It's that time of year again. Market players are packing their bags and gearing-up for a little sangria, sun, fun - and of course business - at this year's sixth annual Investors and Issuers Summit on Global Asset Securitization in Barcelona, Spain.
With 2,500 expected attendees and 150 exhibitors, the conference will be the largest ABS event to date, said conference organizer Scott Brody. The Information Management Network will host this year's event in El Palacio de Congresos de Cataluna, Barcelona's convention center, and at a larger location than last year's spot on the water at the Hotel Arts.
This year, participants can expect to see more coverage of CDOs, synthetic securitizations, credit derivatives and real estate. These areas seem to have increased appeal as a result of the many regulatory changes that have occurred over the last year. Coverage of mortgages is expected to remain the same.
Of particular interest to many market players, the conference will also feature guest speakers from the Basel Accord and the International Accounting Standards Board (IASB). "What will be different for Barcelona this year from other years is that there is a lot of regulatory change in the works - Basel accounting treatment, national regulators introducing different treatment," said Alexander Batchvarov, managing director, head of international ABS at Merrill Lynch and a speaker at the conference. "I think the regulatory topic will be present throughout. It won't be something where people can come to conclusions because it is all still in the air; it's more of an ongoing discussion and exchange of ideas."
Among the many regulatory issues that have been presented this year is the securitization and synthetic segments of the Bank for International Settlement's (BIS) proposal. "As most people know, the sections in the BIS that are least developed and clear are the securitization and synthetic sections," said Batchvarov.
While U.S. regulators have already adopted their version of the risk-based capital requirements for securitizations, the BIS proposal is ultimately expected to create more international demand.
Most recently, the French regulators have also assumed some new risk weighting regulations that appear to contradict the Basel (see ASR 6/3/02 p. 18 and 5/27/02 p.17). The growing volatility seen in subordinated CDO tranches is said to have pushed the recent changes, which seem to aim at preventing banks from structuring deals and retaining the mezzanine piece that can unexpectedly fall to the triple-C/single-D rating tier.
Also on the regulatory front is Portugal - said to be the next securitization hot spot in the European region. The regulatory changes associated with securitization transactions in Portugal have endured several revisions, and are intended to ease the legal complications that were previously associated with such transactions. However, some market sources have feared that the relatively high administrative and regulatory burden and costs associated with setting up an FTC or Sociedade de Titularisaco may still hinder the number of users of Portuguese SPVs going forward. However, these costs could be potentially offset through multi-issuance, which may raise the possibility of long-term growth of Portuguese SPVs in the near term (see ASR 1/28/02 p. 20 and 4/22/02 p. 18).
The European Securitization Forum's (ESF) Whitepaper, also expected to be a hot topic at the conference, may offer some color to the recent regulatory issues. The much-anticipated Framework for European Securitization was launched last week at a pan-European symposium in Brussels, Belgium.
"A lot of people have commented that in Europe, the lack of uniformity of laws, regulations, and practices that relate to securitization arguably has hampered the more efficient growth of those markets on a pan-European market scale," said George Miller, senior vice president and deputy general council of the Bond Market Association. "There are lots of differences between and among jurisdictions, and that's true also of accounting standards and of capital adequacy standards across the board. The Whitepaper attempts to identify the main areas - legal and regulatory market practice - and features that need to be in place. It then offers some views and perspective on different options for achieving greater standardization, and offers perspective on ways to go about doing that."
The framework is a "blueprint" of what the ESF has suggested for a standardization in the laws, regulations, and practices of securitization in Europe. At the moment, the drafted document is in circulation, and will be available at the ESF booth in Barcelona for comment and discussion. "The larger project will be continuing to pursue the ideas that are set forth in that document, refine them as needed, and then to implement them over time - all in the interest of creating a more uniform and hospitable marketplace for securitization," said Miller.
In line with the Whitepaper discussions, Batchvarov, who spoke at the symposium in Brussels about the Whitepaper, said he hopes the conference will bring the industry together and create a better understanding of the issues at hand; in that regard, the Whitepaper will prove quite useful.
It's not going to be all business at the conference however, as many sources are looking forward to the relatively hot parties hosted by several companies. Among the top on the hot fiesta list are Merrill Lynch, Deutsche Bank, JPMorgan, Lehman Brothers, Credit Suisse First Boston and CommerzBank.
And while this year's conference promises to be bigger and maybe even better than last year's, it does not come without some industry concerns. "My concerns are the usual, which I have expressed before," said Batchvarov. "When you have too many people, too many panelists, too many sessions, things tend to get diluted a bit. But, on the other hand, this is a meeting point for the industry and a lot of the substantive discussions will probably take place in the course, so what I said initially can be offset."
