supporting sme financing using securitisation techniques
TRANSCRIPT
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Supporting SME Financing using
Securitisation Techniques
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Table of contents
Introduction............................................................................................................... 3
1 Overview of the SME securitisation market........................................................ 4
1.1 A few words on the European securitisation market.....................................................4
1.2 Review of completed and pending works by other entities ..........................................5
1.3 Main current features and trends of the European ABS market of SME loans..............8
1.4 Challenges of the market............................................................................................ 10
2 Public Sector Bodies and SME Securitisation .................................................. 11
2.1 Rationale for intervention of public sector agencies ................................................... 11
2.2 Rationale for originators ............................................................................................. 12
2 3 Understanding the needs and concerns of originators: Scope and results of the Pan
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Introduction
The scope of the study conducted by a dedicated AMTE working group is the
efficiency of European SME securitisation techniques. This initiative, which aims to
increase the efficiency of Euros Capital Market and benefit the SME financing
activity, involves the intervention of different actors of the economy. Although each
of these actors may have specific drivers of interest, the fundamental role and the
source of dynamism for the European economy of the SME activity leads to a
convergence of actions.
Among the main drivers for active participation, SME loans appears to be a key
asset class for portfolio managers of banks, which are often subject to some
regional, corporate and industry concentrations, and especially as it is the most
sensitive by nature to economic downturns. For public sector agencies,
securitisation has been identified as an area of interest by which they aim to
support and stimulate lending to SMEs. For structuring banks, there is an interest
due to the high potential for future growth. And finally for investors, it is an
attractive area where they can reach further risk diversification.
Nonetheless, specific challenges for this asset class have kept issuance volumes
l d t th ABS t l I d d b th bli t tt ti d
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1Overview of the SME securitisation market
1.1A few words on the European securitisation market
For uninitiated readers and claritys sake, securitisation is the mechanism by which
individually illiquid financial assets such as loans are converted into tradable capital
market instruments. More specifically, selected receivables (assets) of the originator
are packaged together in an underlying pool and sold by the originator to a Special
Purpose Vehicle (SPV). The SPV refinances the pool by issuing debt instruments
(Asset Backed Securities or ABS) on the capital markets.
Among benefits of securitisation, ABS transactions help issuers to get funding,
transfer risk and extend maturity of financing. These benefits can be achieved
under two main structures; a cash structure where the primary benefit for the
originator is to get funding and a synthetic structure with no funding elements
allowing a pure risk transfer through credit protection contracts. An ABS structure
allocates collections from an underlying collateral of receivables (asset claims) to
the securities in the form of so called tranches. This allocation of collections also
extends (inversely) to the distribution of losses among the different tranches in
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Total Funded ABS issuance volumes in ! Bln from 2001 to 2006 YTD
(European assets and European distribution)
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
2001 2002 2003 2004 2005 2006
Source: SG Credit Research
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Members of this AMTE working group have already taken part to similar workshops
on related topic and previous studies have been used as preliminary material to go
further in the analysis.
Some previous studies and Working Papers on SME Securitisation by other
entities:
EUROPEAN COMMISSION DG ENTERPRISE AND INDUSTRY, Study on asset
backed-securities: impact and use of ABS on SME finance, November 2004
EUROPEAN COMMISSION and FBE Fifth EU Bank-SME Round Table February
2006-2007: the securitisation of SME loans
IMF: Asset Securitisation as a Risk Management and Funding Tool: What Does itHold in Store for SMES? February 2005
EUROPEAN INVESTMENT FUND: Securitisation as a means to enhance SME
financing 24/04/2003
KfW and EIF Workshop on SME Securitisation: June 2nd 2005; where the following
were presented:
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Securitisation of Mezzanine SME Loans An overview of Existing
Programmes and their Rationale, Markus Herrman, Director, Head of
ABS Research & Strategy, HSBC
Mid Cap Bonds and Securitisation of SME Bonds Access to the
capital Markets for Austrian SMEs, Henriette Hochgatterer, ExecutiveDirector Treasury, Investkredit Bank AG
How does it feel when they securitise your loan? Experiences from
participants in Securitisation Programme, Ralph Lanckohr, CEO,
International Holding AG, Stefan Meutsch, Managing Director, and
Christian Jrgens, Managing Director, Vereinigte Verlagsanstalten
GmbH
The AMTE Working Group on SME Securitisation Aims and first
results, Philippe Madar, Chairman of the AMTE working group on
SME securitisation, Managing Director ABS Europe, Socit
Gnrale Corporate and Investment Banking
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1.3Main current features and trends of the European ABS market of SME
loans
SME securitisation activity across the EU relies on local markets. In addition to the
local specificities, the lack of homogeneity between the SME loan portfolios makesthe securitisation of SME portfolios more complicated than for other ABS asset
classes. With SMEs accounting for over 90% of all European enterprises a recent
study concludes that SME assets account for an average 15.5% of European bank
assets, which amounts approximately to 3,300 billion. Based on this assumption,
a study for the European Commission estimated that between 1% and 2% of
securitisable SME claims in bank balance sheets have been securitised. Therefore,
there is still considerable scope for growth in this asset class in the coming years.
For illustration, the charts below show the amounts of SME risk transferred to thecapital markets by distinguishing cash and synthetic structures and the repartition
by country.
European SME issuance volumes in ! Bln from 2000 to 2006 YTD
35 0
40.0
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Funded SME issuance volumes in ! Bln from 2000 to 2006 YTD
AUSTRIA
BENELUX
BRITAINEUROPE
FRANCE
GERMANY
GLOBAL
ITALY
LUXEMBOURG
NETHERLANDS
PORTUGAL
SPAIN
SWITZERLAND
POLAND & CZECH
Source: SG Credit Research
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the guarantee of the Kingdom of Spain. These features will be addressed later in
the report.
