Retained securitization deals on the books of Europe’s banks has put a hiccup in the market’s revival.
Nearly four-fifths of all new issuance in the first quarter of this year was retained by banks, with just 22 per cent of the €114.4bn being sold on to end investors, According to first-quarter data reported by the Association for Financial Markets in Europe (AFME).
According to the AFME report, 51.7 per cent of the €2,076bn ($3bn) in outstanding European structured finance deals is now held by the originating banks, not investors. Three years ago, that figure was 7.1 per cent.
The originate to retain model replaced the originate to distribute model as the financial crisis unfolded and banks suffered a liquidity shortage. Banks began retaining deals for use as collateral for short-term loans from central banks.
Industry experts predict placed securitizations could top €100bn this year, up from €88bn in 2010 which was less than 30 per cent of all issuance, according to a report in the Financial Times.
