5 June 2023
Another year of change in the securitisation markets draws to a close with the anticipation that there will be further significant changes, particularly in regulation, over the next year. In the regulatory space, this may lead to some meaningful divergence in how the EU and UK approach regulation of securitisation even if the basic substantive structure of the rules is likely to continue to align. However, change is not limited to regulation: we have seen the mix of issuance affected by bumpy periods that mainly affect public ABS markets, while private securitisation financing has been more constant. New issuers have entered the market – particularly new specialty finance companies – and have secured financing of their product offerings which often contain innovative features. Not surprisingly given that, the market for esoteric securitisations has often been vibrant over the last year: another trend we expect to continue. In short, securitisation has continued to be a rich and diverse landscape and there is no sign of that changing!
Securitisation has not, however, been immune from macro events affecting the capital markets. The financial risks of Covid-19 may be losing prominence but there is still a war in Ukraine and most European economies (including the UK) as well as the United States are having to adjust to a period of high inflation – and corresponding interest rate rises. Moreover, bank failures and rescues have caused issuance and related activity to pause at times. The securitisation markets have nevertheless, on the whole, remained robust in the face of these challenges; but inevitably volatility will remain a fact of life.
Looking forward, we hope that the high level of engagement by policymakers and regulators and the oft-stated policy goal of securitisation being an important component of the EU and UK capital markets will lead to tangible steps being taken to encourage both issuers, through better-calibrated obligations, and investors, through better-focussed diligence requirements, to enter into and deepen the market for securitisation.