European ABS and Repo Markets: From Evil to Blessing?

by Joséphine de Chazournes, July 25, 2012
EMEA

Abstract

European ABS and repos have followed different evolutionary paths during the 2007-2008 crisis and beyond. The European ABS sector is desperately looking for the light at the end of the tunnel, declining from over €700 billion issued in 2008 to less than €60 billion issued in Q1 2012. After a peak of €6,775 billion in outstanding business in June 2007 and a trough in December 2008 below €5,000 billion, the European repo market is flourishing again, with December 2011 levels well above €6,200 billion.

In a new report, European ABS and Repo Markets: From Evil to Blessing? Celent analyses the divergent paths of the ABS and repo markets since 2007, examining why one is dying while the other is thawing. The report examines the market structure, various European regulations that they will have to adapt to, and their future evolution.

“Apart from the changes in market structure that could take place, the main issue that needs to be resolved is a macro one,” says Joséphine de Chazournes, Senior Analyst with Celent’s Securities & Investments group and author of the report. “European regulators seem overly focused on the safety of the banks. It seems that the need to revive European economies comes second to this, but we believe it should not be overlooked. Securitisation could play a big role in this.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
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Tel: +1 212 345 1366

Europe (London)
Chris Williams
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Tel: +44 (0)782 448 3336

Asia (Tokyo)
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Table of Contents

Executive Summary

3

Introduction

5

Overview of the Markets

6

 

Products that Serve Different Purposes

6

 

Market Evolution

7

 

Different Market Structures

10

 

A Different Capacity To Be Traded Electronically or Cleared

12

The European Pipeline of Regulation

17

 

Regulations that Mostly Impact ABSs

17

 

Regulations that Mostly Impact the Repo Market

20

A New Approach to These Markets

23

 

Education Is Key for Both ABS and Repos

23

 

How Else Could the European ABS Market Be Revived?

27

Conclusions

29

Leveraging Celent’s Expertise

31

 

Support for Financial Institutions

31

 

Support for Vendors

31

Related Celent Research

32

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