ABS transactions: Hypoport as the spider in the web
Jacco Samuels is Managing Director of Hypoport, an Amsterdam-based fintech services company. The Dutch arm of Hypoport is part of a larger network of tech-based financial services companies based in Berlin and listed on the Frankfurt stock exchange. We talked to Jacco in the run-up to the Securitisation Event to touch base on his views of ABS today and his company’s position at the sharp end of the latest industry developments.
For more information on ABS or tickets, visit the eventpage of the Securitisation Event 2023.
What is Hypoport’s role in ABS transactions?
Securitisation issuers today face a host of operational challenges when setting up their transactions. We exist to help smooth out the implementation of these deals for financial institutions, and make sure they run well for years to come.
Could you be more specific?
We have clients in Europe, Asia, and Africa, for example, who issue transactions. The largest and core investors are from Europe. Both parties in the deal value our technology and experience in this market as we can help issuers comply with the demands of Europe’s marketplace. We provide specialized technology through our PRoMMiSe platform and related services. These allow our clients to structure and monitor asset backed securities portfolios, and host ABS infrastructure all without them draining already scarce IT resources.
Do you advise clients?
Definitely, we can also service issuers of ABS deals with regulatory and business intelligence specialists. We are very familiar with this market, as we are also a partner in shaping regulatory standards for the structured finance markets. We have 20 years of experience and market intelligence which can help mitigate both internal and external risk factors, as well as ease operational concerns through our PRoMMiSe platform.
“Operational concerns” sounds worrying…
It’s relatively simple: the system automates workflow which takes pressure off personnel challenges and scheduling issues. It’s a cloud-based hosting service so no special IT is required, and it’s got built-in security features to keep auditors happy, so no headaches regarding the internal audit.
How do all parts of the ABS puzzle fit together?
If you break it down into pieces of a puzzle I would say it starts with the economics of a transaction, followed by the legal process, and the last stage is often the automation. ABS transactions are complex by design. Unfortunately, IT systems and processes can be overwhelming too. Our main competitive advantage is that we understand both. That allows an issuer to be able to process complex data from numerous sources and be flexible in terms of the output. We handle a wide variety of data sources and combine them in our platform in a very flexible way. We are therefore able to fulfil the requirements of the various stakeholders in the securitisation industry. This includes the external parties, such as the ECB, ESMA, rating agencies and investors, but also the internal stakeholders at the issuer. Simply put, we know the securitisation market rather well!
Does that experience give you an edge?
I like to think so. We have been building this software for two decades and that means we have considerable specific knowledge in this area. Each securitisation transaction has both an asset and liability aspect. We are able to handle both sides in our system. This helps banks and financial institutions analyse and report securitised and collateralised loan portfolios. We design software specifically for the issuers in securitisations. Our system understands and deals with the challenges presented by the complex regulatory, legal, financial, and technical aspects of structured finance transactions. We also spend a lot of time understanding our clients’ needs in the current securitisation market, and nowadays those needs cover both the regulatory environment and sustainable finance, which is top of mind these days.
Are you involved in sustainable finance?
We aim to be at the forefront of sustainable finance transactions. Sustainability is a major challenge from both a regulatory and data perspective. We are currently gathering the energy efficiency data for housing in the Netherlands in order to grade loans in terms of energy efficiency. The biggest regulatory push today is by far in the “Renovation Wave” for housing. Making buildings more sustainable and energy efficient is a hot topic and a major challenge. The mortgage market is huge and as such has really got the bulk of attention of both ABS issuers and the European Commission. Also, investors’ have a big incentive to invest in green assets, and the energy crisis has focussed consumers’ attention here too.
Do you have any concrete “green” initiatives?
We are involved in a number of Sustainable Strategy initiatives. We have developed an in-house energy efficiency data tool called Greenport which extracts all the energy efficiency data from Dutch commercial and residential properties. We are also a consortium member of Engage, which is setting up the Green Investment Portal to provide consistent housing related ESG data on European housing stock. I believe that ultimately this will help create a European sustainable finance ecosystem which will be interconnected with existing data and regulatory infrastructure via the portal. Once it is fully up and running, the Green Investment Portal will analyse, integrate, and reduce risks for energy efficient investments across the whole EU financial sector.
Any other projects of note?
We are a partner in ESG Screen 17, which provides ESG scoring based on the 17 United Nations Sustainable Development Goals. And we are also one of initiators of the Dutch Energy Efficient Mortgages Hub (EEM NL Hub). This group really want to accelerate energy efficient housing in the Netherlands. This collective relies on a clear understanding of the Dutch mortgage lending landscape and how it relates to the EU Taxonomy. Many of the Hub members are financial institutions. We are involved as a fintech software integrator which is a unique role.
Is the Dutch market ahead of the game regarding its approach to ABS?
We see a real need in the European market for a standardisation of reporting and compliance data in securitisations. Everyone in the Dutch market seems to agree that this is the way forward. There is therefore a mutual understanding between competing parties that we all need to standardise certain key processes, it makes everyone’s life much easier. We feel that this basis of trust elevates the whole market at once.
Could this form a basis for a pan-European way of working or might it run into local issues?
More partnerships between pan-European parties (such as our projects with the European Data Warehouse based in Germany) would leverage more understanding and simplicity in the market. We can learn from each other. I believe that partnerships — even between competitors — are a way forward.
But across Europe? Is that realistic?
I’m sure there would be local issues. Nevertheless, I think that the European regulators want parties at the forefront of this approach to demonstrate that it is possible. My view is that centralising and standardising data would really help the European market which faces a massive challenge in terms of the Renovation Wave and Fit for 55 (the target of cutting emissions by 55% by 2030).
Is Europe looking at the Dutch way of working?
I think the European Commission is encouraged by examples like the Dutch securitisations model, which prove that it is possible to join forces for good, while still competing with each other.
For more information on securitisation and new challenges in the market or tickets, visit the eventpage of the Securitisation Event 2023.
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