According to a recent report from KfW, €28 billion ($35.27 billion) was publicly placed in Europe’s securitization market over 1H10, three times the amount placed in all of 2009.
This is likely reflective of returning investor confidence. In fact, despite continued volatility and uncertainty surrounding regulatory proposals, the European Central Bank's (ECB) restrictive monetary policy has made securitization more attractive to investors, KfW reported.
The jump in volume also shows that financial institutions are now more willing to participate in the securitization market.
“Banks are once again showing a strong interest in securitization as a means of easing the burden on their equity capital and of making their refinancing less dependent on the ECB,” said Günther Bräunig, a member of KfW’s managing board.
The firm was actively involved in the development of the German Securitization Standard, launched in part by the Association of German Banks. Its aim was to restore investor confidence in the securitization markets.
German banks like KfW are complying with specific quality standards to ensure high-quality securitizations. Measures being taken in light of the financial crisis include securitizing exclusively from existing loan portfolios, maintaining risk retention of at least 5%, and avoiding re-securitizations.
“KfW is ready to make its contribution towards financing the economic recovery,” Bräunig said. “We are optimally placed for the funding required in this connection. We also intend to support selected securitization transactions as an anchor investor, in order to help revitalize the securitization market and ultimately also help secure the supply of credit to SMEs and the housing construction sector.”
KfW is Germany’s largest promotional bank.