Anticipated legal changes that facilitate synthetic securitizations under Spanish regulations are finally underway. An official amendment introduces, for the first time, rules regarding synthetic securitizations of loans and other credit rights. This was published in the Spanish Official Gazette. The new law entered into force at the beginning of the year.

So far, the market has seen synthetics from only two Spanish banks - Caja Madrid's Cibeles deal and Santander Central Hispano's Hesperic deal. Neither deal has been completed with an on-shore SPV, as the banks must employ offshore vehicles to ensure regulatory capital relief. The latest deal revealed the potentially large appetite in the Spanish market for such products, which encouraged the government to enact the proper legislation for domestic synthetic securitizations through Spanish vehicles.

Under the new legislation, credit institutions and investment companies will be allowed to transfer portfolio risks via credit default swaps to a Spanish securitization vehicle. Past deals utilized Irish SPVs.

Once the legislation that provides for these domestic vehicles was implemented, sources hoped for a strong surge of interest among some of the larger banks and savings banks. However, analysts at Deutsche Bank said it's not likely to provide any immediate growth in this arena.

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