Over the last year, laissez-faire has become seriously dated.
Whether in the U.S., in Europe or even in some emerging markets, capital-market participants are now banking on their governments to bail them out. And as this month's ASR demonstrates, that once-maligned approach seems to be working.
Although the results haven't been extraordinary, they've generated at least some equilibrium in the markets, both here and across the pond.
In this month's cover story, Nora Colomer revisits the different government schemes the U.K. has instituted so far, with a focus on the Asset-Backed Securities Guarantee Scheme. This particular program is a forward-looking solution that gives hope to the European ABS market, although it's questionable whether or not it will increase securitization volumes on this continent or in the U.K.
It's fitting that this special edition of ASR will be distributed at the Information Management Network's/European Securitization Forum's Global ABS conference titled Regroup and Rebuild Together. This issue not only examines partnerships with the government - a key ingredient of rebuilding - but also looks at the likelihood of recovery and the lessons the crisis has taught us.
Also zeroing in on the government's role, Katie McCaw from Baker & McKenzie looks at the role of asset repurchase facilities provided by the European central banks. "In a market devoid of its traditional investor base, originators and arrangers of securitization transactions within the Eurozone have come to rely heavily on the European Central Bank's asset repurchase, or 'repo,' facility," she says.
Meanwhile, Markus Ernst from Unicredit takes a bold step and discusses that unreachable prospect: a market recovery.
Will the credit crisis fade sooner than anticipated? Or will the markets face another bull trap? These are the questions Ernst poses. More importantly, he asks whether ABS will remain an outcast or re-enter the financial mainstream. His answer is shaped by various factors, including secondary ABS activity.
Using a similar lens on CMBS, Judith O'Driscoll and Anne Horlait from Standard & Poor's parse the different performance indicators that form part of the rating agency's credit analysis of securitized pools as well as its assessment of counterparty risk.
On the emerging markets front, Felipe Ossa has edited excerpts from a seminar held by the International Finance Corp. on future flows, an asset class that, despite recent stress from Kazakh banks, continues to exhibit a sterling track record. According to participants at the seminar, historical future-flow performance has even bettered triple-A corporates.
Meanwhile, the CLO market is unraveling in some places. According to Greg B. Cioffi and David H. Sagalyn from Seward & Kissel, CLO managers are faced with the problem of provisions that were initially used to safeguard the credit quality of CLO portfolios but are now a disincentive for managers to replace credit-impaired loans with stronger ones.
Finally, Christian Lambie from Allen & Overy hits on one of this crisis's tougher lessons. Those involved in evaluating risk, he said, must learn that the buck may stop with them. The message: not every risk can be fobbed off on someone else.
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