There was no mistaking the dominant theme at ABS Vegas, the inaugural conference held Jan. 21-24 by SFIG and IMN: regulation. Numerous sessions were devoted to the impact of the final Volcker Rule, released just a month earlier. While regulators apparently took pains to avoid hurting the securitization market, providing a carve-out for deals backed by loans and leases, there were nevertheless some unpleasant surprises. Several ABS Vegas panels were devoted to the consequences for collateralized loan obligations, which despite their name, are typically backed by corporate bonds as well as loans.
Former Securities and Exchange Commission Chairman Christopher Cox generated some excitement at the conference when he predicted that the SEC would vote on revisions to Regulation AB in February and that it would put off to another day perhaps never a controversial proposal requiring deal sponsors to create an interactive computer program that would allow investors to vary assumptions about the performance of the underlying pool of assets. The SEC subsequently announced that it would vote on Reg AB at an open meeting on Feb. 5, only to pull the vote from the agenda.
Michael Stegman, a counselor to the Treasury Secretary on housing finance, also generated headlines with his reassurance that the Obama Administration is still committed to housing finance reform, despite the fact that Fannie Mae and Freddie Mac have returned to profitability. Stegman said the GSEs’ recent earning reports may significantly overstate their true financial condition. Interestingly, an audience poll indicated that an exceedingly low percentage expect to see it happen under this president.
Regulation is also the theme of our cover story, in which Nora Colomer checks back on Canada’s covered bond market a year after the introduction of a legal framework. She finds that, while the added disclosure and certainty has boosted the appeal of covered bonds, particularly with European investors, it has yet to boost issuance. Canada’s banks have been slower than expected to register new programs and the added cost of complying may offset the reduction in funding costs.
Carol Clouse looks at how CLOs are adapting to life without bonds even as the industry lobbies for a last-minute work around.
John Hintze talks to reinsurance players about the impact of the continued inflow of private capital, which allows cat bond issuers to push for ever lower rates and more generous terms.
And Kevin Wack, of sister publication American Banker, talks to three companies — an auto manufacturer, a data provider, and a taxi service — that are all trying to modernize lending in this market.