It can be noticed that the high level of activity in Germany and Spain is probably in
most part attributable respectively to the PROMISE programme sponsored by KfW
and the FTPYME programme supported by the Spanish Government. Due to theirimportance, the second part of the report presents these programmes in detail.
Based on recent transactions and market participants views, the main trends in the
securitisation market are an increasing investor demand, an improved liquidity
following the development of the secondary market and a standardisation of
structures. As a consequence, the market is expecting the volume issuance of SME
securitisation to grow tremendously in the years to come.
1.4Challenges of the market
Though expected to grow as a whole, there are some specific driving forces behind
the development of the SME securitisation market. In particular, considering the
impact of Basel II on Regulatory Capital of retaining SME exposures and securitised
portfolios of SME loans, originators will be required to perform advanced risk
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2Public Sector Bodies and SME Securitisation
2.1Rationale for intervention of public sector agencies
Public sectors bodies have implemented proposals geared at maximizing the
impact, efficiency and catalytic effect of public sector intervention in SME
securitisation. The principal advantage in SME securitisation being developed
further is without doubt that it can help support greater lending volumes to SMEs.
Securitisation helps to ease the capital and funding constraints of their primary
lenders. Thus, banks and other financial institutions will potentially have enhanced
capital and funding resources by using SME securitisation techniques that attractnew investors with previously limited exposure to SME risks and transfer risks from
banks to broader risk taking population.
In addition, securitisation could provide a mechanism whereby higher risk SME
borrowers, on the edge of credit acceptability and previously denied credit, could
have their needs met, albeit at an appropriate price.
F l t ti B l 2 it l i ht SME l di ill i
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2.2Rationale for originators
2.2.1Regulatory: Basel II Capital Weights on SME assetsThe source of SME financing is facing concerns due to the coming implementation
of the new Basel Capital Accord (Basel II). SME lenders, i.e. mostly banks, will be
forced to update their systems and the way they manage SME exposures. Indeed,
a deeper analysis of credits through a refinement in scoring models and other
procedures may involve high implementation costs and the concern is that it could
reduce the lending activity toward SMEs.
More directly, Basel II capital requirements are expected to change and will have animpact on SME securitisation. To illustrate and better assess the potential effect of
the new regulatory framework, we provide a sensitivity analysis under the advanced
IRB approach where the following assumptions can be set:
The range of one-year probability of default taken into account is
[0.2%;3.0%] corresponding to the credit ratings of assets between
BBB/Baa2 and B+/B1
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The charts enable to highlight the large sensitivity of the Basel II capital charge to
the various inputs. From this illustration and given the heterogeneity of loans
classified as SMEs, a direct impact on the originators capital requirements can not
be derived.
G ll th B l C it l A d ill ti t b k t d t th i i t l
Impact of Maturity on Basel II Capital Weights
with a 50% Recovery Rate and !m25 Turnover
0%
2%
4%
6%
8%
10%
12%
0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 2.2% 2.4% 2.6% 2.8% 3.0%
BBB BBB- BB+ BB BB- B+
Mat 1.5y Mat 3.0y Mat 4.5y Basel I %
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2.3Understanding the needs and concerns of originators: Scope and results
of the Pan European Survey conducted with the collaboration of the FBE
Gaining a better understanding of the needs and concerns faced by originators of
SME loans is one of the two main goals of the Workshop on Public Sector Bodies
and SME securitisation. To this end, the working group agreed that one of the best
tools would be to develop a survey which would be broadly distributed to
originators throughout Europe. A key step was developing this initiative with the
collaboration of the European Banking Federation (FBE) and the European
Association of Cooperative Banks should also contribute.
The FBE concluded that the AMTE initiative could be of interest for the Fifth EU
Bank-SME Round Table, whos third and final topic is the securitisation of SME
loans. The Round Tables are organised by the European Commission to promote
dialogue between banks and SMEs and, ultimately, to promote the availability of
finance for SMEs. One of the objectives of the current exercise is to identify good
practice and procedures which could be more widely adopted around the EU. The
Fifth Round Table began in February this year and will conclude early in 2007.
Securitisation is one of three aspects of Bank-SME relations on the agenda. The
others are transparency; and mezzanine finance and business transfers. AMTE has
been invited to these Round Tables.
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The survey takes the form of a short questionnaire which is intended for completion
by individual banks, whose names are kept rigorously anonymous.
The list of countries which have responded to the survey are the following: Armenia,
Austria, Cyprus, Czech Republic, Finland, Germany, Ireland, Italy, Lithuania,
Norway, Portugal, Slovenia, Sweden, UK and there were some other answers forwhich the country of origination has not been disclosed. More than a third of all
answers stem from countries in Eastern Europe. Detailed information can be found
in Annex 6.2.
In terms of SME portfolio sizes, the total amounts to 318.7 Bln equivalent. It is
mainly made of portfolios of 41 Bln in UK, SEK 508 Bln in Sweden and 201.2
Bln in Eurozone countries.
In addition, based on countries which answered the survey, we present below the
breakdown of SME portfolio sizes according to the originators rating range:
Originators' rating range in !Mln %
AAA 61 194 19.2%
AA 102 609 32.2%
A 151 969 47.7%
BBB 1 181 0 4%
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Present and future SME lending
With respect to the SME lending strategy, originators do not feel constrained on
average by risk exposure, regulatory capital weighting and concentration: Only one
third of all originators see their risk exposure towards SMEs as an obstacle. These
facts explain why 95% of originators plan to increase their SME lending in thecoming years.
