The UK securitisation market: Recent developments, and possible recovery Jenny Owladi Bank of England

2 The UK Securitisation Market Historical Background Historical Background Recent Developments Recent Developments Going forward Going forward Securitisation prospects Securitisation prospects Statistical reporting Statistical reporting

3 Historical Background RMBS: RMBS: Issuance has grown significantly over the last ten years Issuance has grown significantly over the last ten years Securitisations, and master trust structures, popular with main high street lenders. Securitisations, and master trust structures, popular with main high street lenders. Subprime & specialist mortgage lenders also tended to be financed by securitisations Subprime & specialist mortgage lenders also tended to be financed by securitisations CMBS: CMBS: Volumes small compared to RMBS Volumes small compared to RMBS Other securitisations: Other securitisations: Small amount of credit card and auto loan securitisations Small amount of credit card and auto loan securitisations Relatively little covered bond issuance Relatively little covered bond issuance

4 Recent Developments Markets more or less closed for the last two years Markets more or less closed for the last two years Effects of Bank of England Special Liquidity Scheme (SLS): Effects of Bank of England Special Liquidity Scheme (SLS): MFIs can swap securities for liquid assets MFIs can swap securities for liquid assets Lead to large securitisations where entire issue is retained by seller. Lead to large securitisations where entire issue is retained by seller. Approx £287bn of securities used as collateral (as of 30 Jan 2009) Approx £287bn of securities used as collateral (as of 30 Jan 2009) Covered Bonds regulation – March 2008 Covered Bonds regulation – March 2008

5 Securitisations/Loan Transfers Source: Bank of England NB: Limited coverage

6 Going forward Recent issuance to the market: Recent issuance to the market: Lloyds: £4bn RMBS Lloyds: £4bn RMBS Barclays: €2bn covered bond Barclays: €2bn covered bond Santander: €1.75bn covered bond Santander: €1.75bn covered bond Nationwide: £3.5bn RMBS Nationwide: £3.5bn RMBS RMBS relatively expensive funding source RMBS relatively expensive funding source Covered bonds more attractive? Covered bonds more attractive?

7 Bank of England Statistical Reporting New reporting scheme for SPVs from Jan 2010 onwards. New reporting scheme for SPVs from Jan 2010 onwards. All MFIs will report loans that they have securitised on balance sheet. All MFIs will report loans that they have securitised on balance sheet. Claims on and liabilities to own SPVs reported separately. Claims on and liabilities to own SPVs reported separately.

8 Any Questions?