Last week, Deutsche Postbank AG issued an early redemption notice for its synthetic RMBS deal, Provide Domicile 2003-1. This constitutes the first Basel II regulatory call in the synthetic German RMBS market. The Postbank decision is likely to be followed by a wave of early calls for most German synthetic bank securitizations structured with regulatory call language, market sources said.
Regulatory calls generally relate to the implementation of the new Basel Accord. Such calls have been structured into RMBS in order to provide bank lenders with the option to redeem all or some of the outstanding notes (depending on the terms of deal) should the new capital accord affect the economics of securitization, taking into account the cost of funding and capital utilization. In the case of German RMBS, many of the structures are synthetic, and typically the motivation for doing these deals is regulatory capital management.