Despite the welcoming willingness of banks to hand out more money to SMEs in
the future, the amount of loans granted would grow even further should originators
benefit from cost efficient risk transfer and regulatory capital relief: 4 out of 5 banks
would expand their lending if they could transfer risk cost-efficiently.
This is an important result: Obviously, for some banks, securitisation of SME-loans
is too expensive, which prevents them from securitisation and increasing SMElending.
Perception and knowledge of securitisation and public sector initiatives
relating to the latter
Among the originators who have responded to the survey, there is a slight majority
which has not previously securitised assets in general and also which does not plan
t iti SME l
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Difficulties of SME securitisation
When it comes to the main difficulties tied to SME securitisations, costs seem to be
the most important obstacle. 57 % of all answering banks value the costs of
securitisation as too high, and only 16 % regard the cost argument as of minorimportance. This result fits well to the results mentioned above, according to which
banks would extend SME lending if a cost-efficient way of risk transfer would be at
hand.
No clear picture emerges when it comes to the question whether the portfolio is too
small, 43 % reckon this as a difficulty whereas at the same time 43 % answered
that the size of the portfolio is no obstacle to securitisation.
Summary
The survey shows that originators connect securitisation with a wide range of
advantages, whereupon the management of SME risk seems to be of particular
importance. Looking at the main concerns and difficulties faced by originators, the
cost argument dominates all other obstacles. This is also confirmed by the fact that
an overwhelming majority of banks answered that they would increase SME lending
if t ffi i t t t f i k ld b il bl
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2.4Quantitative and qualitative effects of promotional programmes for SME
securitisation in Europe
The other main task of this AMTE workshop concerns a qualitative and quantitative
assessment of existing Public Sector Agency sponsored programmes in Europe.The first step is performed through a qualitative analysis of the comparative role of
different public sector agencies existing structures. It provides a focus on the
guarantees which are provided, in which countries and regions as well as on the
specific conditions required.
The European programmes reviewed in this document are:
The Spanish FTPYME scheme
EIF guarantees
The Portuguese Securitisation Scheme
The KfW Promise programme
I dditi tit ti l i f t ti h b f d b i
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2.4.1The Spanish FTPYME programmeIn May 1999, the Government established a programme of Kingdom of Spain guarantees
for SME securitisations, which facilitates true sale transactions of pools. The aim of the
originators is cheaper funding rather than capital relief and the guarantee by the Kingdomof Spain significantly lowers the overall funding costs for the originator.
Using the following standard assumptions:
Portfolio Assumptions
Minimum Rating single borrower B
Secured loans/ Collateral in % of Portfolio 50%
Number of loan contracts 5000
Maximum Single Borrower concentration
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In addition, underwriting and placement fees also depend on the pool rating, because they
are lower for senior tranches and higher for junior tranches:
Pool Size Pool Rating BB+ Pool Rating BB- Pool Rating BBB-
500 Mio.! 3,4 bp 4,6 bp 3,0 bp
1.000 Mio.! 3,2 bp 4,4 bp 2,8 bp3.000 Mio.! 2,8 bp 4,0 bp 2,4 bp
Finally, all-in costs p.a. over 3-mth Euribor (not including servicing fees that can be
assumed to be identical with/ without securitisation) are presented in the table below:
Pool Size Pool Rating BB+ Pool Rating BB- Pool Rating BBB-
500 Mio.!
106 bp 155 bp 88 bp1.000 Mio.! 102 bp 152 bp 85 bp
3.000 Mio.! 100 bp 149 bp 82 bp
In a typical FTPYME transaction, the guarantee by the Kingdom of Spain covers ca. 25% of
the AAA tranche and the spreads on guaranteed tranches are about 3 bp. (lower risk
premium and zero risk weight under Basel 1 and 2), thereby reducing the overall funding
f h i i b d 5 b
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annual turnover of 30 Mln, the recovery rate is 50% and maturity 5 years,
we come up with the following figures:
Basel II Capital %
Pool Rating BB+ BB- BBB-
1-yr Avg Default Probability assumed 0,70% 1,70% 0,44%
On balance 8,9% 11,3% 7,6%
After securitisation (First Loss Retained) 4,1% 7% 3,1%
Capital relief 4,8% 4,3% 4,5%
The table shows that securitisation will lead to a substantial reduction of capital under
Basel 2 for all three types of portfolios.
2.4.2EIF guaranteesThe EIF guarantees can be used for granular and non granular SME pools and True Sale as
well as synthetic transactions at almost all levels of the capital structure, from AAA down to
B+. Mezzanine tranches wrapped by the EIF can be sold to investors at significantly lower
spreads (lower risk premium as the EIF AAA rated and 20% risk weight under Basel 1 and
i k i h d B l 2)
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2.4.3Portuguese Securitisation SchemeIn Portugal, the public fund created to support securitisation of SME loans is the FGTC
(Fundo de Garantia de Titularizao de Crditos). FGTC intervenes by guaranteeing SME
securitization transactions, either through a direct support to the credits securitized or
through a support to the notes backed by this type of credits.
Douro SME Series 1 has been the first Portuguese transaction to benefit from the support
of FGTC which guarantees the payment of principal of an unrated class of notes that have
been subscribed by the originator.
FGTC guarantee has been formalised in a bilateral agreement between the originator and
FGTC and is not part of the public transaction documents. So, as we do not have any
information regarding fees charged by the FGTC, it is impossible to calculate a quantitative
effect.
