Asset Securitization

Structures and Risk Management in the Current Regulatory Environment

Agenda Program
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Prague, NH Hotel Prague
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The Securitization Market in 2016 and Trends
Structuring and Grouping of ABS Transactions
Securitization Applications: Examples and Case Studies
The Use of Securitization in Bank Capital Management
Significant Risk Transfer (SRT)
Using Securitization to Manage Liquidity and Liquidity Ratios
Investing in Asset-Backed Securities and CDO tranches
Enhancing Yield and Improving Portfolio Performance
Legal, Regulatory and Taxation Issues
Workshop objective
The objective of this seminar is to give you a thorough introduction to Asset Securitization and a good understanding of its uses in bank capital management and the investing process.
We start with the classification of portfolio securitization in the context of structured products, highlight the targets of a deal and describe the roles of the different parties involved in a transaction. We also explain the key motivations for ABS transactions in the current market and regulatory environment.
After making the auditorium familiar with the topic, the focus is on quantitative management from a risk control and investment point of view. We present the quantitative techniques to measure the impact of securitization and to price CDO tranches.
We then study the mathematical basics of ABS rating agency models and give a detailed description of the credit risk model the CRR and the significant risk transfer (SRT). Our examples involve a detailed description of a partially funded synthetic balance sheet CLO structure where the significant risk transfer according to article 244 CRR is intended.
Next, we show how to categorize the different risks that come into play with different structures and we display the way from a first indicative risk assessment to an in depth risk analysis. Finally, we look at how to calculate regulatory equity relief and to apply risk steering methods for the economic risk transfer.

Who should attend?
  • Treasury Professionals
  • ALM Managers
  • Risk Controllers
  • Quantitative Analysts
  • Compliance Officers
  • Structured Product Specialists
The understanding of the content is deepened with exercises. We discuss practical issues arising in the measurement of risk and in the fulfillment of regulatory reporting. The calculation of credit risk figures and prices will require the use of Excel.

Program of the seminar: Asset Securitization

The seminar timetable follows Central European Time (CET).

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Introduction to Asset Securitization

  • Basic definition of asset securitization
  • Differences and similarities to related financial products
    • covered bonds
    • factoring
  • Targets of asset securitization
    • Risk transfer
    • Liquidity and funding source
    • Collateral generation
  • Principal structures and the parties of an ABS transaction
    • basis structures
      • Cash flow
      • Synthetic
      • Synthetic partially funded
    • the role of the regulator
    • the role of the originator
    • the role of the tax lawyers
    • the role of the trustee
    • the role of the borrower
    • the role of the paying agent
    • the role of the rating agencies
    • the role of investment banks

Markets and Regulation

  • Official Sector Intervention in the ABS Markets and the CRR
    • Asset purchase programs and quantitative easing
    • Discount window facilities and haircuts
    • CRR articles 243, 244 and 249 on SRT
  • Case study: The securitization market in 2016 and trends

12.00 - 13.00 Lunch

13.00 - 16.30 Securitization Structuring

  • Different targets different structures
    • Risk transfer and CDS technology
    • Liquidity and funding source: sell the portfolio
    • Collateral generation: sell the portfolio in a true sale modus
  • Grouping ABS transactions
    • Classical ABS
      • Auto loan ABS
      • Leasing ABS
      • Student loan ABS
      • Consumer loan ABS
    • Asset backed commercial paper (ABCP)
      • Conduits, compartments and programs
      • Market characteristic
    • Collateralized debt obligation (CDO)
      • Synthetic structure (unfunded)
      • Partially funded synthetic structure
      • Cash flow structure
  • Taxation issues
    • The originators point of view
    • The SPV's point of view
    • The investors point of view
  • Legal topics
  • Setting Up the SPV - Legal, Regulatory and Practical Issues
  • Credit enhancement techniques
  • Rating of Structured Securities
  • Payment Management
    • Pass-Through vs. Pay-Through
    • Prepayments
    • Early Amortization Triggers

Securitization Applications (Examples and Case Studies)

  • SME Balance Sheet Securitization (CLOs)
  • ECB collateral securitization
  • Exercises

09.00 - 09.15 Recap

09.15 - 12.00 The Use of Securitization in Bank Capital Management

  • Profitability calculation of an ABS transaction
    • RoE before and after the ABS transaction
    • RAROC before and after the ABS transaction
  • Calculation of capital for ABS tranches under the standardized approach of Basel
    • the supervisory formula
  • Calculation of capital for ABS tranches under the internal model approach
    • Introduction of an internal model
  • Significant risk transfer (SRT)
    • Regulatory foundation
      • CRR 575 art. 243 (traditional securitization)
      • CRR 575 art. 244 (synthetic securitization)
      • CRR 575 art. 244 2.a (use of SVF) (mezzanine criterion)
      • CRR 575 art. 244 2.b (use of SVF) (first loss criterion)
      • CRR 575 art. 244. 4 (use of internal model) to show the criteria
    • Case study on synthetic securitization
      • Using the SVF to show the quantitative criterion
      • Using the internal model to show the quantitative criterion
    • Comparison of the approaches
    • Reporting requirements
    • Exercises
  • Using Securitization to Manage Liquidity and Liquidity Ratios
    • Improvement of the LCR
    • Improvement of the NSFR
    • Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Investing in Asset-Backed Securities

  • Who Should Invest in Asset-Backed Securities?
  • Enhancing Yield and Improving Portfolio Performance with ABS
  • Risks of Investing in ABS
    • Credit and sovereign risk
    • Servicer performance risk
    • Interest rate, currency risk and prepayment risks
    • Legal risks
    • Liquidity risk
    • Counterparty and guarantor risk
  • Risk and valuation of CDO tranches
    • Portfolio risk figures
      • Diversity score
      • WARF
      • Asset correlation and default correlation
    • Tranche pricing formula
    • Correlation analysis of different CDO tranches
  • Small exercises and final discussion

Evaluation and Termination of the Seminar

Training catalogue in PDF
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