The ECB published a market overview of SRT (Significant Risk Rransfer) transactions in August, which confirms the positive trend for European SRT securitisations since 2020. In 2022, EUR 170bn were securitised. The newly securitised nominal volume in 2022 is thus for the first time again above the level before the Corona crisis of 2019. This development is also due to the introduction of STS eligibility for synthetic transactions in 2021, which account for the majority of the volume compared to true sale securitisations.
SRT market still with a lot of upside – opportunity for financing the green transformation
However, the ECB notes that SRT securitisation continues to fail to realise its potential as an additional funding source for the European economy. How this potential could be unfolded is suggested by Fernando Gonzalez (ECB/SSM) and Giuliano Giovannetti (Granular Investments) in their July 2023 SUERF Policy Brief. They point out that SRT transactions can be an important tool for financing the green transformation. This is urgently needed as bank balance sheets alone cannot cover the emerging financing needs. In doing so, they propose concrete measures to address a major problem in the securitisation market: The limited number of investors.
Therefore, the EIF could play a decisive role, i.e.:
- acting as a market maker and structuring standardised securitisations in accordance with the relevant EU Green Standards;
- developing uniform transaction documentation;
- acting as a front investor and pass through
Conclusion
The strong market growth in SRT securitisations is a positive development and, in view of the upcoming surge in investment and financing needs, also essential to the green transformation. It is therefore to be welcomed that the ECB is contributing to market development with its own proposals, and we expressly welcome the idea of an active role for the EIF in connection with SRT transactions. In this way, the investor base can be continuously expanded and sustainable growth can ensue.