However, if the FGTC charges a fee that is below the commercial premium, there is a
b i l d f h i i F i if h FGTC
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Tranche Rating Pool Rating BB+ Pool Rating BB- Pool Rating BBB- Spreads
Super Senior 82,4% 76,4% 84,9% 7 bp
AAA/Aaa 10,0% 11,0% 9,0% 35 bp
AA/Aa2 0,5% 1,1% 0,5% 45 bp
A/A2 0,5% 0,8% 0,6% 60 bp
BBB/Baa2 1,2% 1,9% 0,8% 100 bp
BB/Ba2 1,3% 1,8% 1,1% 400 bp
First Loss 4,1% 7,0% 3,1% 1600 bp
One important advantage of using the KfW platform is the zero risk weighting of KfW.
Because of the zero risk weighting, the credit default swap with KfW significantly reduces
the capital the originator has to hold for the portfolio after the synthetic securitisation. If the
originator would use a different bank credit default swap counterparty, the risk weight on
the Super Senior credit default swap would be 20% under Basel 1 (assuming thatmezzanine tranches are fully funded and that the first loss piece is retained by the
originator). Therefore, the advantage from the originators point of view is:
Under Basel 1:
Super Senior * (20%-0%) * 8% * Cost of Capital (net of Capital Benefit)
f ( ) C f C %
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investors and KfW executes a CDS on the Super Senior with a suitable counterparty (20%
weighted OECD bank). As a consequence, KfW has to hold capital against counterparty
risk. KfW charges a commercial fee for its services and, in particular, for the capital
commitment, and this fee must be subtracted from the benefits mentioned above. Since
these benefits depend on the originators Cost of Capital, it is quite difficult to quantify the
net effect (it will be substantial for a bank with high Cost of Capital, but negligible for abank with low Cost of Capital).
To summarise, there seems to be an advantage for some originators to use the PROMISE
platform. However, similar to the EIF case, the advantage depends on the originators
internal Cost of Capital.
Therefore, maybe other qualitative factors are more important and may induce substantial
cost savings for originators:
The standardisation of the PROMISE structure (use of KfW certificates as
collateral, documentation etc.) leads to lower transaction costs (Rating
agencies, lawyers etc.). Obviously, this effect is more important for small
pool sizes where transaction costs are higher. KfWs experience shows that
transaction costs can be 30%-50% lower for PROMISE deals compared to
other non platform deals. So for a small transaction (500 Mln. Pool size)
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3Standardisation of SME Securitisation Transactions
The AMTE Working Group on SME securitisation has developed a standard format of datato help banks prepare for transactions and for ease of reporting. Based on the different
requirements for origination and monitoring, the workshop focuses on two specific aspects
of a transaction.
The first aspect relates to the standardisation of transactions through the originators
databases usually required, which aims to develop a consistent SME framework and a
standard set of quantitative information required by rating agencies.
The second aspect applies to the standardisation of investors information, which aims to
develop a consistent set of information for transaction management phase and for investor
reports.
3.1Standardised Originators Data required for an SME securitisation
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from a mapping of the originators credit scoring system or by using the rating agencies
country specific credit models based on selected financial data of borrowers.
In addition to the individual rating, the static data to be provided on a name by name basis
by an originator for a SME securitisation of a non granular portfolio are presented in Annex
6.3.1.
3.1.2Granular PortfolioIn the case of a sufficient granular and homogeneous pool of assets, an ABS rating
methodology will be performed in addition to the usual qualitative due diligence. The ABS
approach will be based mainly on satisfactory (i) historical data provided by the originator
and (ii) detailed information on the portfolio to be securitised.
3.1.2.1 Static Data
The static data set corresponds to the snapshot of the portfolio containing the SME loans
to be securitised. It will be used to build distribution tables of the eligible portfolio.
The static data to be provided by an originator for a SME securitisation of a granular
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For example, investors would like to have more often information about the breakdown of
the securitised portfolio
by industrial sectors,
by geographical (region) and,
by turnover range.
The standardised investor report to be produced for a SME securitisation is presented in
Annex 6.4.
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4Achieved consensus and Recommendations
4.1Increasing efficiency of public sector intervention by catering the originators
needs
The SME lending market is facing some regulatory challenges with the Basel II
implementation and its impact in terms of further growth is very difficult to assess due to
the heterogeneity of the SME asset class.
However, it is apparent that public sector activity has been successful in stimulating SME
securitisation. Indeed, the success of recent issues can be attributed to the role of publicsector agencies as demonstrated by the issuance volume in the countries where incentive
programmes have been established (approximately 60% of SME European securitisation
has occurred when cost saving enhancements from public sector agencies are available).
In the last few years, SME loan portfolios were securitised in a number of European
countries, amongst others in Germany, Spain, the UK, Switzerland, Portugal, Italy, the
Netherlands, Poland, Finland and the Czech Republic. Support as deal facilitators by a
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providers like rating agencies, legal advisors and investment banks to work
more efficiently as they become familiar with the details of the platform.
Public platforms can thus exploit economies of scale, and securitisation can
become economically more attractive to a wider range of potential market
participants. The cost saving argument is of special importance for
originators who conduct their first transaction and for originators with
smaller portfolios.
When standardised platforms require a high level of quality, with respect to
reporting standards, this sends a positive signal to investors and contributes
to liquidity. Successful examples in this context are KfWs PROMISE
platform and the Spanish FTPYME-Program, which both contributed
decisively to the securitisation of SME loans.
