the US, where the market has grown 300% above the 2011 levels.”
One likely reason for this difference, is the European regulation. The Securitisation Regulation has done many good things for the securitisation market, but did it help the market to fully recover? Not according to Thun, who says, “The European Securitisation framework is still unfinished.” The good news is that policy makers in the EU and the UK have understood this and consulted the market in early 2021 to address some of the shortcomings. One of these is the distinction between public vs. private securitisations and the potential disclosure of the latter.
There is currently a debate taking place on the subject of public versus private securitisations from both issuer and investor perspectives. This is partly due to the regulatory definition between the two types of securitisation, explains Thun. “The Securitisation Regulation defines a ‘public’ securitisation as being one which has a prospectus in line with the EU Prospectus Directive. Everything else is ‘private’. Is this rather straightforward way to distinguish public versus private securitisations the only valid one? I doubt it.”
Thun explains that the current definition has led to a certain amount of confusion in the market. These questions have emerged more prominently since the missing pieces of the Securitisation Regulation came into force in late 2020 and in 2021. “We want to talk about this topic during the European Securitisation Event, as there are quite a few grey areas. Should information on private securitisations be made available via a securitisation repository such as European DataWarehouse to regulators, investors, and the central bank, or not? Who benefits from this the most? How much work would be involved? These are very interesting questions and I hope that we can dispel some of the doubts during the panel discussion.”
*currently on Netflix
For more information or tickets, visit the eventpage of the Securitisation Event 2022.