With the new German trade tax initiative promptly on its way, the Germans were finally able to discuss trends and developments outside of synthetics at their session this year.

Last year there were only hints that true sale would some day come to Germany. Now, industry players are hopeful that the foundation will be set as early as this month - before the German regulators break for the summer.

But while most on this year's panel agree that the trade tax resolution on certain SPVs will facilitate a growing true sale market, the consensus is still that German securitization law should stay as is. The view is that in the long run, working within the existing framework will reduce future complexities. Panelists doubt that changing the laws would bring the miraculous results experienced in Italy. In Germany, changing the laws would signify a lengthy time constraint. Under the current law, true sale structures have been achievable.

The new true sale initiative formed by nine banks - including a mix of large commercial banks, Landesbanks and the government-sponsored KfW - promise to maintain the needed political pressure for an improved market environment for true sale structures. "We had a feeling that by getting together we could succeed to get the right environment, and KfW would have the right access to the right people," said one panelist.

The objective is not only to securitize the portfolios within the group; down the line, the platform is expected to extend to all German portfolios. The first phase was designed this way because when KfW was underway with talks, the group swelled to its current number with more banks hankering to get in. At this initial stage, the government-sponsored bank felt it would be more beneficial and proactive to limit the group in order to get the initiative underway.

Outside the trade tax issue, panelists agreed the legal framework for accounting is another area that might need some tweaking. According to panelists, the German GAAP recently implemented changes that would severely restrict off-balance sheet accounting. Interestingly, today's market objective means originators are less likely to tap the market with this one incentive in mind. Rather, the current economic strains are likely to inspire securitization for regulatory capital relief or funding.

On the synthetic side there has been little change over the years. The PROMISE and PROVIDE structures are still popular, and plans to extend the PROVIDE program outside of Germany have already befitted Austrian originators. As for new opportunities developing outside of TSI, the current market for banks means a growing non-performing loan market. However, the German securitization framework is not as favorable as the Italian framework for the securitizations of these loans. "It's definitely a prospect as a new asset class, but it won't be as extensive as in Italy where the framework is more favorable to this asset class," said one panelist. "The solution in Germany could be to look at it from a synthetic perspective."

Also on the German psyche are the aircraft and shipping transactions. Such deals are limited to only a few originators, but panelists said it could work for them as they look to move from a holding to trading position in the future. CMBS transactions will still be a part of German activity, but expect to see smaller deals from smaller players. What's certain for German securitizations is that, from an investor's perspective, the market's sure to become interesting again.


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