A further starting point for public support is to act as risk takers. Precisely,
public entities invest in subordinated tranches. This support is particularly
necessary in transactions which are difficult to securitise, e.g. transactions
with new asset classes and/ or portfolios with low granularity. Public
investment enhances the attractiveness of the whole transaction, as
investors feel more comfortable with participation of key investors. The
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4.2Promotion of standardised data
The heterogeneity issue of SME portfolios has been raised and a move towards a greater
standardisation of data is likely to develop further this asset class. Moreover, financial
statements transparency is essential in the efficiency of portfolio selection process andshould be promoted in order to improve risk analysis and therefore investors appetite.
Based upon discussions among group members, the AMTE working group has built a
standard format for originators data and investors reporting. In addition to these
templates, the AMTE working group recommends the following solutions to reach the level
of standardisation required:
Data transparency improvement through financial disclosure and individual
electronic data to be gathered and monitored with an annual frequency at
least. The last three years financial statements of the borrower are often
required in the case of a non granular portfolio.
Identification of consistent SME portfolios in the originators database using
more accurate criteria (e.g. Basel II definitions) and other key parameters
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5Action Plan
5.1Communication to third parties
Circulation of the report to relevant parties.
In addition, the group wishes to create a dialogue with entities influent on the topic, such
as:
CESR
ECB
EFAMA European Commission
FSA
National banking federations (France, Germany, Spain)
Associations dealing with securitisation such as the European Securitisation
Forum
5.2Report promotion: Participation in future events
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6Annexes
Annex 6.1: AMTE Working Group Composition
Annex 6.2: Results of the AMTE Pan European Survey
Annex 6.3: Standardised Originators Data required for an SME securitisation
Annex 6.4: Standardised Investor Report for an SME securitisation
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Annex 6.1: AMTE Working Group Composition
Members:
Corinne Lambert AMTE
Valrie Blanchin AMTE
Nathalie Esnault Calyon
Romain Munera CAAM
Olivier Amblard EIF
Alessandro Tappi EIFFabrice Garnier HSBC
Maxime Stevignon JP Morgan
Dr. Dieter Glder represented by Dr. Omar Rann KfW
Anke Brenken KfW
Cornelia Lamers KfW
Bruno de Pampelonne Merrill Lynch
Michel Madelain Moodys
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Questions regarding portfolio of SME loans
How would you qualify the level of diversification of your SME loans portfolio?
1= Good 2= Average 3= Insufficient
OverallNumber %
"1" - Good 29 66%
"2" - Average 14 32%
"3" - Insufficient 1 2%
Total 44 100%
In terms of exposure to single namesNumber %
"1" - Good 35 80%
"2" - Average 8 18%
"3" - Insufficient 1 2%
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Present and future SME lending
Do you feel constrained in your SME lending by any of the following factors?
Risk exposure
Number %
Yes 15 34%
No 29 66%
Total 44 100%
Regulatory capital weightingNumber %
Yes 12 27%
No 32 73%Total 44 100%
ConcentrationNumber %
Yes 10 23%
No 34 77%
Total 44 100%
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Perception and knowledge of securitisation and public sector initiatives relating to
the latter
Have you previously securitised assets in general?Number %
Yes 20 45%
No 24 55%
Total 44 100%
Have you planned to securitise SME loans?Number %
Yes 19 43%
No 25 57%
Total 44 100%
Are you aware of any public initiatives aiding SME securitisation?Number %
Yes 14 32%
No 30 68%
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Provides cost-effective fundingNumber %
"1" 7 23%
"2" 9 30%
"3" 10 33%"4" 4 13%
Total 30 100%
Provides cost-effective regulatory capital reliefNumber %
"1" 7 23%
"2" 9 30%
"3" 9 30%
"4" 5 17%
Total 30 100%
Whether or not you have used, or simply plan on using, SME securitisation, what do you
view as the main difficulties tied to such transactions?
(1= highly pertinent, 5= not pertinent).
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Availability of IT systems to produce necessary dataNumber %
"1" 4 11%
"2" 11 29%
"3" 9 24%"4" 9 24%
"5" 5 13%
Total 38 100%
Costs of securitisation are too highNumber %
"1" 6 16%
"2" 15 41%
"3" 10 27%
"4" 4 11%
"5" 2 5%
Total 37 100%
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Annex 6.3: Standardised Originators Data required for an SME securitisation
6.3.1 Static Data for both Non Granular and Granular Portfolio
Field Number Field Name Field Definition
1 Current Date Date at the time of data extraction
2 Company Iden tif icat ion Number The company ident if ica tion number de te rm ined by the count ry's regula to r
3 Company Group name The company group name if the company is a subsidiary of a larger group
4 Company Recording Date Date at the time of the company's first identification to the originator
5 Country Code Country code or country name of the company / subsidiary to which the loan has been granted
6 Industry Sector Industry sector corresponding to the main business activities of the company
7 Geographical Region / Postcode Geographical region as defined by the country's administration or postcode of the company's headquarters
8 Company score Company score or rating if any, set by the originator based on its internal scoring system
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Field Number Field Name Field Definition
9 Initial Date Date at the time the loan has been granted
10 Initial Outstanding Balance Initial outstanding balance of the loan at the initial date
11 Current Outstanding B alance Current outstanding balance at the current date
12 Currency Currency of the loan
13 Maturity Date Maturity Date of the loan defined at inception
14 Fixed Interest Rate Fixed interest rate compounded annually used to calculate the interest payment of the loan
15 Floating In te rest Marg in Float ing in te rest margin ove r the interest ra te index if the loan has a va riable in te rest ra te
16 Interest Rate Index Interest rate index or market benchmark rate used as floating interest rate basis
17 Payment Frequency Payment frequency of instalments during the loan amortisation
18 Amortisation Type Linear / Bullet / Specific Amortisation
19 Loan Seniority Rank of the loan in the priority order of payment (Senior Secured/Unsecured, Subordinated)
20 Loan Security Type Nature of the loan security (mortgage, pledge)
21 Loan Collateral Type Nature of the loan collateral (real estate, securities)
22 Loan-To-Vaue Ratio of the loan outstanding amout to the value of the guarantee
23 Originator Loan Share Originator's share of the loan securitised
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6.3.2 Historical Data for a Granular Portfolio
Cumulated Gross Default Rate
For a generation of loans (being loans originated during the same quarter), the cumulative gross default rate in respect of a month is
calculated as the ratio of:
- the cumulative defaulted amount (the total outstanding amounts of the loans that have defaulted) recorded between the month when
such loans were originated and the relevant month, to
- the initial outstanding amount of such loans
The definition of the default used by the originator has to be provided.
