Greek issuer Aspis Bank launched the first deal to be structured under the country's new securitization law introduced in June. While the E250 million (US$292 million) RMBS transaction is certain to catch the eye of investors looking to diversify, some market analysts wonder how much paper this market can really offer.

Aspis Bank's Byzantium Finance Plc is backed by prime and subsidized residential mortgage loans and offers three tranches rated triple-A, single-A and triple-B. It's expected to close before year-end.

According to ABN Amro, Greek residential mortgages outstanding stood at E21.3 billion (US$24.7 billion) at the end of 2003. ABN points out this level is approximately 10% of what U.K.-based mortgage lender HBOS holds on its balance sheet. "Yes, the Greek residential mortgage market is growing rapidly, but remains very small by international standards on both gross (total mortgages outstanding) and relative terms (debt-to-GDP)," said the analyst at ABN.

The potential for the market is largely limited by cultural differences. In Greece, first- time buyers are inclined to be

lifetime residents and older than in neighboring countries. "Anecdotal evidence suggests that a large driver for the uptake in mortgages is by younger Greeks who simply do not wish to wait to inherit a home," reported the ABN analyst. About 75% of the borrowers are first-time homebuyers.

Consequently, it's unlikely that Greece will add significant diversification to European RMBS issuance. "When you start to see Portuguese paper trading at the same level of prime U.K. RMBS, it's likely that investors will be looking for more diversification," said one market analyst. "It would be good to see more from the European market.

"The real volume potential is in Spain and Italy - these are the countries that have more securitizable collateral," ABN Amro said. "In Germany, the true-sale initiative opens up a huge potential for these types of deals going forward."

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