Nurnberger Hypothekenbank launched a EURO443 million residential mortgage-backed deal via West LB last Thursday, but raised only EURO11.6 million, with the rest structured as a credit default swap (CDS). It is increasingly common for banks to use a CDS for most of the tranches on these types of synthetic deals.

The primary aim of the transaction was to release regulatory capital, but Nurnberger Hyp also wanted to gain relief under the restrictions of the German Mortgage Bank Act, which imposes limits on the percentage of second- lien mortgages a Hypothekenbank can have on its books.

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