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Nu mb er of quarters after origination
Quarter of
Origination
Originated
Amount1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
2001 - Q2 350 120 000 0.0% 0.5% 1.7% 3.2% 4.1% 4.7% 5.1% 5.2% 5.3% 5.4% 5.6% 5.6% 5.6% 5.8% 5.8% 5.8%
2001 - Q3 401 740 000 0.0% 0.3% 1.3% 2.2% 2.9% 3.4% 4.4% 4.3% 4.4% 4.6% 4.8% 5.1% 5.1% 5.2% 5.2%
2001 - Q4 398 070 000 0.0% 0.5% 2.0% 3.7% 4.7% 5.4% 5.9% 6.0% 6.1% 6.2% 6.4% 6.4% 6.4% 6.6%
2002 - Q1 304 460 000 0.0% 0.4% 1.6% 2.9% 3.8% 4.3% 4.7% 4.8% 4.8% 4.9% 5.1% 5.1% 5.1%
2002 - Q2 349 340 000 0.0% 0.3% 1.4% 2.3% 3.1% 3.6% 4.7% 4.6% 4.6% 4.9% 5.0% 5.3%
2002 - Q3 346 150 000 0.0% 0.3% 1.4% 2.4% 3.1% 3.5% 3.9% 4.0% 4.1% 4.2% 4.9%
2002 - Q4 361 740 000 0.0% 0.3% 1.0% 1.8% 2.4% 2.5% 3.1% 3.2% 3.5% 4.0%
2003 - Q1 295 420 000 0.0% 0.3% 0.9% 1.6% 2.3% 2.6% 2.8% 3.0% 3.1%
2003 - Q2 378 270 000 0.0% 0.2% 0.9% 1.4% 1.8% 2.1% 2.2% 2.4%
2003 - Q3 393 980 000 0.0% 0.3% 0.9% 1.5% 1.5% 1.6% 1.7%
2003 - Q4 436 130 000 0.0% 0.2% 0.8% 1.0% 1.0% 1.3%
2004 - Q1 391 170 000 0.0% 0.3% 0.7% 0.9% 1.4%2004 - Q2 435 430 000 0.0% 0.2% 0.2% 0.3%
2004 - Q3 394 170 000 0.0% 0.2% 0.3%
2004 - Q4 422 290 000 0.0% 0.1%
2005 - Q1 199 620 000 0.0%
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Cumulated Recovery Rate
For a generation of defaulted loans (being loans defaulted during the same quarter), the cumulative recovery rate in respect of a month is
calculated as the ratio of:
- the cumulative recoveries recorded between the month when such loans were defaulted and the relevant month, to
- the gross defaulted amount of such loans
The definition of the timing and the amount of the recovery used by the originator has to be provided.
Nu mber of quarters after default
Quarter of
Default
Defaulted
Amount1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
2001 - Q2 15 900 000 0.0% 53.1% 55.8% 58.5% 61.2% 63.9% 66.6% 69.3% 72.0% 74.7% 77.5% 80.2% 82.9% 85.6% 88.3% 91.0%
2001 - Q3 17 580 000 0.0% 52.8% 55.1% 57.5% 59.8% 62.2% 64.6% 66.9% 69.3% 71.6% 74.0% 76.4% 78.7% 81.1% 83.4%
2001 - Q4 18 220 000 0.0% 47.4% 50.9% 54.3% 57.7% 61.2% 64.6% 68.0% 71.5% 74.9% 78.3% 81.8% 85.2% 88.6%
2002 - Q1 17 040 000 0.0% 52.8% 55.0% 57.1% 59.2% 61.4% 63.5% 65.7% 67.8% 69.9% 72.1% 74.2% 76.4%
2002 - Q2 19 540 000 0.0% 53.1% 56.8% 60.6% 64.3% 68.0% 71.7% 75.4% 79.1% 82.9% 86.6% 90.3%
2002 - Q3 19 780 000 0.0% 45.3% 48.9% 52.6% 56.3% 60.0% 63.7% 67.4% 71.1% 74.7% 78.4%
2002 - Q4 21 120 000 0.0% 45.4% 49.3% 53.2% 57.1% 61.0% 64.9% 68.8% 72.7% 76.6%
2003 - Q1 22 620 000 0.0% 46.8% 51.2% 55.5% 59.9% 64.3% 68.6% 73.0% 77.3%
2003 - Q2 21 800 000 0.0% 54.2% 58.1% 62.1% 66.0% 70.0% 73.9% 77.8%
2003 - Q3 23 520 000 0.0% 60.1% 65.2% 70.3% 75.3% 80.4% 85.5%
2003 - Q4 20 240 000 0.0% 56.1% 62.9% 69.6% 76.4% 83.1%
2004 - Q1 18 500 000 0.0% 62.8% 71.1% 79.3% 87.6%
2004 - Q2 18 160 000 0.0% 56.8% 71.3% 85.8%
2004 - Q3 17 920 000 0.0% 59.7% 93.8%
2004 - Q4 17 500 000 0.0% 45.5%
2005 - Q1 17 680 000 0.0%
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Prepayment Rate
At a given month, the annual prepayment rate (APR) is calculated
from the monthly prepayment rate (MPR) according to the
following formula:
APR = 1 - ( 1- MPR )^12
The monthly prepayment rate (MPR) is calculated as the ratio of:
- the outstanding principal balance of all loans prepaidduring the month, to
- the outstanding principal balance of all loans (defaulted
loans excluded) at the beginning of the same month
Month Oustanding
2001 - 06 1 706 200 000
2001 - 09 1 739 050 000
2001 - 12 1 732 570 000
2002 - 03 1 752 440 000
2002 - 06 1 785 680 000
2002 - 09 1 824 000 000
2002 - 12 1 873 380 000
2003 - 03 1 874 050 000
2003 - 06 1 919 470 000
2003 - 09 1 985 690 000
2003 - 12 2 079 310 000
2004 - 03 2 148 850 000
2004 - 06 2 240 430 000
2004 - 09 2 292 010 0002004 - 12 2 356 990 000
2005 - 03 2 350 580 000
12.0%
10.7%
12.8%9.8%
11.4%
11.4%
13.4%
12.4%
13.3%
12.9%
14.6%
12.8%
13.5%
15.0%
11.8%
13.3%
Annual Prepayment Rate
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Delinquency Rate
At a given month, the delinquency rate is calculated as the ratio
of:
- the outstanding principal balance of all delinquent loans,
to
- the outstanding principal balance of all loans (defaulted
loans excluded) at the same cut-off date
Month 1 Month 2 M onths 3 M onths 4 M onths 5 M onths 6 M onths
juin-01 1.3% 0.6% 0.3% 0.1% 0.1% 0.1%
juil-01 1.2% 0.5% 0.2% 0.1% 0.1% 0.1%
aot-01 1.0% 0.6% 0.2% 0.1% 0.1% 0.1%
sept-01 1.3% 0.6% 0.3% 0.2% 0.1% 0.1%
oct-01 1.4% 0.6% 0.3% 0.2% 0.1% 0.1%
nov-01 1.0% 0.6% 0.3% 0.2% 0.1% 0.1%
dc-01 0.9% 0.5% 0.2% 0.1% 0.1% 0.1%
janv-02 1.5% 0.6% 0.2% 0.1% 0.1% 0.1%
fvr-02 1.4% 0.5% 0.4% 0.1% 0.1% 0.1%
mars-02 1.3% 0.5% 0.2% 0.1% 0.1% 0.1%
avr-02 1.2% 0.4% 0.2% 0.1% 0.1% 0.0%
mai-02 1.1% 0.4% 0.2% 0.1% 0.1% 0.1%
juin-02 1.1% 0.4% 0.1% 0.1% 0.0% 0.0%
juil-02 1.1% 0.3% 0.1% 0.1% 0.0% 0.0%aot-02 1.0% 0.3% 0.1% 0.1% 0.0% 0.0%
sept-02 1.1% 0.4% 0.2% 0.1% 0.0% 0.0%
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Annex 6.4: Standardised Investor Report for an SME securitisation
Investor Report Issue Date
Issue Date
Accrual Period [Start and include]Actual Number of Days
Reference Date
Report Date
Calculation Date
Revolving Period YES/NO ?
Acceleration Event YES/NO ?
Amortisation Event YES/NO ?
Date and Transaction Status Information
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Original Current Legal Final Initial Current Rating
Class Balance % of Total Balance % of Total Maturity Rating Rating Review
Senior CDS (*) 1 425 000 95.0% 865 000 92.0% sept-15 Aaa/AAA Aaa/AAA YES/NO ?
Class A+ (*) 7 500 0.5% 7 500 0.8% sept-15 Aaa/AAA Aaa/AAA YES/NO ?
Class A 15 000 1.0% 15 000 1.6% sept-15 Aa2/AA Aa2/AA YES/NO ?
Class B 9 000 0.6% 9 000 1.0% sept-15 A3/A- A3/A- YES/NO ?
Class C 18 000 1.2% 18 000 1.9% sept-15 Baa3/BBB- Baa3/BBB- YES/NO ?Class D 9 000 0.6% 9 000 1.0% sept-15 Ba1/BB+ Ba1/BB+ YES/NO ?
Class E 6 000 0.4% 6 000 0.6% sept-15 Ba3/BB- Ba3/BB- YES/NO ?
Class F 3 000 0.2% 3 000 0.3% sept-15 B2/B B2/B YES/NO ?
Class G 7 500 0.5% 7 500 0.8% sept-15 NR/NR NR/NR YES/NO ?
Total 1 500 000 100.0% 940 000 100.0%
Key Transaction Data
Notes Summary (Amounts are in ! Mln)
(*) for a synthetic transaction
Default Ratio
Cumulative aggregate Principal Outstanding Balance of all Purchased Receivables became Defaulted Receivables from Closing Date
Aggregate Principal Outstanding Balance of all Purchased Receivables on Closing Date
Default Trigger Level for Amortisation Event at the Relevant Calculation Date
Default Trigger Level for Acceleration Event at the Relevant Calculation Date
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Delinquency Ratio
Overdue Principal Outstanding Balance of all Purchased Receivables which are Delinquent Receivables
Performing Receivables Principal Balance
Delinquency Ratio Trigger
Prepayment Rate
Cumulative aggregate Prepayments of the last Collection Period
Aggregate Principal Outstanding Balance of all Purchased Receivables on Closing Date
Summary of Portfolio Characteristics
At closing At reference Date
Number of Loans
Number of Obligors
Minimum Loan Size
Maximum Loan Size
Average Loan Size
Outstanding Balance % out of total Originator's Pool
Outstanding Balance % out of Securitised Pool
Outstanding Balance (in! Mln)
Average Outstanding Balance per Contract (in ! Mln)
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At closing At reference Date Trigger levels
if any
Receivables Secured by First Ranking Real Security
Weighted Average Loan to Value of all SME loans benefiting from a First Ranking Real Security
Loans unsecured or guaranteed only by a Generic Security
Weight of Receivables with Fixed Interest Rate
Weighted Average Interest Rate if Fixed (%)
Weighted Average Margin if Floating (%)
Weighted Average Spread of SME loans
Max Weight of All Purchased Receivables of a Single BorrowerWeight of Top Ten Borrowers Purchased Receivables
Weight of the Non-Amortising Receivables with Remaining Term > 1 year
Weight of Receivables with Quarterly (or less) Interest Instalments
Weighted Average Original Term (in months)
Weighted Average Remaining Term (in months)
Weighted Average Seasoning (in months)
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Cash Flows and possible Replenishment Amounts
Collection Period
Purchase Condition
Interest Collections
Interest in respect of late payments
Amounts to be Received under the Hedge Agreement
Recoveries from Defaulted Receivables
Collections on Overdue Principal Instalments
Interest accrued on the Transaction Accounts
Overdue Principal Instalments
Principal outstanding balance of Receivables which became defaulted
less the Principal instalments of of these receivables already taken into account on previous Calculation Dates
Revenue Shortfall (if any) calculated on the last Payment Date
Receivables Principal Amortised Amount
Scheduled Principal Collections
Principal instalments prepaid
Principal outstanding balance of Receivables which became defaulted during the Collection Period
less the Principal instalments of these receivables already taken into account on previous Calculation Dates
Replenishment Amount if any
Excess Available Principal Amount
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Issuer Available Funds
Amounts standing to the credit of the Transaction Accounts
less amounts on the Hedge Collateral Account or any Witheld Amount
less amount on the Excess Available Principal Account if Purchase Condition = N
less the Minimum Cash Reserve Amount
Collections
Interest received in respect of Autorised Investments
Amount received from the Originator in respect of re-assignment of Receivables
Proceeds of sale of any Receivables under the Transaction Documents
Interest earned on the Transaction Accounts other than the Hedge Collateral Account
Amounts received by the Issuer under the Transaction Documents
Amounts to be received under the Hedge Agreement
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Months after the Principal Interest Outstanding
Reference Date Instalments Component Component Balance
1 month
2 months
3 months
4 months5 months
6 months
7 months
Collateral Level Information
Theoretical Amortisation Schedule assuming 0% prepayments and 0% defaults
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Months after the Principal Interest Outstanding
Reference Date Instalments Component Component Balance
1 month
2 months
3 months
4 months
5 months
6 months
7 months
Theoretical Amortisation Schedule in a base case scenario
Initial Rating Current Rating
Originator
Servicer
Third Parties Ratings
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Interest Rate Type At closing % of Total At reference Date % of Total
Floating
Fixed
Capped
Breakdown of the Pool Outstanding Balance by Interest Rate Type
Loan Type At closing % of Total At reference Date % of Total
Amortising
Revolving
Bullet
Breakdown of the Pool Outstanding Balance by Loan Type
Redemption Type At closing % of Total At reference Date % of Total
Direct Debit
Breakdown of the Pool Outstanding Balance by Redemption Type
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Securities At closing % of Total At reference Date % of Total
Mortgage
Personal Guarantee
Banking Deposit
Pledge on shares
Breakdown of the Pool Outstanding Balance by Securities
Sector At closing % of Total At reference Date % of Total
Aerospace & Defense
Air transport
Automotive
Electronics
Equipment leasing
Industrial Equipment
Insurance
Utilities
(*) Sectors of activities defined according to a Rating Agency split
Breakdown of the Pool Outstanding Balance by Sector of Activities (*)
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Region At closing % of Total At reference Date % of Total
Region 1
Region 2
Region 3
Breakdown of the Pool Outstanding Balance by Geographical Region
Turnover At closing % of Total At reference Date % of Total
< 1,000,000
1,000,000
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Internal Score At closing % of Total At reference Date % of Total
1
2
10
Breakdown of the Pool Outstanding Balance by Internal Rating
Borrower ID At closing % of Total At reference Date % of Total
1- Borrower 159
2- Borrower 16
3- Borrower 147
10- Borrower 278
Concentration: 10 biggest borrowers of the pool
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Number of Employees At closing % of Total At reference Date % of Total
< 10
10
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Relation Age At closing % of Total At reference Date % of Total
0 - 3
4 - 6
7 - 10
11 - 15
> 15
Breakdown of the Pool by Relation Age between the SME and the Originator (in Years)
Performance of the Underlying Pool
Original Pool
The tables presenting the original pool performance for a granular portfolio are included in the quantitative due diligence report. Please refer
to the 2.2 historical data section of the Standardised Originators Data.
Securitised Pool / Transaction Performance
The tables presenting the actual performance of the securitised pool for a granular portfolio should be reproduced on the same basis than the
tables for the original pool.